On Jan 3, we upgraded our recommendation on
) to Neutral from Underperform based on its improved growth
Why the Upgrade?
On Oct 18, Parker-Hannifin reported modest first quarter 2014
results with net income of $244.3 million or $1.61 per share
compared with $239.9 million or $1.57 per share in the
year-earlier quarter. The year-over-year growth was driven by
incremental orders in the quarter and lower share count. The
reported earnings were also 9.5% above the Zacks Consensus
Estimate of $1.47.
Following the release of first-quarter results, the Zacks
Consensus Estimate for fiscal 2014 has increased 0.6% to $6.55
On Dec 10, the company reached a new 52-week high driven by
strong balance sheet; accretive acquisitions and its ability to
consistently raise dividends. Further, the order trends for the
company are also improving. In addition, Parker-Hannifin's
consistently strong performance in its Aerospace segment is
giving it a solid momentum in the industry with improvement in
Parker-Hannifin has been assiduously expanding its market
share, especially in emerging economies like China, and boosting
business portfolio over time through its acquisition strategy.
The company acquired eight companies in fiscal 2013, which
contributed $0.5 billion in annual sales. During the first
quarter of fiscal 2014, acquisitions accounted for more than 2%
increase in revenues.
Moreover, Parker-Hannifin has a strong balance sheet and
generates a strong cash flow. Over the past decade, Parker
Hannifin has increased its operating cash flow from just $0.5
billion in 2001 to $1.8 billion in 2013. The company also offers
healthy dividend hikes, reflecting its commitment of rewarding
shareholders with risk-adjusted returns. For fiscal 2013, the
company has consecutively raised its dividend four times by 5%,
reflecting a yield of 1.5%.
Further, following the first quarter earnings release, the
company increased its fiscal 2014 guidance. Earnings from
continuing operations for the fiscal are currently expected to be
in the range of $7.78 to $8.38, up from its earlier guidance of
$7.35 to $8.15 per share.
Other Stocks to Consider
Parker-Hannifin currently has a Zacks Rank #3 (Hold). Other
stocks worth considering include
) with a Zacks Rank #1 (Strong Buy), and
Altra Industrial Motion Corp.
Barnes Group Inc.
), both carrying a Zacks Rank #2 (Buy).
ALTRA HOLDINGS (AIMC): Free Stock Analysis
BARNES GRP (B): Free Stock Analysis Report
MIDDLEBY CORP (MIDD): Free Stock Analysis
PARKER HANNIFIN (PH): Free Stock Analysis
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