Back to top

Analyst Blog

Shares of Parker-Hannifin Corporation (PH - Analyst Report) reached a 52-week high of $122.52 on Monday, Dec 9, 2013. However, the stock closed at $120.79, representing a one-year return of about 43.9% and a decent year-to-date return of about 37.8%. Average volume of shares traded over the last three months stands at approximately 978,306.

Strong balance sheet, strong acquisitions and the company’s ability to consistently raise dividends are some of the growth catalysts for the company. In addition, the company reported improved results for the first quarter of 2014.

Parker delivered positive earnings surprises in the last four quarters with an average beat of 2.94%. This Zacks Rank #2 (Buy) company has a market cap of $18.03 billion and a long-term expected earnings growth rate of 9.5%.

Parker’s Strengths

Parker has a strong balance sheet and generates a strong cash flow. Over the past decade, Parker Hannifin has increased its operating cash flow from just $0.5 billion in 2001 to $1.8 billion in 2013. At the end of the first quarter, Parker’s cash and cash equivalents were $1.94 billion with long-term debt of $1.5 billion and a debt to capitalization ratio of 19.8% compared with 20.7% in the last quarter.

The company gives good dividend hikes, reflecting its commitment to return value to shareholders. For fiscal 2013, the company has consecutively raised its dividend four times by 5%, reflecting a yield of 1.5%.

In addition, Parker follows a Win Strategy that primarily aims to measure customer service excellence through efficient business and cash management strategies.

Improved 1Q14 Earnings

Parker-Hannifin reported first-quarter fiscal 2014 earnings per share of $1.61, which was 9.5% above the Zacks Consensus Estimate of $1.47. Earnings also grew 2.5% year over year driven by incremental orders in the quarter.  

Total revenue in the first quarter increased marginally by 0.6% year over year to $3.23 billion from $3.21 billion in the year-ago quarter. Weak performance in the American market continued to affect the company’s revenues. However, this was offset by strong operational performance during the quarter. Revenues fell marginally short of the Zacks Consensus Estimate of $3.24 billion.

Further, following the first quarter earnings release, the company increased its fiscal 2014 guidance. Earnings from continuing operations for fiscal 2014 are currently expected to be in the range of $7.78 to $8.38 per share, up from its earlier guidance of $7.35 to $8.15 per share.

The guidance includes an expected gain of approximately $1.68 per share associated with a previously-announced joint venture agreement between Parker Aerospace and GE Aviation, an operating unit of General Electric Company (GE - Analyst Report), and restructuring expenses of approximately $100 million or 47 cents per share.

Estimate Revisions

Over the last 60 days, 4 out of 8 estimates for 2014 have been revised upward while none moved lower. Thus, the Zacks Consensus Estimate improved 1.9% to $6.53 per share. For 2015, 4 out of 10 estimates moved upward, helping the Zacks Consensus Estimate advance 1.7% to $8.18 per share.

Conclusion

The company is confident of delivering a better fiscal 2014. The company is upbeat about its accretive acquisitions and its strong balance sheet. Further, the order trends for the company are also improving. In addition, the company’s consistently strong performance in its Aerospace segment is giving it a good momentum in that industry with improvement in orders.

Other Stocks to Consider

Other stocks in the machinery and motion control industry that are currently performing well and have a good visibility include Xylem Inc. (XYL - Analyst Report) with a Zacks Rank #1 (Strong Buy) and DXP Enterprises, Inc. (DXPE - Snapshot Report) that carries a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
PLANAR SYST… PLNR 4.44 +5.21%
BITAUTO HOL… BITA 81.71 +5.12%
CTPARTNERS… CTP 16.66 +4.26%
CHINA BIOLO… CBPO 47.91 +3.30%
MALLINCKROD… MNK 72.94 +2.85%