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Analyst Blog

On Mar 20, 2014, we issued an updated research report on Parker-Hannifin Corporation . The company reported a modest performance for the second quarter of fiscal 2014 due to incremental orders and improved performance in its Industrial Sales business.

Parker delivered a positive earnings surprise in two of the last four quarters, with an average beat of 1.17%. It reported decent earnings in the first quarter of fiscal 2014, up 4.2% year over year, but missed the Zacks Consensus Estimate by a penny.

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

Nevertheless, Parker-Hannifin has a healthy balance sheet and generates strong cash flow. Over the past decade, Parker Hannifin increased its operating cash flow from just $0.5 billion in 2001 to $1.8 billion in 2013. The company also offers healthy dividend hikes, reflecting its commitment to rewarding shareholders with risk-adjusted returns. In fiscal 2013, the company has consecutively raised its dividend 4 times by 5%, reflecting a yield of 1.5%.

Parker’s modest results and guidance led to downward estimate revisions for the current quarter and fiscal 2014. 6 out of 8 estimates for the current quarter and 4 out of 10 estimates for fiscal 2014 were revised downward over the past 60 days. This led to a significant decrease of 10 cents in the Zacks Consensus Estimate for the current quarter, which is now at $1.66 per share and a decline of 5 cents for fiscal 2014, which now stands at $6.51 per share.

Other Stocks to Consider

Parker-Hannifin currently has a Zacks Rank #3 (Hold). Other stocks worth considering include Middleby Corp. , and Altra Industrial Motion Corp. and Xylem Inc. , all three carrying a Zacks Rank #2 (Buy).

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