And management raised its guidance above the current consensus estimate for the remainder of its fiscal 2012. This should drive a flurry of positive estimate revisions from analysts. It is currently a Zacks #2 Rank (Buy).

In addition, Parker Hannifin raised its dividend for the second consecutive quarter. It yields a solid 1.9%. And valuation is attractive too with shares trading at just 10.5x forward earnings.

Company Description

Parker Hannifin is a leading manufacturer of motion and control technologies. It reports revenue in four business segments:

North America Industrials (38% of revenue)
International Industrials (39%)
Aerospace (16%)
Climate & Controls (7%)

Parker was founded in 1918 and is headquartered in Cleveland, Ohio. It has a market cap of $13.1 billion.

Third Quarter Results

Parker Hannifin delivered better than expected third quarter results on April 24. Earnings per share hit a quarterly record of $2.01, well ahead of the Zacks Consensus Estimate of $1.72. It was a 20% increase over the same quarter in 2011.

Sales rose 5% to $3.393 billion, ahead of the Zacks Consensus Estimate of $3.279 billion. Organic sales were up 6% year-over-year, driven by a double-digit increase in the North America Industrial segment, which more than offset softness internationally.

Operating income increased 6% as a small decline in the gross profit margin was offset by the leveraging of its selling, general and administrative expenses.

Increased Guidance

Following strong third quarter results, management at Parker Hannifin increased its earnings guidance for the remainder of the year to a range of $7.30-$7.50 per share.

This was well above the Zacks Consensus Estimate of $7.11 on the day of the announcement, so expect a strong increase in estimate revisions over the next few days.

It is currently a Zacks #2 Rank (Buy).

Dividend

Also on April 24, Parker Hannifin announced its second dividend increase in as many quarters. As you can see in the chart below, the company has been consistently raising its dividend over the last several years:

The company has increased its dividend an incredible 56 consecutive fiscal years, which puts it among the top five longest running dividend-increase records in the S&P 500.

It currently yields 1.9%.

Valuation

The valuation picture looks very reasonable for PH. Shares trade at just 10.5x 12-month forward earnings, in-line with the industry median, and a discount to its 10-year median of 14.0x.

Its price to book ratio of 2.3 is in-line with the group and its historical multiple.

The Bottom Line

With solid earnings momentum, strong growth projections, a steadily rising dividend and reasonable valuation, Parker Hannifin offers investors attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.