Back to top

Image: Bigstock

Parker-Hannifin Arm & Lufthansa Technik Ink Long-Term Deal

Read MoreHide Full Article

Parker Aerospace, a business unit of Parker-Hannifin Corporation (PH - Free Report) , has inked a long-term agreement with Lufthansa Technik for the maintenance, repair, and overhaul (“MRO”) services of Airbus A350 components. The deal includes the majority of repairable components for the A350 fuel, hydraulic and fuel tank inerting systems.

The collaboration will help increase component and systems reliability and diminish related maintenance costs for airline customers globally. The partnership will help optimize services by focusing on repair development, instead of replacing components. This will help keep the aircraft in flight longer, in turn, reducing costs.

In addition to being an original equipment manufacturer (OEM), Parker-Hannifin develops and integrates components across many aerospace technologies, while Lufthansa Technik is a leader in MRO with expansive knowledge of airline operations. The integration of OEM data with powerful MRO insight and repair capabilities will likely help drive efficiency, optimize reliability and reduce costs.

Parker-Hannifin has been enjoying remarkable revenue expansion and improved margins on the back of the revamped Win Strategy, in recent times.The company is also seeing improving demand in key end markets and regions, with order growth being positive for four consecutive quarters.

In addition, Parker-Hannifin continues to benefit from its extensive distribution network, which sells to the more lucrative MRO markets. Robust distribution sales helped it reach out to smaller OEMs. We believe the company’s strong aftermarket sales are likely to raise its bottom line and margins for fiscal 2018 and beyond.

Buoyed by the competency of the revamped Win Strategy and strategic acquisitions, Parker-Hannifin is bullish about delivering its fundamental financial goals. Investors also seem to be optimistic on the company’s future prospects, as its shares have risen 41% over the past year, outperforming the industry’s average return of 28%.

Furthermore, Parker-Hannifin’s strategic buyouts have constantly broadened its market presence and boosted its core revenue growth. For instance, the CLARCOR buyout has strengthened the company’s filtration product suite, thus driving recurring revenue growth. Also, other bolt-on acquisitions completed over the past two years, namely Jäger Automobil-Technik GmbH, Jäger Automotive Polska President Engineering Group Limited and Helac Corporation are anticipated to supplement top-line growth, going forward.

Also, the company’s diligent global restructuring initiatives are proving conducive to profitability. These initiatives helped Parker-Hannifin offset weakness in some vital regions, thus strengthening its position in the end markets.

The company has made impressive progress in key areas, including safety performance, customer experience, and profitable growth, and believes these initiatives will unlock further growth opportunities.

However, this Zacks Rank #3 (Hold) company has been affected by an escalation in prices for core materials like steel, aluminum, castings and nickel, among others, over the past few quarters. Such price hikes can significantly mar the company’s profits and margins. Also, Parker-Hannifin has been experiencing sluggishness in its key natural resources market, including oil and gas, agriculture, mining and construction equipment, which can exert a lot of pressure on the company’s distributors engaged in the oil and gas business.

Zacks Rank & Stocks to Consider

Better-ranked stocks in the broader space include Barnes Group Inc. (B - Free Report) , A.O. Smith Corporation (AOS - Free Report) and Franklin Electric Co., Inc. (FELE - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Barnes Group has a solid earnings surprise history for the trailing four quarters, having beaten estimates each time for an average of 11.6%.

A.O. Smith also has a decent earnings surprise history, with an average beat of 3.3% over the trailing four quarters, beating estimates thrice.

Franklin Electric generated one beat and two in-line earnings over the trailing four quarters, for an average positive surprise of 0.4%.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Published in