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Parker-Hannifin (PH) to Post Q2 Earnings: What's in Store?

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Parker-Hannifin Corporation (PH - Free Report) is slated to report second-quarter fiscal 2020 (ended December 2019) results on Jan 30, before market open.

The company pulled off positive earnings surprise of 5.29%, on average, in the last four quarters, beating estimates all through. Parker-Hannifin’s first-quarter fiscal 2020 (ended September 2019) adjusted earnings of $2.76 per share outpaced the Zacks Consensus Estimate of $2.64 by 4.55%.

In the past six months, the company’s shares have gained 12.3% compared with 8.4% growth recorded by the industry it belongs to.

Factors at Play

Parker-Hannifin is likely to have benefited from strength in its original equipment manufacturer business, particularly in military end markets. Also, growth in commercial aftermarket business is expected to have bolstered its Aerospace Systems segment's top line in the fiscal second quarter.

Also, strength across end markets like forestry, marine, and lawn and turf might have supplemented revenues in the quarter. In addition, benefits of the company’s unique Win Strategy and growth-based investments are expected to get reflected in its results. Moreover, synergy savings from the CLARCOR acquisition (March 2017) are expected to get reflected in its results. Further, the acquired Exotic Metals Forming business (September 2019), which has been supporting the company’s aerospace products and solutions with unique products and proprietary manufacturing capabilities, might have bolstered Aerospace segment’s fiscal second quarter revenues.

However, low orders, on account of weakness in the global industrial end markets, particularly in Europe and Asia-Pacific might have affected the top line of the Diversified Industrial segment. Also, for fiscal 2020, Parker-Hannifin expects to incur business-realignment expenses of $40 million, higher than $20 million projected earlier. Notably, the company’s realignment initiative might have affected its fiscal second-quarter financials.

In addition, the company’s significant international presence exposes it to unfavorable movements in foreign currencies, which might have affected its revenues in the to-be-reported quarter. For fiscal 2020, the company expects adverse foreign currency translation to affect the company's top line by 1%.

Notably, the Zacks Consensus Estimate for second-quarter fiscal 2020 revenues for the Aerospace segment is pegged at $753 million, indicating growth of 22.1% from the year-ago quarter reported number. The consensus estimate for revenues for the North America operations of the Diversified Industrial segment stands at $1,611 million, indicating a 1.3% decline from the year-ago quarter reported figure.  The consensus mark of $1,098 million for International operations of the Diversified Industrial segment indicates a decline of 10.3%.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat. But that is not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESPParker-Hannifin has an Earnings ESP of -0.79% as the Most Accurate Estimate is pegged at $2.27, lower than the Zacks Consensus Estimate of $2.29.

Zacks Rank: Parker-Hannifin carries a Zacks Rank #3.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right mix of elements to beat estimates this time around:

Stanley Black & Decker, Inc. SWK has an Earnings ESP of +1.21% and a Zacks Rank of 3.You can see the complete list of today’s Zacks #1 Rank stocks here.

Rockwell Automation, Inc. ROK has an Earnings ESP of +1.36% and a Zacks Rank of 3.

Dover Corporation DOV has an Earnings ESP of +1.72% and a Zacks Rank #3.

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