Parker-Hannifin Reiterates at Neutral - Analyst Blog
January 12 2012 - 7:30AM
Zacks
We recently maintained a Neutral
recommendation on Parker-Hannifin Corporation
(PH).
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.
Parker-Hannifin’s manufacturing,
service, distribution and administrative facilities are located in
40 states and in 47 foreign countries. The company’s motion and
control technologies and systems are used in the products of its
three principal business segments: Industrial; Aerospace; and
Climate & Industrial Controls. The products are sold as
original and replacement equipment through product and distribution
centers worldwide
On October 18, 2011, the company
came out with record first-quarter fiscal 2012 earnings per share
of $1.91, which was above the Zacks Consensus Estimate of $1.70 and
prior-year earnings of $1.51.
The company’s total revenue
increased by 14.3% year over year to $3.2 billion, which is also a
record level achieved. Sales for the quarter included 1%
contribution from acquisition and 3% from currency effects. Total
orders in the quarter increased by 9%.
Industrial International segment
achieved highest sales growth on a year-over-year basis, with its
revenue increasing by 17.9% to $1.3 billion. However, the segment
revenue declined from $1.4 billion in the fourth quarter of
2011.
Industrial North America segment
revenue increased 13.1% to $1.2 billion. Aerospace revenue
increased 13.9% year over year to $497.5 million. Climate and
Industrial Controls segment revenue spiked 3.3% to $242.5
million.
Parker Hannifin increased its
fiscal 2012 earnings per share guidance in the range of $7.25 –
$7.85 from $6.70 – $7.50. The increased expectation was led by
excellent first-quarter result, solid order intake and a decline in
share count.
The company had a good start in
2012, with first-quarter sales reaching an all-time record of $3.2
billion, an increase of 14% over last year. Parker-Hannifin’s
incremental margin return on sales was 20% for the quarter, which
was above the company’s guidance of about 16%.
Parker-Hannifin continues to
benefit from a recovering economy and implementation of the Win
Strategy. The company focuses on providing leading services to its
customers, lean operations and investments in new developments,
which will help it to achieve strong earnings growth ahead. Net
income in the quarter reached a record high of $298 million. Net
income margin was a record 9.2%. Diluted earnings in the quarter
were also at an all time high.
However, a depressed market
condition remains a matter of concern for the company. Orders for
the Climate and Industrial Control segment inched down 1% due to
weakness in some of their markets. Major competitors of
Parker-Hannifin are Eaton Corporation (ETN),
EMERSON ELECTRIC CO. (EMR) and Honeywell International
Inc. (HON).
We expect the company to perform in
line with the market and hence maintained a Neutral
recommendation.
EMERSON ELEC CO (EMR): Free Stock Analysis Report
EATON CORP (ETN): Free Stock Analysis Report
HONEYWELL INTL (HON): Free Stock Analysis Report
PARKER HANNIFIN (PH): Free Stock Analysis Report
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