PH - Parker Hannifin - Raises Full Year Guidance on Strong Sales

Parker Hannifin sees strong growth in all of its global markets, even in a slowing North America, as the industrial sector continues to outperform. The company has a long history of rewarding shareholders, having increased its dividend 52 consecutive years. Parker Hannifin has beaten Wall Street estimates the last four quarters on average of 6.73%. It has a forward P/E of 13.45.

Full Analysis

Parker Hannifin Corporation (PH) manufactures motion and control technologies systems, including hydraulic systems, for the commercial, mobile, industrial and aerospace markets. The company operates in 43 countries around the world.

On Apr 7, the company increased its hydraulic technology capabilities by acquiring Vansco Electronics, a manufacturer of electronic controls, displays and terminals, communication and operator interfaces, and sensors. Vansco employs 1,005 people in facilities in Canada, the United States, Finland, Belgium, and the United Kingdom.

In 2007, Vansco saw sales of approximately $180 million, with approximately 83% of the sales made in Parker's Industrial North America reporting segment. Terms of the deal were not disclosed.

Parker Reports a Record Third Quarter

On Apr 22, Parker Hannifin reported third-quarter earnings that beat Wall Street estimates by 11.19%, or 15 cents a share. Net income rose 22% to $255.4 million, or $1.49 per share, from $209.3 million, or $1.19 per share, in the year-ago period. Analysts expected $1.34 per share.

Sales increased 14.4% to $3.2 billion from $2.8 billion, a quarterly record. Of the growth in the quarter, 4.3% was organic, 4.0% was the result of strategic acquisitions, and the remainder was from the movement of foreign currency exchange rates.

Each of the segments saw sales rise during the quarter. The Industrial International segment led all segments with sales increasing 32.2%. The Industrial North America segment, despite the slowing economy, saw sales rise 3.7% compared to a year ago, and the Aerospace segment increased sales 7.7%.

The Climate & Industrial Controls segment was the laggard, rising only 0.5% compared to a year ago. That segment was adversely impacted by the ongoing weakness in the automotive, residential construction and heavy duty trucks markets.

PH Raises Full Year Guidance on Strong Sales

The company is bullish going into its fourth quarter and raised guidance for the year. PH raised guidance to the range of $5.40 to $5.60 from its previous forecast of $5.15 to $5.40 per share.

"Since fiscal 2008 continues to be strong overall, we have again raised our earnings guidance," said Don Washkewicz, Chairman, CEO and President.

"Orders are growing in Europe, Asia, Latin America and North America. Many of our key markets, including Aerospace, continue to grow. For other markets, especially those in North America which have been in recession, we are positioned to benefit when they return to more normal growth levels," he said.

Analysts Raise Estimates on the Fourth Quarter and the Year

In response to the company's increased guidance, brokerage analysts raised estimates for the fourth-quarter and the full year. For the quarter, consensus estimates rose five cents to $1.45 from $1.40 per share. For the year, analysts raised to be in-line with the company's guidance. Consensus estimates rose by seven cents to $5.46 from $5.39 a share.

Parker Hannifin's 2008 P/E is 13.45. Its price-to-book is 2.60. The company's five year average return on equity is an outstanding 15.29%. PH also pays a dividend, which it has increased for 52 consecutive years, among the top five longest-running dividend-increase records in the S&P 500 index. The current dividend yield is 1.10%.

Content Courtesy: Zacks Investment Research

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