On Oct 4, 2013, we downgraded
) to Underperform based on the company's dismal fourth quarter
Why the Downgrade?
Estimates for Parker, which focuses on the manufacturing of
motion and control technologies, have been declining ever since
it reported fourth quarter results on Aug 7. Parker-Hannifin's
fourth quarter revenues as well as earnings per share of $3.43
billion and $1.78 missed the Zacks Consensus Estimate of $3.46
billion and $1.95, respectively. The company also disappointed
with its outlook for fiscal 2014.
Following the release of fourth quarter results, the Zacks
Consensus Estimate for 2014 has gone down 13% to $6.41 per share.
The Zacks Consensus Estimate for 2015 also declined 2.8% to $8.04
per share. With the Zacks Consensus Estimate for both 2014 and
2015 going down, the company now has a Zacks #5 Rank (Strong
Cause for Concern
Parker was primarily affected by major cancellations and
rescheduling of orders in the third quarter. Further, the company
has been witnessing continued decline in industrial North America
sales. The decline was attributable to recessionary conditions,
negative currency translations and flat organic sales. In
addition, orders also declined for the segment.
The company expects the sluggish trends to continue at least
through the first half of fiscal 2014. Given the fourth quarter
performance and the challenging outlook, we fail to see any
significant catalyst that could drive the shares in the near
term. Margins will also remain under pressure.
The Zacks Consensus Estimate for the first quarter of 2014 has
gone down 16.6% to $1.46.
While we prefer to avoid Parker-Hannifin until we see signs of
improvement in the company's performance, other stocks operating
in the industry that are worth a look include
Momenta Pharmaceuticals Inc
The Babcock & Wilcox Company
). Momenta Pharmaceuticals and Middleby Corp carry a Zacks Rank
#1 (Strong Buy), while Babcock & Wilcox Company has a Zacks
Rank #2 (Buy).
BABCOCK&WILCOX (BWC): Free Stock Analysis
MIDDLEBY CORP (MIDD): Free Stock Analysis
MOMENTA PHARMA (MNTA): Free Stock Analysis
PARKER HANNIFIN (PH): Free Stock Analysis
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