Wrapping up Q2 earnings, we look at the numbers and key takeaways for the engineered components and systems stocks, including Applied Industrial (NYSE:AIT) and its peers.

Engineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

The 13 engineered components and systems stocks we track reported a mixed Q2. As a group, revenues missed analysts’ consensus estimates by 1.2% while next quarter’s revenue guidance was 0.9% below.

Inflation progressed towards the Fed's 2% goal recently, leading the Fed to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be debating whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.

Thankfully, engineered components and systems stocks have been resilient with share prices up 6.9% on average since the latest earnings results.

Applied Industrial (NYSE:AIT)

Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE:AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.

Applied Industrial reported revenues of $1.16 billion, flat year on year. This print fell short of analysts’ expectations by 2.1%. Overall, it was a slower quarter for the company with a miss of analysts’ organic revenue estimates and underwhelming earnings guidance for the full year.

Neil A. Schrimsher, Applied’s President & Chief Executive Officer, commented, “Our fiscal fourth quarter reflects strong execution and positive margin momentum within an ongoing muted demand backdrop.”

Interestingly, the stock is up 11.5% since reporting and currently trades at $221.86.

Is now the time to buy Applied Industrial? Access our full analysis of the earnings results here, it’s free.

Best Q2: Arrow Electronics (NYSE:ARW)

Founded as a single retail store, Arrow Electronics (NYSE:ARW) provides electronic components and enterprise computing solutions to businesses globally.