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Organic sales growth of 6% marked the strongest performance in over two years, driven by a notable acceleration in volume as customer spending behavior broadened across 17 of the top 30 end markets.

The Engineered Solutions segment delivered 9.3% organic growth, fueled by double-digit increases in automation and fluid power as customers prioritize brownfield applications to address labor constraints and production agility.

The technology vertical now represents over 15% of Engineered Solutions, contributing 300 basis points to the segment's organic growth through semiconductor wafer fab equipment and emerging data center liquid cooling opportunities.

Service Center performance improved to 4% organic growth as higher capacity utilization at customer sites triggered increased break-fix activity and maintenance on aged production equipment.

Cross-selling initiatives between segments contributed over 100 basis points to Service Center organic growth, reflecting the success of the 'One Applied' value proposition in capturing technical MRO requirements.

Management attributes steady gross margins to internal margin initiatives and favorable mix, which effectively offset ongoing LIFO headwinds and inflationary pressures.

Full-year fiscal 2026 guidance was tightened toward the high end, assuming organic sales growth of 3.8% to 4.2% and EBITDA margins between 12.3% and 12.4%.

Fourth quarter organic growth is projected at 4% to 5.5%, factoring in high-single-digit trends in early April but accounting for significantly tougher year-over-year comparisons in May and June.

Management expects the next 12 to 18 months to be a more active period for M&A, focusing on midsize and small tuck-in targets across fluid power, flow control, and automation.

Guidance assumes a degree of variability persists due to geopolitical developments and trade policy uncertainty, though current indicators suggest an early-stage end-market recovery.

Incremental EBITDA margins are targeted at mid- to high-teens on mid-single-digit organic growth, supported by structural mix tailwinds and continuous improvement culture.

LIFO expense of $5.6 million created a 27 basis point headwind on gross margins compared to the prior year, with slightly higher LIFO expense anticipated in the fourth quarter.

A new share repurchase authorization for up to 3 million shares was approved by the Board, following $236 million in year-to-date buybacks.

The Hydrodyne acquisition is currently performing at the company-wide margin average, which is dilutive to the Engineered Solutions segment average but expected to improve.

Suppliers' approach to pricing remains fluid; while price increases have normalized to a regular cadence, management remains vigilant regarding potential tariff and trade policy modifications.

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Both categories saw sequential acceleration, with national accounts growing 7% and local accounts growing 5% year over year.

The broad-based strength indicates a general improvement in the U.S. industrial backdrop rather than a niche recovery.

Flow control grew approximately 6%, benefiting from the technology vertical and primary metals, though the chemical sector remains a year-over-year headwind.

Management noted that while chemicals are currently down, the trend is improving as they head into the next fiscal year.

Excluding LIFO, segment incremental margins were approximately 19%, which management views as strong performance aligned with expectations.

Lower-margin project mix in flow control and the integration of Hydrodyne were the primary factors tempering segment-level margins.

Management expressed confidence in an accelerating M&A pace, citing a strong pipeline of targets and the potential for more sellers to enter the market as the environment improves.

The focus remains on technical acquisitions that enhance the company's 'One Applied' engineering capabilities.

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