Parker-Hannifin Underperforms Est - Analyst Blog
January 20 2012 - 8:42AM
Zacks
Parker-Hannifin Corporation (PH) released its
second-quarter fiscal 2012 earnings result before the market opened
today, reporting earnings per share of $1.56, below the Zacks
Consensus Estimate of $1.64 and above prior-year earnings of
$1.39.
Total
Revenue
The company’s sales in the reported quarter increased by 8.4%
year over year to $3.1 billion. Parker-Hannifin achieved record
sales in the second quarter. Total revenue in the quarter was aided
by double-digit growth in Industrial North America business
segment. Total orders in the quarter increased by 3%.
Segment Revenue
Industrial International segment increased 13.2% year over year
to $1.2 billion. However, the segment revenue declined from $1.3
billion in the first quarter of fiscal 2012.
Industrial North America segment revenue increased by 6.2% to
$1.2 billion. Aerospace revenue increased by 8.0% year over year to
$496.5 million. Climate and Industrial Controls segment revenue
inched down 2.9% to $208.2 million.
Orders increased by 8% in Industrial North America segment, 1%
in Industrial International segment, remained unchanged in
Aerospace segment and declined 5% in Climate and Industrial
Controls segment.
Income and Expenses
Net income for the quarter was $242.3 million, an increase of
4.5% year over year. Total segment operating margin reached a
quarterly record of 14.2% for the company, led by strong operating
margin in Industrial North America with the segment profit reaching
$195.7 million.
SG&A expense was $368.7 million in the quarter compared with
$345.7 million in the second quarter of fiscal 2011.
Balance Sheet and Cash Flow
Cash and cash equivalents were $488.0 million at the end of the
quarter with long-term debt of $1.7 billion and shareholder’s
equity of $5.2 billion.
The company generated cash flow from operations of $540.5
million in the first six month of fiscal 2012 compared with cash
flow from operations of $408.2 million in the prior-year
period.
Outlook
Parker-Hannifin lowered its fiscal 2012 earnings per share
guidance in the range of $6.90 – $7.30 from $7.25 – $7.85. The
company adjusted its guidance based on the prevailing business
conditions internationally.
We believe Parker-Hannifin is a high-quality company that is
showing signs of 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 Segment and Climate &
Industrial Controls Segment 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 #4 Rank (Sell
recommendation) over the next one-to-three months.
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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