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Proactive Acquisitions by Parker

Zacks Equity Research

Parker Hannifin Corporation (PH) has been assiduously expanding its market share, especially in the emerging economies and business portfolio over time despite facing the ongoing difficult macro-economic conditions. Acquisition of a number of private labels paved the way for such a business expansion; the latest on its record being PIX Transmissions Ltd. in India.

Post acquisition, Parker's Fluid Connectors Group will conflate with PIX Transmissions’ hydraulics manufacturing business, and it will be regarded as a unit of the company’s International Industrial Segment. However, the financial terms and conditions of the agreement were not unveiled.

The agreement is seen as a positive aspect for the company's manufacturing business which is expected to eminently strengthen Parker’s businesses in India and bolster its performances quite comprehensively. Besides, the acquisition will also help the company in augmenting its product base.

The previous acquisition of John Fowler (India) Private Limited by Parker is also likely to have a positive impact on the company’s growth prospects in the emerging markets. Earlier, in the third quarter of fiscal 2012, the company witnessed about 4.7% augmentation in net sales from the year-ago quarter. Net income for the quarter also came in at $312.7 million, up 11.0% from the prior year quarter.

We believe Parker stands in a favorable position to benefit from new business wins, tremendous geographical diversification and product mix. Furthermore, the company’s strong consumer insight is likely to support its growth momentum.However, it faces fierce competition from its peers such as DXP Enterprises, Inc. (DXPE), Kadant Inc. (KAI) and Nordson Corporation (NDSN).

The current Zacks Consensus Estimate for the fourth quarter of 2012 is $1.93, reflecting a year-over-year growth of 8.01%. Estimates for the fiscal year 2012 and 2013 are $7.41 and $7.98, representing annual growth of 16.33% and 7.64%, respectively. We currently maintain a ‘Neutral’ recommendation on Parker. The stock carries a Zacks #3 Rank, translating into a short-term (1-3 months) ‘Hold’ rating.

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