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Parker-Hannifin's (PH) Deal to Acquire Meggitt Gets Approval

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Parker-Hannifin Corporation (PH - Free Report) yesterday announced that the terms of its recommended acquisition of Meggitt PLC have been approved by the latter’s shareholders. In August 2021, the company entered into an agreement to acquire Meggitt’s all issued and to be issued ordinary share capital in cash.

Parker-Hannifin’s shares declined 1.9% yesterday to eventually close the trading session at $279.47.

Headquartered in Coventry, the U.K., Meggitt is a leading provider of aerospace and defense motion and control technologies. The company, which employs more than 9,000 people globally, generated annual revenues of about $2.3 billion in 2020.

Inside the Headlines

The Meggitt acquisition, which is in sync with Parker-Hannifin’s Win Strategy, is expected to strengthen the company's engineered aerospace offerings across the aerospace and defense end markets. The company expects the addition of Meggitt’s strong research and development capabilities, skilled workforce, and solid operational practices to enhance its shareholder value.

The completion of the transaction, which is subject to certain regulatory clearances, is anticipated to take place in third quarter of calendar 2022.

Meggitt will be integrated into Parker-Hannifin’s Aerospace Systems segment. This segment designs and manufactures aerospace products and provides aftermarket support to commercial, business jet, military, and general aviation aircraft and missile end markets. The segment generated revenues of $630 million, accounting for 15.9% of net revenues in fourth-quarter fiscal 2021 (ended June 2021).

A couple of other notable buyouts made by Parker-Hannifin in fiscal 2020 (ended June 2020) are Exotic Metals Forming Company and LORD Corporation. The company did not acquire any assets in fiscal 2021. Acquired assets boosted the company’s sales by $394.1 million in fiscal 2021.

Zacks Rank, Price Performance and Estimate Revisions

Parker-Hannifin, with approximately $36.1 billion market capitalization, currently carries a Zacks Rank #3 (Hold). The company is poised to benefit from improving product demand, acquisitions, cost-control measures, and share-holder friendly policies in the quarters ahead. However, it has been dealing with the adverse impacts of high cost of sales and operating expenses over time.

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Year to date, the company’s share price has increased 2.5% compared with the industry’s growth of 5.7%.

The Zacks Consensus Estimate for its earnings is pegged at $17.05 for fiscal 2022 (ending June 2022), down 0.1% from the 30-day-ago figure. The consensus estimate for fiscal 2023 (ending June 2023) earnings is pegged at $18.85, down 0.4% over the same time frame.

Key Picks

Some better-ranked stocks from the same space are Kadant Inc (KAI - Free Report) , Helios Technologies, Inc (HLIO - Free Report) , and EnPro Industries, Inc. (NPO - Free Report) . While Kadant sports a Zacks Rank #1 (Strong Buy), Helios and EnPro Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kadant pulled off a trailing four-quarter earnings surprise of 22.26%, on average.

Helios pulled off a trailing four-quarter earnings surprise of 36.46%, on average.

EnPro Industries pulled off a trailing four-quarter earnings surprise of 80.64%, on average.