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Reasons Why Parker-Hannifin (PH) Stock is Worth Investing in Now

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Parker-Hannifin Corporation (PH - Free Report) seems an attractive investment option for investors seeking exposure in the manufacturing space. Its investment appeal is supported by solid fundamentals and growth prospects. The manufacturer of motion & control technologies and systems presently carries Zacks Rank #2 (Buy).

The company is based in Cleveland, OH, and has a $34.3-billion market capitalization. It belongs to the Zacks Manufacturing – General Industrial industry, which comes under the ambit of the Zacks Industrial Products sector. Notably, the industry is currently in the top 25% (with a rank of 64) of more than 250 Zacks industries.

In the past three months, the company’s shares have gained 34.6% compared with the industry’s growth of 16.4%. Also, the sector and the S&P 500 rallied 19.1% and 11%, respectively, during the same timeframe.


Below we have discussed why it is prudent to invest in Parker-Hannifin now.

Diversified Businesses & Other Tailwinds: The company has a solid product portfolio — including sealing devices, fluid connectors, hydraulic components, fluid metering and lubrication components. Such a wide range of products are used by customers in mobile construction, agriculture, transportation, refrigeration and air conditioning, aerospace, and other end markets. Such diversity enables it to make for the losses in one or more markets with benefits in others.

In the quarters ahead, strengthening businesses in aerospace military maintenance, repair and overhaul (“MRO”) as well as rail and power generation; semiconductor, life science and military original equipment manufacturers (OEMs) markets are likely to aid the company’s performance.

In addition to these, buyout activities (explained below), unique Win Strategy, cost-control measures and growth investments are likely tailwinds.

For fiscal 2021 (ending June 2021), Parker-Hannifin anticipates adjusted earnings of $11.70-$12.30 per share. This projection represents an increase from $9.80-$10.80 mentioned earlier.

Buyouts: The company expanded market share, customer base and product offerings through acquisitions. Notably, it added Exotic Metals Forming Company to its portfolio in September 2019, while LORD Corporation was acquired in October 2019.

Sales in the first quarter of fiscal 2021 (ended September 2020) and fourth-quarter fiscal 2020 (ended June 2020) gained 9.1% and 8.1%, respectively, from buyouts. Further, the company anticipates a positive sales impact of 2.8% in fiscal 2021.

Reward to Shareholders: The company ardently believes in rewarding shareholders through dividend payouts. In the first quarter of fiscal 2021, it paid out $113.5 million as dividends to shareholders. Notably, the payout was relatively flat from the year-ago comparable quarter.

It is worth noting here that that the share buyback activities were temporarily halted in March due to the pandemic. As for the dividends, the quarterly rate has been hiked by 16% in April 2019. The rate presently is pegged at 88 cents.

Earnings Estimate Trend: In the past 60 days, the company’s earnings estimates have been increased, suggesting positive sentiments for the stock. Notably, the Zacks Consensus Estimate for Parker-Hannifin’s earnings is pegged at $12.18 for fiscal 2021 and $14.27 for fiscal 2022 (ending June 2022), reflecting growth of 13.8% and 6.8% from the 60-day-ago numbers.

Also, estimates for the second quarter of fiscal 2021 (ended December 2020) grew 9.5% to $2.43 in the past 60 days. Seven upward revision revisions in estimates were recorded for the second quarter of fiscal 2021 and fiscal 2022, while nine hikes in estimates were recorded for fiscal 2021. Notably, there were no downward revisions for three periods.

Other Key Picks

Some other top-ranked stocks in the industry are EnPro Industries, Inc. (NPO - Free Report) , Applied Industrial Technologies, Inc. (AIT - Free Report) and Dover Corporation (DOV - Free Report) . While EnPro currently sports a Zacks Rank #1 (Strong Buy), both Applied Industrial and Dover carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for EnPro and Dover improved for the current year, while were unchanged for Applied Industrial. Further, the earnings surprise for the last reported quarter was 109.38% for EnPro, 39.06% for Applied Industrial and 22.14% for Dover.

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