Parker-Hannifin Q1 Earnings Beat, Up Y/Y, Guidance Intact

Parker-Hannifin Corporation (NYSE:PH) reported adjusted earnings of $1.61 per share for the first-quarter of fiscal 2017, which surpassed the Zacks Consensus Estimate of $1.57 and rose 5.9% on a year-over-year basis.

The year-over-year improvement in the bottom line came largely on the back of the revamped Win Strategy. Also, a fall in cost of sales proved conducive to the earnings performance.

Inside the Headlines

Net sales in the fiscal first quarter fell 4.4% year over year to $2,743.1 million and also fell short of the Zacks Consensus Estimate of $2,767 million. Lackluster performance in the company’s Diversified Industrial segment proved to be a major drag.

Parker-Hannifin’s adjusted total segment operating income for the reported quarter was $411.1 million down from the year-ago tally of $416.0 million marginally.

Segmental Performance

At the Diversified Industrial Segment, North American sales for the fiscal first quarter decreased 9.2% to $1,167.0 million. Also, this segment recorded a 4% decline in orders on a year-over-year basis.

International Industrial, which is also classified under the Diversified Industrial segment, reported a 2.3% decrease in sales to $1,014.9 million. Despite tepid sales, orders at this segment rose 3% on a year-over-year basis.

Revenues at the Aerospace Systems segment grew 3.1% year over year to $561.2 million. Also, orders at this segment improved an impressive 14% in the quarter under review.

Liquidity

As of Sep 30, 2016, Parker-Hannifin’s cash and cash equivalents were $1,393.8 million compared with $974.2 million at the end of first-quarter fiscal 2016. Long-term debt was $2,653.0 million at the end of first-quarter fiscal 2017 compared with $2,701.1 million as of Sep 30, 2015.

Share Repurchase

During the fiscal first quarter, Parker-Hannifin repurchased approximately $115 million of shares. This marks the completion of the company’s commitment to repurchase a minimum of $2 billion in shares by Oct 2016.

Guidance

Parker-Hannifin released reiterated its guidance for the fiscal year ending Jun 30, 2017. The company expects adjusted earnings from continuing operations in the range of $6.40–$7.10 per share. This guidance includes expected business realignment expenses of approximately 25 cents per share.

Buoyed by the competency of the revamped Win Strategy, Parker-Hannifin is bullish about delivering its fundamental financial goals. The company has made impressive progress in key areas including safety performance, customer experience, and profitable growth and believes that these initiatives will unlock further growth opportunities.

To Conclude

Parker-Hannifin’s overarching Win Strategy has proven to be a tried and tested growth driver for its key financials. Moreover, the company’s diligent global restructuring initiatives are also proving conducive to profitability. These initiatives helped Parker-Hannifin offset weakness in some key regions, thus strengthening the company’s position in end-markets. Encouragingly, the company has been witnessing stabilization in most of its key end markets, indicating brighter prospects.

Despite these positives, tough economic conditions may likely play a spoilsport, thwarting the Zacks Rank #3 (Hold) company’s growth to some extent.

Stocks to Consider

Some better-ranked stocks in the same space include Chart Industries Inc. (NASDAQ:GTLS) , Barnes Group Inc. (NYSE:B) and Nordson Corporation (NASDAQ:NDSN) .

Barnes Group’s earnings are projected to grow at the rate of nearly 6% in the current fiscal year, far ahead of its peers. It carries a Zacks Rank #2 (Buy).

Chart Industries, also carrying a Zacks Rank #2, has registered a remarkable positive average surprise of over 428.4% over the four trailing quarters, driven by two massive beats.

Nordson sports a Zacks Rank #1 and has a decent earnings beat history, having surpassed estimates thrice over the trailing four quarters, for an average beat of 9.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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