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Parker-Hannifin Corporation (PH - Analyst Report) reported modest fiscal second quarter 2014, ending Dec 31, 2013 results with adjusted net income of $189.9 million or $1.24 per share exceeding $181.1 million or $1.19 per share in the year-earlier quarter. The year-over-year growth was driven by incremental orders and improved performance in its Industrial Sales business. Reported earnings fell marginally short of the Zacks Consensus Estimate of $1.25 per share.

Total Revenue

Total revenue in the second quarter increased 1.3% year over year to $3.11 billion from $3.07 billion in the year-ago quarter. The company saw an increase of 3.1% organically. However, this was partially offset by a 0.7% negative foreign currency translation and an additional decline of 1.4% owing to the poor performance of the company’s joint venture agreement with GE Aviation (an operating unit of General Electric Company (GE - Analyst Report)) during the quarter. Revenues fell short of the Zacks Consensus Estimate of $3.14 billion.

Segment Performance

Parker’s Industrial Sales segment comprises two sub-segments - Industrial North America and Industrial International.

Industrial North America segment revenues increased 0.6% year over year to $1.33 billion. Operating income also increased 5.4% to $200.6 million in the quarter. The segment reported a 3% year-over-year increase in orders.

Industrial Internationalsegment sales were up 4.7% to $1.28 billion. Operating income also increased year over year by 7.4% to $134.2 million, while orders increased 6% year over year.

Revenues in the Aerospace segment decreased 4.7% year over year to $503.8 million despite a 7% increase in orders. Operating income declined 13.8% to $45.0 million. The decrease was mainly due to the negative impact of the company’s joint venture business with GE Aviation.

Balance Sheet & Cash Flow

At the end of the quarter, Parker’s cash and cash equivalents were $2.14 billion with long-term debt of $1.5 billion.

Cash flow from operating activities aggregated $540.1 million (8.5% of sales) for the six-month period including a discrete pension allowance of $75 million. Excluding this allowance, cash flow was 9.7% of sales during the quarter. In the prior-year quarter, the company had reported a cash flow of $347.3 million (5.5 % of sales).

Guidance

The company reduced its fiscal 2014 guidance. Earnings from continuing operations for fiscal 2014 are currently expected in the range of $6.20 to $6.60 per share, down from its earlier guidance of $7.78 to $8.38 per share. The guidance includes restructuring expenses of 47 cents per share.

However, the one-time charge of $1.26 per share from writing-off of assets and the gain of $1.68 per share from the joint venture agreement between Parker Aerospace and GE Aviation are not included in the guidance. The previous guidance included this gain.

Parker-Hannifin currently has a Zacks Rank #2 (Buy). Other similarly ranked stocks worth considering include Middleby Corp. (MIDD - Analyst Report) and Barnes Group Inc. (B - Snapshot Report).

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