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Parker-Hannifin (PH) Up 4.9% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Parker-Hannifin Corporation (PH - Free Report) . Shares have added about 4.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Parker-Hannifin Q2 Earnings Top Estimates, Sales Fall Y/Y
Parker-Hannifin kept its recent streak of beating estimates alive for the sixth consecutive quarter, as its adjusted earnings of $1.91 per share for second-quarter fiscal 2017 came miles ahead of the Zacks Consensus Estimate of $1.40.
The earnings figures reflected an impressive growth of 25.7% on a year-over-year basis. The year-over-year improvement in the bottom line came largely on the back of the revamped Win Strategy. In addition, a fall in cost of sales proved conducive to the earnings performance.
Inside the Headlines
Net sales in the fiscal second quarter edged down 1.3% year over year to $2,671 million, but came marginally ahead of the Zacks Consensus Estimate of $2,697 million. Currency headwinds and lackluster performance in the company’s Diversified Industrial segment proved to be a major drag.
Parker-Hannifin’s adjusted total segment operating income for the reported quarter was $391.9 million, up from the year-ago tally of $365.5 million.
Segmental Performance
At the Diversified Industrial Segment, North American sales for the quarter decreased 3.4% to $1,161 million. Additionally, this segment recorded flat growth in orders on a year-over-year basis.
International Industrial, which is also classified under the Diversified Industrial segment, performed a little better as it reported a 1.4% year-over-year increase in sales to $1,006 million. In addition to decent sales growth, orders at this segment rose 10% on a year-over-year basis.
Revenues at the Aerospace Systems segment fell 1.6% year over year to $544 million. However, orders at this segment improved 9% in the quarter under review.
Despite tepid overall sales growth, PH achieved strong adjusted segment operating margins during the reported quarter, which were a second quarter record of 14.7%, expanding 120 basis points year over year.
Liquidity
As of Dec 31, 2016, Parker-Hannifin’s cash and cash equivalents were $1,521 million compared with $1,047 million at the end of second-quarter fiscal 2016. Long-term debt was $2,654 million at the end of second-quarter fiscal 2017 compared with $2,701 million as of Dec 31, 2015.
Acquisitions
During the quarter, Parker-Hannifin inked its most notable acquisition agreement to buy air filtration systems provider – CLARCOR Inc. – for roughly $4.3 billion in cash. CLARCOR is bringing a range of industrial air and liquid filtration products and technologies to the table, which will significantly bolster Parker-Hannifin’s filtration product suite. Moreover, this acquisition will unlock fresh recurring revenue streams for Parker-Hannifin’s Filtration Group as 80% of CLARCOR’s revenue is generated through aftermarket sales.
The company is bullish on the integration of CLARCOR, with its filtration business, which will help it double sales at this unit.
Further, on Feb 1, Parker-Hannifin announced the acquisition of Helac Corporation, which specializes in the design and manufacture of helical rotary actuators. Helac also manufactures a line of attachments used in material handling and construction equipment markets.
Helac will be integrated into Parker-Hannifin’s Cylinder Division within the Hydraulics Group and its sales will be reported under Parker's Diversified Industrial segment. The addition of Helac will aid Parker-Hannifin in expanding its hydraulics product portfolio and cater to customers in a wide variety of markets.
We believe that these acquisitions will drive growth and expansion for the company in the times to come.
Guidance
Parker-Hannifin raised its guidance for adjusted earnings from continuing operations for the fiscal year ending Jun 30, 2017 to a range of $7.05–$7.55 per share (up from previous projection of $6.40–$7.10). This guidance is adjusted for expected business realignment expenses of approximately $0.25 per share, and acquisition-related expenses of $0.09 per share, and excludes any impact from the CLARCOR or Helac acquisitions.
Buoyed by the competency of the revamped Win Strategy, Parker-Hannifin is bullish about delivering its fundamental financial goals. The company has made impressive progress in key areas, including safety performance, customer experience, and profitable growth, and believes that these initiatives will unlock further growth opportunities.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been two upward revisions for the current quarter compared to one downward.
At this time, Parker-Hannifin stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. Following a similar course, the stock was allocated also a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than value investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of these revisions indicates a downward shift. The stock has a Zacks Rank #1 (Strong Buy). We are looking for an above average return from the stock in the next few months.
