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Parker-Hannifin (PH) to Post Q1 Earnings: What's in the Cards?

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Parker-Hannifin Corporation (PH - Free Report) is slated to report first-quarter fiscal 2022 (ended September 2021) results on Nov 4, before market open.

The company pulled off a surprise of 19.34%, on average, in the last four quarters, beating on earnings all through. Parker-Hannifin’s fourth-quarter fiscal 2021 (ended June 2021) adjusted earnings of $4.38 per share outpaced the Zacks Consensus Estimate of $4.32 by 1.39%.

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In the past three months, shares of the company have lost 1.6% compared with a 4.2% decline of the industry it belongs to.

Factors at Play

Parker-Hannifin is expected to have benefited from strength in its industrial end market in the first-quarter fiscal 2022. Also, recovery in the company’s commercial aerospace end market is likely to have driven its top line. However, it has been witnessing supply-chain challenges and an increase in labor and raw material costs, which might have had a bearing on its performance in the quarter.

Acquisitions made by the company positively impacted its revenues in fourth-quarter fiscal 2021. The trend is likely to have continued in the to-be-reported quarter as well, given the strength across its acquired businesses. The company strengthened its business portfolio through the buyout of Exotic Metals Forming Company and LORD Corporation in fiscal 2020 (ended June 2020).

Parker-Hannifin’s unique Win Strategy and growth-based investments are likely to have been beneficial in the quarter under review. Also, several cost-control actions taken by the company, including the reduction of discretionary expenses, are expected to have helped it maintain a healthy margin performance.

Despite its cost-management focus, the company has been experiencing rising cost of sales and operating expenses over the past few quarters. In fourth-quarter fiscal 2021, its cost of sales increased 19.7% year over year while selling and administrative expenses jumped 17.3%. Expenses associated with the company’s realignment program might have also affected its profitability in the fiscal first quarter. It anticipates realignment expenses to hurt its adjusted earnings by 27 cents per share in fiscal 2022 (ending June 2022).

The Zacks Consensus Estimate for first-quarter fiscal 2022 revenues for the Aerospace segment is pegged at $594 million, suggesting growth of 3.7% from the year-ago reported figure but a decline of 5.7% on a sequential basis. The consensus estimate for revenues for the North America operations of the Diversified Industrial segment stands at $1,724 million, indicating 12.8% growth year over year but a 5.4% decline from the quarter-ago reported number. The consensus mark of $1,335 million for International operations of the Diversified Industrial segment indicates a year-over-year increase of 18.2% but an 11.4% decline sequentially.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat. But that is not the case here as we will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Parker-Hannifin has an Earnings ESP of -2.65%, as the Most Accurate Estimate is pegged at $3.68, lower than the Zacks Consensus Estimate of $3.78.

Zacks Rank: The company carries a Zacks Rank #4 (Sell).

Key Picks

Here are some companies you may want to consider from the Zacks Industrial Products sector as our model shows that these have the right combination of elements to deliver an earnings beat this season:

Deere & Company (DE - Free Report) has an Earnings ESP of +5.55% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Middleby Corporation (MIDD - Free Report) has an Earnings ESP of +1.54% and a Zacks Rank #3.

Johnson Controls International plc (JCI - Free Report) has an Earnings ESP of +0.17% and a Zacks Rank of 2, at present.