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Can Parker-Hannifin (PH) Maintain its Earnings Streak in Q2?
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Parker-Hannifin Corporation (PH - Free Report) will report second-quarter fiscal 2017 earnings on Feb 2, before the opening bell.
In the last reported quarter, Parker-Hannifin had posted a positive earnings surprise of 2.6%. The company has an excellent earnings track record, beating estimates in each of the trailing four quarters. The stock boasts an average positive surprise of approximately 10.5%.
Let's see how things are shaping up for this announcement.
Factors Influencing Q2
Parker-Hannifin’s “Win Strategy”, its core business system focusing on key areas, including customer engagement, customer experience, profitable growth and financial performance, has acted as a staple growth driver for the past few quarters. Leveraging on the strength of this overarching business system, the company expects to deliver a compound annual growth rate in earnings per share of 8%, over the coming five years. Expectedly, fiscal second-quarter operating margins and top line will be supported by the Win Strategy.
Parker-Hannifin’s initial savings from division consolidation and simplification initiatives continue to manifest themselves in the strong margin performance. We believe that these cost-reduction initiatives will generate significant savings for the soon-to-be-reported quarter, thus driving growth. In addition, the company’s extensive distribution network, which sells to the more lucrative maintenance, repair and operations (MRO) markets, are likely to act as a key catalyst for aftermarket parts.
The company’s exposure to Maintenance, Repair, and Overhaul and CAPEX markets as well as its robust potential for margin improvement, are likely to boost its bottom line significantly in the upcoming quarter. Further, Parker-Hannifin’s solid free cash flow generation and balance sheet is a major positive, enabling it to take diligent capital allocation actions and market expansion drive through acquisitions.
Past acquisitions, including PEGL, have significantly benefited the company and are expected to do so for the to-be-reported quarter as well. During the fiscal second quarter, the company inked its most notable acquisition agreement to buy air filtration systems provider – CLARCOR Inc. – for roughly $4.3 billion in cash. The company is bullish on the integration of CLARCOR, with its filtration business, which will help it double sales at this unit.
Despite these positives, weak original equipment manufacturing demand in key verticals, like oil & gas, agriculture, mining, manufacturing and construction, has been marring Parker-Hannifin’s growth momentum. As a matter of fact, poor performance in the Diversified Industrial segment had proved to be a major drag on the fiscal first-quarter sales performance. Additionally, volatility in commodity markets and sluggishness in the emerging markets have been adding to Parker-Hannifin’s concerns.
As Parker Hannifin has about 40% of international exposure in geographies like Europe, Asia and South America, prolonged economic weakness in these regions is likely to affect revenue growth. This apart, the strengthening dollar remains a major growth deterrent for the company and can hamper the fiscal second-quarter revenues. Parker-Hannifin’s realignment plan, though beneficial for the long run, flares up its restructuring expenses, and can hurt growth in the upcoming quarter.
Earnings Whispers
Our proven model does not conclusively show that Parker-Hannifin will beat earnings in the fiscal second quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.40. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Parker-Hannifin’s Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Key Picks
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
MRC Global Inc. (MRC - Free Report) has an Earnings ESP of +27.3% and a Zacks Rank #2.
Fairmount Santrol Holdings Inc. has an Earnings ESP of +11.1% and a Zacks Rank #2.
Zacks' Top 10 Stocks for 2017
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Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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Can Parker-Hannifin (PH) Maintain its Earnings Streak in Q2?
Parker-Hannifin Corporation (PH - Free Report) will report second-quarter fiscal 2017 earnings on Feb 2, before the opening bell.
In the last reported quarter, Parker-Hannifin had posted a positive earnings surprise of 2.6%. The company has an excellent earnings track record, beating estimates in each of the trailing four quarters. The stock boasts an average positive surprise of approximately 10.5%.
Let's see how things are shaping up for this announcement.
Factors Influencing Q2
Parker-Hannifin’s “Win Strategy”, its core business system focusing on key areas, including customer engagement, customer experience, profitable growth and financial performance, has acted as a staple growth driver for the past few quarters. Leveraging on the strength of this overarching business system, the company expects to deliver a compound annual growth rate in earnings per share of 8%, over the coming five years. Expectedly, fiscal second-quarter operating margins and top line will be supported by the Win Strategy.
Parker-Hannifin’s initial savings from division consolidation and simplification initiatives continue to manifest themselves in the strong margin performance. We believe that these cost-reduction initiatives will generate significant savings for the soon-to-be-reported quarter, thus driving growth. In addition, the company’s extensive distribution network, which sells to the more lucrative maintenance, repair and operations (MRO) markets, are likely to act as a key catalyst for aftermarket parts.
The company’s exposure to Maintenance, Repair, and Overhaul and CAPEX markets as well as its robust potential for margin improvement, are likely to boost its bottom line significantly in the upcoming quarter. Further, Parker-Hannifin’s solid free cash flow generation and balance sheet is a major positive, enabling it to take diligent capital allocation actions and market expansion drive through acquisitions.
Past acquisitions, including PEGL, have significantly benefited the company and are expected to do so for the to-be-reported quarter as well. During the fiscal second quarter, the company inked its most notable acquisition agreement to buy air filtration systems provider – CLARCOR Inc. – for roughly $4.3 billion in cash. The company is bullish on the integration of CLARCOR, with its filtration business, which will help it double sales at this unit.
Despite these positives, weak original equipment manufacturing demand in key verticals, like oil & gas, agriculture, mining, manufacturing and construction, has been marring Parker-Hannifin’s growth momentum. As a matter of fact, poor performance in the Diversified Industrial segment had proved to be a major drag on the fiscal first-quarter sales performance. Additionally, volatility in commodity markets and sluggishness in the emerging markets have been adding to Parker-Hannifin’s concerns.
As Parker Hannifin has about 40% of international exposure in geographies like Europe, Asia and South America, prolonged economic weakness in these regions is likely to affect revenue growth. This apart, the strengthening dollar remains a major growth deterrent for the company and can hamper the fiscal second-quarter revenues. Parker-Hannifin’s realignment plan, though beneficial for the long run, flares up its restructuring expenses, and can hurt growth in the upcoming quarter.
Earnings Whispers
Our proven model does not conclusively show that Parker-Hannifin will beat earnings in the fiscal second quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.40. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
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Zacks Rank: Parker-Hannifin’s Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with a Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Key Picks
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
MRC Global Inc. (MRC - Free Report) has an Earnings ESP of +27.3% and a Zacks Rank #2.
Greif, Inc. (GEF - Free Report) has an Earnings ESP of +8.0% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Fairmount Santrol Holdings Inc. has an Earnings ESP of +11.1% and a Zacks Rank #2.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>