Applied Industrial raises FY27 EPS guidance as first-quarter sales rise 7.6% from a year earlier

Applied Industrial Technologies reported fiscal 2027 first-quarter net sales of $1.3 billion, up 7.6% from a year earlier, and net income of $110.4 million, or $2.97 per diluted share. Net income rose 9.5% and diluted earnings per share rose 12.9%, and the company raised both ends of its fiscal 2027 earnings outlook.

Per-share growth outruns reported net income

The income statement shows why the per-share line outpaced the profit line. Net income rose 9.5% to $110.4 million, while diluted earnings per share rose 12.9% to $2.97 from $2.63, and average diluted shares fell to 37,180 from 38,271, in thousands. The release's summary bullet cites a 12.7% increase next to $2.97 per share; that rate matches the basic per-share change, which ran to $3.01 from $2.67, so it does not attach to the diluted figure the bullet names. Operating income rose 11.3% year over year to $143.6 million, and EBITDA, a non-GAAP measure, rose 9.6% to $160.3 million.

Engineered Solutions carries the growth; Service Center margins slip

Segment detail explains where the 7.6% consolidated increase came from. In the segment table, which reports dollars in thousands, Engineered Solutions sales rose 14.1% to $475.82 million, all of it organic, and segment operating income climbed to $60.92 million from $45.86 million; its EBITDA margin widened to 15.1% from 13.8%. Service Center, the larger unit at $815.35 million of sales, grew 4.2% from a year earlier on a reported basis and 3.5% organically. Its operating income edged up to $105.32 million from $104.05 million, and its EBITDA margin narrowed to 13.6% from 13.9%. Acquisitions added 0.3% at the consolidated level and currency 0.2%; selling days were unchanged at 64.

Guidance raised on a smaller share count, not on higher demand

Applied lifted fiscal 2027 diluted EPS guidance to $11.70 to $12.20 from $11.65 to $12.15, and the release attributes the change to “a slightly lower diluted share count assumption following first quarter share repurchases”. The sales outlook was left at a 4.0% to 6.5% increase and the EBITDA margin outlook at 12.5% to 12.8%, both first set in mid-August. Guidance assumes no contribution from future acquisitions or buybacks and incorporates “macro uncertainty tied to ongoing geopolitical events and trade policy dynamics” alongside inflation and growth investments. The cash-flow statement shows $80.03 million of treasury share purchases in the quarter, against $53.18 million a year earlier.

Cash conversion weakens as inventory builds

In the cash-flow statement, which also reports dollars in thousands, operating cash flow fell to $86.38 million from $119.32 million, and free cash flow — operating cash less capital spending — was $73.36 million, down from $112.02 million. The statement shows a $45.49 million use for working capital, net of acquisitions, against $584,000 a year earlier, with inventories of $533.25 million versus $508.98 million on June 30. Capital expenditures rose to $13.01 million from $7.3 million. LIFO expense, a pre-tax item tied to inventory costs, was $5.6 million, or $0.12 per share after tax, versus $2.6 million and $0.05.

October's double-digit start and the next dated checkpoints

Chief Executive Neil A. Schrimsher said sales trends “remain positive into early F2Q27, with organic sales month to date in October up approximately 10% year over year”, a faster pace than the 7.1% organic growth recorded in the quarter. The release offers a same-day checkpoint: a conference call at 10 a.m. ET on October 27 to discuss the quarter and outlook. It also declared a quarterly dividend of $0.51 per share, payable November 30 to shareholders of record November 13. Separately, Peter C. Wallace retired from the board at the October 20 annual meeting, and the board elected Joe A. Raver as independent chairman. The filing contains no analyst consensus figures, so no beat-or-miss conclusion can be drawn from it.