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Parker-Hannifin (PH) Down 10.8% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Parker-Hannifin (PH - Free Report) . Shares have lost about 10.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Parker-Hannifin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Parker-Hannifin Q3 Earnings Top Estimates, Revenues Lag

Parker-Hannifin reported mixed results for third-quarter fiscal 2019 (ended March 2019), wherein its earnings beat estimates but revenues lagged the same.

Earnings/ Revenues

Quarterly adjusted earnings came in at $3.17 per share, up 13.2% year over year from $2.80 per share. The bottom line also outpaced the Zacks Consensus Estimate of $3.01.

Revenues for the fiscal third quarter were $3,687.5 million, down 1.7% year over year. However, the figure improved 2% organically. Notably, the top line missed the consensus estimate of $3.71 billion.

Segmental Breakup

Revenues in the North American segment came in at $1,750.6 million, down 1% year over year.

The company’s International top-line performance depreciated 8% to $1,284.9 million in the reported quarter.

The Aerospace Systems segment generated revenues of $652.1 million, up 9% year over year.

Costs/Margins

Cost of sales in the fiscal third quarter was $2,766.7 million, down 1.9% year over year. Selling, general and administrative expenses were $360.9 million, down from $416.5 million incurred in the year-ago quarter. Adjusted operating margin was 17.2%, up 90 basis points.

Balance Sheet/Cash Flow

Exiting the fiscal third quarter, Parker-Hannifin had cash and cash equivalents of $1,098.7 million, up from $1,089.5 million recorded as of Mar 31, 2018. At the end of the reported quarter, long-term debt was $4,284.2 million compared with $4,818.6 million as of Mar 31, 2018.

In the first nine months of fiscal 2019, the company generated $1,092.6 million cash from operating activities, up from $901.2 million witnessed in the comparable period last fiscal year.

Outlook

Parker-Hannifin intends to boost its near-term revenues and profitability on the back of its Win Strategy. The company has revised its earnings view for fiscal 2019 from $11.35-$11.85 to $11.45-$11.75 per share. However, organic revenue growth is predicted to lie in the 2-3% range, lower than the prior view of 2-4%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Parker-Hannifin has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Parker-Hannifin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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