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Value

With North American sales returning to pre-recession levels, Parker Hannifin (PH - Analyst Report) is cashing in on strong demand from both North America and the international market as it saw record fiscal Q2 sales. This Zacks #1 Rank (strong buy) is still a value stock, with a forward P/E of 14.2.

Originally founded in Cleveland in 1938, Parker Hannifin, which manufactures motion and control technologies for industrial and aerospace customers, has expanded to now employ 55,000 people in 46 countries.

54th Consecutive Annual Dividend Increase

On Jan 27, Parker Hannifin raised its quarterly cash dividend by 10% to 32 cents from 29 cents. It was payable on Mar 4 to shareholders of record as of Feb 10.

It was the company's 243rd consecutive quarterly dividend.

Parker Hannifin has been rewarding shareholders more than usual this year. It has raised the dividend 2 other times in fiscal 2011 for a total increase of 23% this year.

Fiscal 2011 marks the 54th consecutive fiscal year the company has raised the dividend, an impressive track record equaled by only 4 other S&P 500 companies.

Shares currently yield 1.5%.

Strong Demand Continued in Fiscal Q2

In the fiscal first quarter of 2011, Parker Hannifin said it saw sales returning to pre-2008 recession levels in both of its largest segments Industrial North America and Industrial International.

The good times continued.

On Jan 20, the company reported fiscal second quarter results and saw record second quarter sales which jumped 21.7% to $2.9 billion from $2.4 billion in the year ago period.

It also beat the Zacks Consensus Estimate by 6.9%. Earnings per share were $1.39 compared to the consensus of $1.30. It made just 64 cents in the year ago quarter.

It was the 7th consecutive earnings beat. The company has an incredible earnings surprise track record, only missing 1 time in the last 5 years.

Sales Up in All Segments

Sales rose by 23.4% in the Industrial North America segment and 23.1% in the Industrial International segment compared to a year ago. These are the two largest segments making up a combined $2.1 billion out of the quarter's $2.9 billion in total sales.

Sales also climbed by 22.6% in Climate and Industrial Controls to $214.3 million and 14.7% to $459.6 million in the Aerospace segment.

Total orders also jumped by 29% as of the end of Dec 31, 2010.

Fiscal 2011 Guidance Raised For a Second Time

The company gave a preliminary 2011 guidance range in August 2010 of $3.60 to $4.40 per share. In October, when it reported first quarter results which were better than analysts expectations, it raised it to $5.20 to $5.80 per share.

In January, after seeing record Q2 sales, it raised it again to $5.80 to $6.20 per share.

Parker Hannifin made just $3.40 in fiscal 2010.

Zacks Consensus Estimates Rise

Not surprisingly, given yet another guidance increase, analysts moved to raise estimates to match the company's forecast.

The fiscal 2011 Zacks Consensus Estimate rose to $6.14 from $5.79 in the last 2 months. That is earnings growth of 80.5%.

The fiscal 2012 Zacks Consensus also jumped to $6.97 from $6.58 in the last 60 days for further earnings growth of 13.6%.

Parker Hannifin is expected to report fiscal third quarter results on Apr 19.

Shares At New 5-Year Highs But There's Still Value

Shares have been hot, finally breaking out to new 5-year highs during the latest stock market rally.

But despite the shares taking off, the stock still has some decent value characteristics.

In addition to a forward P/E under 15, which is my cut-off for a "value" stock, it also has a price-to-book ratio of 2.7 which is within value parameters.

The company also has a solid 1-year return on equity of 17.6%, which is better than its peers at 16.3%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

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