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Parker Hannifin Corporation (PH) released its fourth-quarter fiscal 2011 earnings result before the market opened today, reporting earnings per share of $1.79, slightly below the Zacks Consensus Estimate of $1.80 and above prior-year earnings of $1.35.

For full-year fiscal 2011, earnings per share of $6.37, were in line with the Zacks Consensus Estimate. The company achieved record earnings results during the year and also record sales and earnings for the quarter.

Total Revenue

The company’s sales in the reported quarter increased by 22.4% year over year to $3.4 billion. Sales for the quarter included a 1% contribution from acquisition and 6% from currency effects. Total orders in the quarter increased by 15%.

Segment Revenue

Industrial International segment achieved highest sales growth, with its revenue increasing by 33.8% year over year to $1.4 billion. This was followed by Industrial North America segment revenue increasing by 18.6% to $1.2 billion and Climate and Industrial Controls segment revenue by 15.2% to $276.8 million. Aerospace revenue was up 9.3% to $521.9 million.

Orders increased by 11% in the Industrial North America segment, 18% in Industrial International, 27% in Aerospace and 1% in Climate and Industrial Controls.

Income and Expenses

Net income for the quarter was $294.7 million, an increase of 32.1% year over year. Industrial North America operating margin was 16.9% and Industrial International margin was 14.7%.

SG&A expense was $413.4 million in the quarter compared with $349.3 million in the fourth quarter of 2010.

Balance Sheet and Cash Flow

Cash and cash equivalents was $657.5 million at the end of the quarter with long-term debt of $1.7 billion and shareholder’s equity of $5.4 billion.

The company generated cash flow from operations of $1.17 billion in fiscal 2011 compared with cash flow from operations of $1.22 billion in the prior-year period.

Outlook

Parker Hannifin expects fiscal 2012 earnings per share to be in the range of $6.70 to $7.50. The company continues to focus on implementation of Win Strategy, a prime benefactor for Parker. The company aims on providing leading services to its customers, new product developments and system innovations. Acquisitions are also a target for the company for growth.  

We believe Parker Hannifin is a high-quality company that is showing good execution. 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.

However, the company’s domestic and foreign operations are subject to significant competitive pressures. To compete successfully, the company’s Industrial and Climate & Industrial Controls must excel in terms of product quality and innovation, customer service, manufacturing and distribution capability and price competitiveness.

Meanwhile, the Aerospace segment must excel on the basis of technological and engineering capability, quality, delivery and service, and price competitiveness. Major competitors of Parker are Eaton Corporation (ETN) and Honeywell International Inc. (HON)

Parker-Hannifin Corporation is a leading worldwide full-line diversified manufacturer of motion and control technologies and systems, including fluid power systems, electromechanical controls and related components. In addition to motion and control products, the company is also a leading worldwide producer of fluid purification, fluid and fuel control, process instrumentation, air conditioning, refrigeration, electromagnetic shielding and thermal management products and systems.

We continue to maintain a Neutral rating on Parker-Hannifin for the long term. The company has a Zacks #2 Rank (Buy recommendation) over the next one-to-three months.

 
EATON CORP (ETN): Free Stock Analysis Report
 
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