Parker-Hannifin (PH) Displays Bright Prospects, Risks Persist
Parker-Hannifin Corporation PH is poised to benefit from solid demand for its products and solutions in the industrial end market. Recovery in the company’s commercial aerospace end market and its unique Win Strategy (version 3.0) are also expected to benefit it in the quarters ahead. For fiscal 2022 (ending June 2022), the company anticipates organic sales to grow 10-12% year over year, higher than the increase of 7-10% guided earlier.
PH intends to strengthen its businesses through the addition of assets. The buyouts of Exotic Metals Forming Company and LORD Corporation in fiscal 2020 (ended June 2020) enabled it to strengthen its business portfolio. Also, its deal to acquire Meggitt plc (entered in August 2021) is expected to boost its motion & control technologies offerings in aerospace and defense end markets.
It remains focused on rewarding shareholders through dividend payments and share buybacks. In the first six months of fiscal 2022, it used $265.6 million for paying out dividends, reflecting an increase of 16.9% year over year. In April 2021, it hiked its quarterly dividend rate by 17%. Also, in the first six months of fiscal 2022, it bought back shares worth $280 million.
However, Parker-Hannifin has been dealing with rising costs and expenses over the past few quarters. In second-quarter fiscal 2022 (ended December 2021), the company’s cost of sales and selling, general and administrative expenses increased 9.8% and 6.8%, respectively, on a year-over-year basis.
Its high-debt profile also poses a concern. Exiting the fiscal second quarter, its long-term debt balance remained high at $6,250.5 million. Considering the company’s high debt profile, its cash and cash equivalents of $449.5 million do not seem impressive.
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In the past six months, this Zacks Rank #3 (Hold) stock has lost 5.4% compared with the industry’s decline of 8.2%.
Stocks to Consider
Some better-ranked stocks from the Zacks Industrial Products sector are discussed below.
Franklin Electric Co., Inc. FELE presently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise in the last four quarters was 17.4%, on average.
In the past 30 days, Franklin Electric’s earnings estimates have been stable for 2022. FELE’s shares have lost 3.5% in the past six months.
AGCO Corporation AGCO presently sports a Zacks Rank #1. Its earnings surprise in the last four quarters was 56.65%.
In the past 30 days, AGCO’s earnings estimates have decreased 0.3% for 2022. AGCO’s shares have jumped 9.6% in the past six months.
Ferguson plc FERG presently carries a Zacks Rank #2 (Buy). Its earnings surprise in the last reported quarter was 11.56%.
In the past 30 days, Ferguson’s earnings estimates have increased 6.5% for fiscal 2022 (ending July 2022). FERG’s shares have lost 9.3% in the past six months.
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