2nd UPDATE: Parker Hannifin 2Q Net Up 4.6%; Lowers Outlook
January 20 2012 - 12:13PM
Dow Jones News
Parker Hannifin Corp.'s (PH) fiscal second-quarter earnings rose
4.6%, but its profit was lower than expected and the diversified
manufacturer trimmed its outlook for 2012 as business conditions
weakened overseas.
The company lowered its profit guidance for the year to $6.90 to
$7.30 a share, from guidance in October of $7.25 to $7.85 a share.
Analysts had anticipated the company would earn $7.43 a share. The
revision moves the company's profit target closer to the range
projected in August. Parker moved up its guidance in October after
particularly strong fiscal first quarter results.
"We did see some demand moderating, which is what we had
anticipated," said Chairman and Chief Executive Don Washkewicz
during a conference call Friday with analysts. "Internationally, we
are seeing some softening in business conditions consistent with
global macroeconomic indicators."
Parker's diminished outlook will likely raise investors' anxiety
about Eaton Corp. (ETN) and other industrial conglomerates that
compete in some of the same markets as Parker.
Parker's stock was recently trading down 5% at $80.70 a
share.
The company's product lines include components for hydraulic and
pneumatic gear used in construction equipment, aircraft parts,
components for commercial trucks and refrigeration and
air-conditioning equipment. The Cleveland-based company's customers
include machinery makers Caterpillar Inc. (CAT), Deere & Co.
(DE) and aerospace manufacturer Boeing Co. (BA).
Parker's orders, an indication of future sales, rose 3% in the
second quarter from a year earlier, but most of the improvement was
driven by an 8% increase in orders for the company's North America
industrial business segment. Orders rose just 1% in the
international industrial business and declined 5% in the climate
and industrial controls business. Orders for the aerospace segment,
meanwhile, were flat.
The company attributed the softness in aerospace orders to
unsettled economic conditions in Europe, tough year-earlier
comparison figures and seasonal weakness caused by the Christmas
and New Year's holidays.
"December is always a lousy month from a business standpoint
because of the holidays," Washkewicz said.
For the quarter ended Dec. 31, the company's operating margin
increased slightly to 14.2% from 14% a year earlier. But the margin
declined from the first quarter's 16.1%.
Parker's North American industrial business was the company's
best-performing business segment, as sales climbed 13.2% to $1.18
billion. The segment's operating income increased 23% to $195.7
million, as the operating margin rose 1.3 percentage points from a
year earlier to 16.5%.
Conversely, the operating margin for the international
industrial business slipped 1 point to 13.6%, as operating income
fell 1.1% to $165.9 million. Sales from the international business
increased 6.2% to $1.2 billion.
Aerospace segment sales increased 8% to $496.5 million.
Operating income from the business rose 10.5% to $70.3 million.
Sales for the climate and industrial controls segment fell 2.9% as
operating income was nearly flat from a year earlier at $9.8
million.
Overall for the quarter, Parker reported a profit of $240.8
million, or $1.56 a share, up from $230.2 million, or $1.39 a
share, a year earlier. Net sales increased 8.4% to $3.11
billion.
Analysts polled by Thomson Reuters had forecast earnings of
$1.62 a share on revenue of $3.1 billion.
Earlier this week, the company said it launched a tender offer
to purchase the remaining 43.51% of Japanese subsidiary Taiyo Ltd.
(6252.TO), which manufactures hydraulic and pneumatic gear and has
annual sales of about $225 million. The offer is valued at $75
million and has the support of Taiyo's board, Parker said. Parker
took a majority stake in the company in 2006.
--By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
--Ben Fox Rubin contributed to this article.
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