Parker-Hannifin Corporation ( PH Quick Quote PH - Free Report) have rallied 23.3% in the year-to-date period, outperforming the industry’s 8.9% increase. The upside can be linked primarily to strong demand across end markets and PH’s shareholder-friendly policies. Image Source: Zacks Investment Research What’s Aiding the Stock?
Steady demand across end markets and higher orders are supporting Parker-Hannifin’s growth. Orders were up 2% year over year in the fiscal third quarter. The Diversified Industrial segment is benefiting from continued broad-based growth in the North American region. The segment’s revenues increased 10.8% year over year in the first nine months of fiscal 2023. Revenues at the Aerospace Systems segment surged 67% year over year in the first nine months of fiscal 2023 owing to robust original equipment manufacturer and maintenance, repair and operations commercial activity.
Benefits from Parker-Hannifin’s Win Strategy, which focuses on innovation, strategic positioning, distribution growth and incentive plan changes to drive organic growth, is expected to have boosted the company’s shares. Thanks to contribution from the Win Strategy, the company’s adjusted EBITDA margin increased 80 basis points year over year in the first nine months of fiscal 2023. The September 2022 acquisition of Meggitt plc is driving growth of the Aerospace Systems segment. Segmental revenues surged 88.9% year over year in the fiscal third quarter. The acquisition has expanded Parker-Hannifin’s presence in the United Kingdom, positioning it well to provide a broader suite of solutions for aircraft and aeroengine components and systems. Considering the benefits of this acquisition and strength across key end markets, Parker-Hannifin improved earnings and organic growth forecast for fiscal 2023. 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 shareholders through dividends holds promise. 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. Will the Uptrend in Shares Last?
While a slowdown in the manufacturing sector hints at a softer demand environment for Parker-Hannifin, market watchers predict an improvement in the situation in the second half of 2023. This signals industrial companies, including PH, to prepare for demand recovery in the future. Continued improvements in supply chains and faster deliveries are expected to aid PH’s performance in 2023.
Despite a slowdown in manufacturing activities, key end markets have remained strong. This should help PH’s shares hold up well, at least in the near term. Zacks Rank & Key Picks
Parker-Hannifin carries a Zacks Rank #3 (Hold).
Some better-ranked stocks within the broader Industrial Products sector are as follows: Flowserve ( FLS Quick Quote FLS - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 2.5%, on average. You can see . the complete list of today’s Zacks #1 Rank stocks here Flowserve has an estimated earnings growth rate of 64.5% for the current year. Shares of the company have gained 16.6% in a year. Graco ( GGG Quick Quote GGG - Free Report) currently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 7.9%, on average. Graco has an estimated earnings growth rate of 16.4% for the current year. Shares of the company have rallied 30.2% in a year. Ingersoll Rand ( IR Quick Quote IR - Free Report) presently sports a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 12.6%, on average. Ingersoll Rand has an estimated earnings growth rate of 14.8% for the current year. Shares of the company have jumped 24.7% in a year.