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Earnings Preview: Parker Hannifin

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Parker Hannifin Corporation (PH - Free Report) is slated to release third-quarter fiscal 2011 results on Wednesday, April 27. The current Zacks Consensus Estimate for third quarter earnings per share (EPS) is $1.54, representing an annualized growth of 63.40%.  

Parker Hannifin had outperformed the Zacks Consensus Estimate over the trailing four quarters with a positive surprise of 5.40%.

Second Quarter Highlights

Parker Hannifin reported second-quarter fiscal 2011 earnings per share from continuing operations of $1.39. The company surpassed the Zacks Consensus Estimate of $1.30. Earnings for the period were more than double the earnings of $0.64 in the second quarter of fiscal 2010.

Total revenue for the quarter was $2.9 billion, representing a year-over-year increase of 21.7%. The increase in total revenue was led by strong demand in many market most markets. Total organic sales increased by 22% with sales increasing surging in all segments. Orders levels were up in all segments of the company and impressively, the company’s aerospace segment witnessed a recovery in demand during the quarter.

Agreement of Estimate Revisions  

In the last 7 days, two earnings estimate was increased for fiscal 2011 and and one for fiscal 2012 each out of 16 and 17 total estimates, respectively. Moreover, one earnings estimate for the second quarter of fiscal 2011 was raised.

Magnitude of Estimate Revisions  

Despite a positive revision, the absence of magnitude kept earnings estimates stable for 2011 and 2012 in the last 7 days.

The estimate for the third quarter has was also stable at $1.54 per share, reflecting a growth of 63.40% over the year-ago comparable quarter.

Our Take  

We believe Parker Hannifin is a high-quality company that is showing good execution through its cost-saving efforts. The company is witnessing a recovery in aerospace demand, which positively favors its future growth.

MRO (Maintenance, Repair, and Overhaul) is expected to get a boost from continued deferral of capital investment in new machines. Parker Hannifin’s strong exposure to MRO-type products and ability to convert net income into free cash flow will benefit future earnings.

We currently maintain our Neutral recommendation on Parker Hannifin, with a Zacks #2 Rank (Buy recommendation) over the next one-to-three months.

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