Reviewing Applied Industrial Technologies (AIT) & Kennametal (KMT)

Applied Industrial Technologies (NYSE: AIT) and Kennametal (NYSE:KMT) are both mid-cap industrial products companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, earnings, valuation, risk, profitability and dividends.

Dividends

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Applied Industrial Technologies pays an annual dividend of $1.20 per share and has a dividend yield of 1.7%. Kennametal pays an annual dividend of $0.80 per share and has a dividend yield of 2.0%. Applied Industrial Technologies pays out 42.3% of its earnings in the form of a dividend. Kennametal pays out 52.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Applied Industrial Technologies has raised its dividend for 8 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Applied Industrial Technologies and Kennametal, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Applied Industrial Technologies 0 3 0 0 2.00
Kennametal 0 6 4 0 2.40

Applied Industrial Technologies presently has a consensus price target of $63.00, indicating a potential downside of 11.33%. Kennametal has a consensus price target of $50.35, indicating a potential upside of 28.41%. Given Kennametal’s stronger consensus rating and higher probable upside, analysts plainly believe Kennametal is more favorable than Applied Industrial Technologies.

Volatility and Risk

Applied Industrial Technologies has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500. Comparatively, Kennametal has a beta of 2.03, meaning that its share price is 103% more volatile than the S&P 500.

Profitability

This table compares Applied Industrial Technologies and Kennametal’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Applied Industrial Technologies 5.43% 16.53% 8.99%
Kennametal 6.54% 17.09% 7.62%

Valuation & Earnings

This table compares Applied Industrial Technologies and Kennametal’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Applied Industrial Technologies $2.59 billion 1.06 $133.91 million $2.84 25.02
Kennametal $2.06 billion 1.55 $49.13 million $1.52 25.80

Applied Industrial Technologies has higher revenue and earnings than Kennametal. Applied Industrial Technologies is trading at a lower price-to-earnings ratio than Kennametal, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

89.8% of Applied Industrial Technologies shares are held by institutional investors. Comparatively, 99.2% of Kennametal shares are held by institutional investors. 3.7% of Applied Industrial Technologies shares are held by company insiders. Comparatively, 2.0% of Kennametal shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Kennametal beats Applied Industrial Technologies on 10 of the 17 factors compared between the two stocks.

Applied Industrial Technologies Company Profile

Applied Industrial Technologies, Inc. is an industrial distributor in North America, Australia and New Zealand, serving maintenance, repair and operations (MRO), and original equipment manufacturing customers in various industries. In addition, the Company provides engineering, design, and systems integration for industrial and fluid power applications, as well as customized mechanical, fabricated rubber, and fluid power shop services. It operates in two segments: service center-based distribution and fluid power businesses. The service center-based distribution segment provides customers with a range of industrial products primarily through a network of service centers. The fluid power businesses segment consists of specialized regional companies that distribute fluid power components, design and assemble fluid power systems, and perform equipment repair. The fluid power businesses primarily sell products and services directly to customers rather than through the service centers.

Kennametal Company Profile

Kennametal Inc. is a supplier of tooling, engineered components and materials consumed in production processes. The Company operates through two segments: Industrial and Infrastructure. The Industrial segment generally serves customers that operate in industrial end markets, such as transportation, general engineering, aerospace and defense. The Infrastructure segment generally serves customers that operate in the earthworks and energy sectors supporting primary industries, such as oil and gas, power generation, underground, surface and hard-rock mining, highway construction and road maintenance. It provides wear-resistant products, application engineering and services backed by material science serving customers across various sectors. The Company’s product offerings include a selection of standard and customized technologies for metalworking, such as metal cutting tools, tooling systems and services, as well as materials, such as cemented tungsten carbide products and super alloys.

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