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Parker-Hannifin (PH) Up 4.9% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Parker-Hannifin Corporation (PH - Free Report) . Shares have added about 4.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Parker-Hannifin Q2 Earnings Top Estimates, Sales Fall Y/Y
Parker-Hannifin kept its recent streak of beating estimates alive for the sixth consecutive quarter, as its adjusted earnings of $1.91 per share for second-quarter fiscal 2017 came miles ahead of the Zacks Consensus Estimate of $1.40.
The earnings figures reflected an impressive growth of 25.7% on a year-over-year basis. The year-over-year improvement in the bottom line came largely on the back of the revamped Win Strategy. In addition, a fall in cost of sales proved conducive to the earnings performance.
Inside the Headlines
Net sales in the fiscal second quarter edged down 1.3% year over year to $2,671 million, but came marginally ahead of the Zacks Consensus Estimate of $2,697 million. Currency headwinds and lackluster performance in the company’s Diversified Industrial segment proved to be a major drag.
Parker-Hannifin’s adjusted total segment operating income for the reported quarter was $391.9 million, up from the year-ago tally of $365.5 million.
Segmental Performance
At the Diversified Industrial Segment, North American sales for the quarter decreased 3.4% to $1,161 million. Additionally, this segment recorded flat growth in orders on a year-over-year basis.
International Industrial, which is also classified under the Diversified Industrial segment, performed a little better as it reported a 1.4% year-over-year increase in sales to $1,006 million. In addition to decent sales growth, orders at this segment rose 10% on a year-over-year basis.
Revenues at the Aerospace Systems segment fell 1.6% year over year to $544 million. However, orders at this segment improved 9% in the quarter under review.
Despite tepid overall sales growth, PH achieved strong adjusted segment operating margins during the reported quarter, which were a second quarter record of 14.7%, expanding 120 basis points year over year.
Liquidity
As of Dec 31, 2016, Parker-Hannifin’s cash and cash equivalents were $1,521 million compared with $1,047 million at the end of second-quarter fiscal 2016. Long-term debt was $2,654 million at the end of second-quarter fiscal 2017 compared with $2,701 million as of Dec 31, 2015.
Acquisitions
During the quarter, Parker-Hannifin inked its most notable acquisition agreement to buy air filtration systems provider – CLARCOR Inc. – for roughly $4.3 billion in cash. CLARCOR is bringing a range of industrial air and liquid filtration products and technologies to the table, which will significantly bolster Parker-Hannifin’s filtration product suite. Moreover, this acquisition will unlock fresh recurring revenue streams for Parker-Hannifin’s Filtration Group as 80% of CLARCOR’s revenue is generated through aftermarket sales.
The company is bullish on the integration of CLARCOR, with its filtration business, which will help it double sales at this unit.
Further, on Feb 1, Parker-Hannifin announced the acquisition of Helac Corporation, which specializes in the design and manufacture of helical rotary actuators. Helac also manufactures a line of attachments used in material handling and construction equipment markets.
Helac will be integrated into Parker-Hannifin’s Cylinder Division within the Hydraulics Group and its sales will be reported under Parker's Diversified Industrial segment. The addition of Helac will aid Parker-Hannifin in expanding its hydraulics product portfolio and cater to customers in a wide variety of markets.
We believe that these acquisitions will drive growth and expansion for the company in the times to come.
Guidance
Parker-Hannifin raised its guidance for adjusted earnings from continuing operations for the fiscal year ending Jun 30, 2017 to a range of $7.05–$7.55 per share (up from previous projection of $6.40–$7.10). This guidance is adjusted for expected business realignment expenses of approximately $0.25 per share, and acquisition-related expenses of $0.09 per share, and excludes any impact from the CLARCOR or Helac acquisitions.
Buoyed by the competency of the revamped Win Strategy, Parker-Hannifin is bullish about delivering its fundamental financial goals. The company has made impressive progress in key areas, including safety performance, customer experience, and profitable growth, and believes that these initiatives will unlock further growth opportunities.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been two upward revisions for the current quarter compared to one downward.
Parker-Hannifin Corporation Price and Consensus
Parker-Hannifin Corporation Price and Consensus | Parker-Hannifin Corporation Quote
VGM Scores
At this time, Parker-Hannifin stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. Following a similar course, the stock was allocated also a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than value investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of these revisions indicates a downward shift. The stock has a Zacks Rank #1 (Strong Buy). We are looking for an above average return from the stock in the next few months.