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Parker-Hannifin (PH) Down 4.1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Parker-Hannifin (PH). Shares have lost about 4.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Parker-Hannifin due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Parker-Hannifin's Q4 Earnings & Revenues Top Estimates

Parker-Hannifin reported better-than-expected results for fourth-quarter fiscal 2019 (ended June 2019), wherein both earnings and revenues beat estimates.

Earnings/Revenues

Quarterly adjusted earnings came in at $3.31 per share, up 2.8% year over year from $3.22. The bottom line also outpaced the Zacks Consensus Estimate of $3.09.

In fiscal 2019, the company’s adjusted earnings came in at $11.85 per share, up 14%.

Revenues for the fiscal fourth quarter were $3,681.5 million, down 3.6% year over year. However, the top line beat the consensus estimate of $3,669 million.

For fiscal 2019, revenues came in at $14,320.3 million, up from $14,302.4 million recorded in the previous fiscal.

Segmental Breakup

North American segment’s revenues came in at $1,745.3 million, down 3.3% year over year.

The company’s International top-line performance declined 8.6% to $1,258.3 million.

Aerospace Systems segment generated revenues of $677.9 million, up 6.5%.

Costs/Margins

Cost of sales in the fiscal fourth quarter was $2,739.6 million, down 3.2% year over year. Selling, general and administrative expenses were $391.5 million, down from $418.2 million. Adjusted operating margin was 17.6%, up 10 basis points.

Balance Sheet/Cash Flow

Exiting the fiscal fourth quarter, Parker-Hannifin had cash and cash equivalents of $3,219.8 million, up from $822.1 million recorded on Jun 30, 2018. At the end of the reported quarter, long-term debt was $6,520.8 million compared with $4,318.6 million as of Jun 30, 2018.

In fiscal 2019, the company generated $1,730.1 million cash from operating activities, up from $1,596.7 million in fiscal 2018.

Outlook

Parker-Hannifin intends to boost its near-term revenues and profitability on the back of its Win Strategy. The company provided earnings view for fiscal 2020 in the range of $11.50-$12.30 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Parker-Hannifin has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Parker-Hannifin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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