Parker-Hannifin Tops Expectations

Parker-Hannifin Corporation(PH - Analyst Report) reported earnings per share of $2.01 per share in the third quarter of fiscal 2012, compared to $1.68 in the year-ago quarter, easily beating the Zacks Consensus Estimate of $1.72.

Total Revenue

Parker-Hannifin posted sales of $3.4 billion, up 4.7% from the year-ago quarter. Organic sales growth came in at 6% driven by double-digit growth in the Industrial segment in North America. However, currency translation adversely impacted sales by 1% in the quarter. Orders increased 2% year over year.

Segment Revenue

On a segment basis, Revenues from the Industrial segment in North America increased by 11.6% to $1.3 billion. Industrial International segment declined by 0.5% year over year to $1.3 billion.

Aerospace revenue increased by 7.7% year over year to $542.8 million. Climate and Industrial Controls segment revenues declined by 6.0% to $248.7 million.

Orders increased by 7% in Industrial North America segment, 1% in Industrial International segment, increased 4% in the Aerospace segment but declined 6% in Climate and Industrial Controls segment.

Income and Expenses

Net income for the quarter was $312.7 million, an increase of 11.0% year over year. Total segment operating margin reached a quarterly record of 15.1%, up from 14.2% in the previous quarter, propelled by strong operating margin in Industrial North America.

SG&A expense was $377.5 million in the quarter compared with $375.0 million in the third quarter of fiscal 2012.

Balance Sheet and Cash Flow

Cash and cash equivalents were $773.5 million at the end of the third quarter, compared to $1,107.9 million at the end of the year-ago quarter. Long-term debt came in at $1.5 billion, down from $1.7 billion in the previous quarter.

The company generated cash flow from operations of $1,006.5 million in the first nine months of fiscal 2012 compared with cash flow from operations of $799.9 million in the year-ago period.

Outlook

Driven by strong results in the first nine months of fiscal 2012, Parker-Hannifin increased its fiscal 2012 earnings per share guidance in the range of $7.30 – $7.50 from $6.90 – $7.30. The company adjusted its guidance based on the prevailing business conditions internationally.

Parker-Hannifin Corporation is a leading worldwide full-line diversified manufacturer of motion and control technologies and systems, including fluid power systems, electromechanical controls and related components. In addition to motion and control products, the company is also a leading worldwide producer of fluid purification, fluid and fuel control, process instrumentation, air conditioning, refrigeration, electromagnetic shielding and thermal management products and systems.

The company continues to build a robust financial position, maintaining a strong cash flow generation for the company.

We continue to maintain a Neutral recommendation on Parker-Hannifin for the long term. The company has a Zacks #2 Rank which translates into a short-term rating of Buy.