10/10/2015

Applied Industrial acquires S.G. Morris

Industrial equipment wholesaler Applied Industrial Technologies, Inc. (AIT - Snapshot Report) recently announced the acquisition of S. G. Morris Co. Financial terms of the transaction were kept under wraps. We believe investors and the market at large were positive about this development, as evident from a 2.4% rise in the company’s share price on Oct 2.

S. G. Morris Co. is a recognized distributor of fluid power components in Cleveland, Toledo and Pittsburgh. In addition, the firm provides engineered fluid power systems to a vast industrial customer base. This acquisition will enable Applied Industrial Technologies to expand its fluid power components and engineered fluid power systems operations in the states of Ohio and Pennsylvania.

In addition, Applied Industrial Technologies expects the buyout to boost its revenue generation capabilities as well as strengthen its workforce by addition of 68 skilled employees. Operating as the company’s subsidiary, S. G. Morris will henceforth be known as S. G. Morris Co., LLC.

We believe the latest acquisition is consistent with Applied Industrial Technologies’ strategic expansion policy, involving both organic and inorganic means. It is also indicative of the company’s strong balance sheet and healthy cash position. In Aug 2015, the company purchased Atlantic Fasteners, a distributor of C-Class consumables based in Agawam, MA.

However, despite such expansionary efforts, Applied Industrial Technologies is exposed to certain headwinds that have weakened its investment value in the near term. With a market capitalization of $1.5 billion, the stock presently carries a Zacks Rank #4 (Sell). The low ranking was led by a 6.1% decline in earnings estimates as well as an Earnings ESP of -3.78% for fiscal 2016.

See more at: http://www.zacks.com/stock/news/192481/applied-industrial-acquires-s-g-morris-shares-up-24#sthash.df8kXrLL.dpuf