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Will Parker-Hannifin (PH) Q1 Earnings Disappoint Yet Again?

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Leading manufacturer of motion & control technologies and systems Parker-Hannifin CorporationPH is slated to report first-quarter fiscal 2016 results on Oct 22, before the opening bell.

Last quarter, the company posted a negative surprise of 22.7%. Nevertheless, the stock has an average positive surprise of 3.1% for the trailing four quarters.

Let's see how things are shaping up for this announcement.

Factors to Consider

Parker-Hannifin has been experiencing sluggishness in its key natural resources market that includes oil and gas, agriculture, mining and construction equipment. Such weakness exerts a lot of pressure on the company's distributors who are engaged in the oil and gas business. Though the company expects to outweigh these weaknesses in the second half of the year, the first part of fiscal 2016 will be troubled.

Additionally, continuous strengthening of the U.S. dollar is reducing the company's sales since the last few quarters. Parker-Hannifin anticipates the currency headwinds to continue in the future too, thereby weighing on the financial performance in fiscal 2016.

Apart from this, although Parker-Hannifin's realignment plan may benefit it in the long run, it is proving to be a drag on the company's financials in the near term. During the last reported quarter, the company witnessed a 50% increase in its total restructuring expense to $27 million. Also, in fiscal 2016, Parker-Hannifin is anticipated to incur about $100 million in business realignment.

Nevertheless, the company may benefit from its upgraded, " Win Strategy " that it disclosed during the last three months. Also, the PEGL acquisition concluded last month may boost Parker-Hannifin's position in the mining as well as LNG and Industrial Gas markets.

Earnings Whispers

Our proven model does not conclusively show that Parker-Hannifin is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP : Parker-Hannifin currently has an ESP of -0.69% for the quarter. This is because the Most Accurate estimate of $1.45 per share stands below the Zacks Consensus Estimate of $1.46.

Zacks Rank : Parker-Hannifin's Zacks Rank #5 (Strong Sell), when combined with a negative ESP, lowers the predictive power of ESP and makes an earnings beat unlikely.

Notably, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Allegiant Travel Company ALGT , earnings ESP of +0.76% and a Zacks Rank #2.

The Chubb Corporation CB , earnings ESP of +3.57% and a Zacks Rank #2.

Capital One Financial Corporation COF , earnings ESP of +2.08% and a Zacks Rank #3.

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CAPITAL ONE FIN (COF): Free Stock Analysis Report

CHUBB CORP (CB): Free Stock Analysis Report

PARKER HANNIFIN (PH): Free Stock Analysis Report

ALLEGIANT TRAVL (ALGT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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