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Here's Why Parker-Hannifin (PH) Should Grace Your Portfolio Now
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Parker-Hannifin Corporation (PH - Free Report) has been gaining from steady demand across end markets and higher orders. Synergies from the Meggitt acquisition, coupled with benefits from the Win strategy, will bolster PH’s growth story in 2023. The company’s shareholder-friendly policies hold promise.
This Zacks Rank #2 (Buy) company’s Diversified Industrial segment is benefiting from continued broad-based growth in the North American region. The Diversified Industrial segment’s revenues increased 10.8% year over year in the first nine months of fiscal 2023.
Robust original equipment manufacturer (“OEM”) and maintenance, repair and operations (“MRO”) commercial activity is aiding the Aerospace Systems segment. The Meggitt acquisition (September 2022), which has expanded PH’s presence in the UK, positioning it well to provide a broader suite of solutions for aircraft and aeroengine components and systems, has bolstered the Aerospace Systems unit. Revenues from the unit surged 88.9% year over year in the third quarter of fiscal 2023, primarily due to contribution from the Meggitt buyout. PH expects to achieve synergies of $75 million from the buyout in fiscal 2023. By fiscal 2026, it expects to achieve synergies of $300 million.
Improved margins, thanks to the unique Win Strategy (version 3.0 launched in fiscal 2020), which focuses on innovation, strategic positioning, distribution growth and incentive plan changes to drive organic growth, should drive Parker-Hannifin’s growth. With the Win strategy, the company’s adjusted EBITDA margin increased 80 basis points year over year in the first nine months of fiscal 2023.
Parker-Hannifin’s improved guidance for fiscal 2023 raises optimism in the stock. The company expects fiscal 2023 organic sales to increase approximately 10% compared with a rise of 6-8% anticipated earlier. Adjusted earnings are estimated to be between $20.60 and $20.90 per share compared with $19.20-$19.70 estimated earlier.
Parker-Hannifin’s commitment to reward its shareholders through dividends is encouraging. In April, PH hiked its dividend by 11% to $1.48 per share (annually: $5.92). In the first nine months of fiscal 2023, Parker-Hannifin rewarded its shareholders with dividends of $513.23 million, up 29% year over year. In fiscal 2022, the company distributed dividends of $569.9 million, reflecting an increase of 19.9% from the year-ago period’s level.
Amid these positives, shares of Parker-Hannifin have gained 16.5% in the year-to-date period, outperforming the industry’s 4.9% increase.
Image Source: Zacks Investment Research
The optimism surrounding the stock is evident from the Zacks Consensus Estimate for fiscal 2023 earnings being revised upward by 4.4% in the past 60 days..
Other Key Picks
Some other top-ranked stocks within the broader Industrial Products sector are as follows:
Image: Bigstock
Here's Why Parker-Hannifin (PH) Should Grace Your Portfolio Now
Parker-Hannifin Corporation (PH - Free Report) has been gaining from steady demand across end markets and higher orders. Synergies from the Meggitt acquisition, coupled with benefits from the Win strategy, will bolster PH’s growth story in 2023. The company’s shareholder-friendly policies hold promise.
This Zacks Rank #2 (Buy) company’s Diversified Industrial segment is benefiting from continued broad-based growth in the North American region. The Diversified Industrial segment’s revenues increased 10.8% year over year in the first nine months of fiscal 2023.
Robust original equipment manufacturer (“OEM”) and maintenance, repair and operations (“MRO”) commercial activity is aiding the Aerospace Systems segment. The Meggitt acquisition (September 2022), which has expanded PH’s presence in the UK, positioning it well to provide a broader suite of solutions for aircraft and aeroengine components and systems, has bolstered the Aerospace Systems unit. Revenues from the unit surged 88.9% year over year in the third quarter of fiscal 2023, primarily due to contribution from the Meggitt buyout. PH expects to achieve synergies of $75 million from the buyout in fiscal 2023. By fiscal 2026, it expects to achieve synergies of $300 million.
Improved margins, thanks to the unique Win Strategy (version 3.0 launched in fiscal 2020), which focuses on innovation, strategic positioning, distribution growth and incentive plan changes to drive organic growth, should drive Parker-Hannifin’s growth. With the Win strategy, the company’s adjusted EBITDA margin increased 80 basis points year over year in the first nine months of fiscal 2023.
Parker-Hannifin’s improved guidance for fiscal 2023 raises optimism in the stock. The company expects fiscal 2023 organic sales to increase approximately 10% compared with a rise of 6-8% anticipated earlier. Adjusted earnings are estimated to be between $20.60 and $20.90 per share compared with $19.20-$19.70 estimated earlier.
Parker-Hannifin’s commitment to reward its shareholders through dividends is encouraging. In April, PH hiked its dividend by 11% to $1.48 per share (annually: $5.92). In the first nine months of fiscal 2023, Parker-Hannifin rewarded its shareholders with dividends of $513.23 million, up 29% year over year. In fiscal 2022, the company distributed dividends of $569.9 million, reflecting an increase of 19.9% from the year-ago period’s level.
Amid these positives, shares of Parker-Hannifin have gained 16.5% in the year-to-date period, outperforming the industry’s 4.9% increase.
Image Source: Zacks Investment Research
The optimism surrounding the stock is evident from the Zacks Consensus Estimate for fiscal 2023 earnings being revised upward by 4.4% in the past 60 days..
Other Key Picks
Some other top-ranked stocks within the broader Industrial Products sector are as follows:
Ingersoll Rand (IR - Free Report) presently carries a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 12.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Ingersoll Rand has an estimated earnings growth rate of 8.9% for the current year. The stock has rallied 12.8% in the year-to-date period.
Allegion (ALLE - Free Report) presently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 12.5%, on average.
Allegion has an estimated earnings growth rate of 15.1% for the current year. The stock has gained 2.5% in the year-to-date period.