2023-03-17 08:47:27 ET
Applied Industrial Technologies ( NYSE: AIT ) on Friday was upgraded to Outperform from a prior investment rating of Neutral by analysts at Baird. They said the distributor of industrial parts is poised to outperform after recent market declines on worries about the financial health of banks.
“We see a favorable setup with distributors historically outperforming during recession/three to five years thereafter, while strong execution, improving return on invested capital (ROIC) and mix shifts toward higher-margin, and secular growth markets justify a premium-to-historical valuation,” David Manthey, analyst at Baird, said in a March 17 report.
Baird maintained its price target of $160 a share, based on an enterprise value-to-EBITDA multiple of 13 times estimated EBITDA for 2023. The analyst also maintained an EPS estimate of $8.25 for 2023 and $7.77 for 2024.
“While AIT's multiple remains above longer-term averages, we are comfortable that a slight premium to historical valuation and the market overall is appropriate in light of the fact that AIT is a demonstrably better business today,” according to Baird.
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Applied Industrial Technologies upgraded to Outperform at Baird