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What's in Store for Parker-Hannifin (PH) in Q4 Earnings?

Zacks Equity Research

Parker-Hannifin Corporation PH is slated to report fourth-quarter fiscal 2019 (ended June 2019) results on Aug 1, before market open.

The company pulled off average positive earnings surprise of 8.32% in the last four quarters. Notably, Parker-Hannifin’s third-quarter fiscal 2019 (ended March 2019) adjusted earnings of $3.17 per share outpaced the Zacks Consensus Estimate of $3.01 by 5.32%.

In the past month, the company’s shares have gained 1.7% against 1.3% decline recorded by the industry it belongs to.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Parker-Hannifin’s top line has been gaining momentum on the back of strength in original equipment manufacturer (OEM) and maintenance, repair and overhaul (MRO) businesses in both commercial and military end markets. Also, strength across industrial end markets like material handling, construction and refrigeration is likely to drive its revenues in the fiscal fourth quarter. In addition, the company’s top line will gain from consistent stability across end-market conditions in its Diversified Industrial segment, particularly in North America, despite some recent slowdown in order rates.

Also, Parker-Hannifin’s revamped Win Strategy and its productivity initiatives have helped it attain significant cost savings. For instance, the company’s adjusted operating margins expanded 90 basis points year over year to 17.2% in the third quarter of fiscal 2019. This trend is likely to continue, and get reflected in the to-be-reported quarter as well.

Moreover, the company is likely to have benefited from its ongoing business-realignment moves and increased synergy savings from the CLARCOR acquisition (March 2017). This is expected to drive its upcoming results. However, integration costs associated with the buyout and business-realignment expenses might dampen its profitability in the quarter.

Amid this backdrop, the Zacks Consensus Estimate for fourth-quarter fiscal 2019 revenues for the Aerospace segment is pegged at $666 million. Notably, the segment reported revenues of $636 million in the year-ago quarter. The Zacks Consensus Estimate for revenues for the North America operations of the Diversified Industrial segment is pegged at $1,763 million, indicating a decline from $1,805 million reported in the year-ago quarter. International operations of the Diversified Industrial segment is expected to decline 8% year over year to $1,266 million.

Earnings Whispers

Our proven model provides some idea on the stocks that are about to release their earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) for a likely earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our 
Earnings ESP Filter.

That is not the case here as we will see below.

Earnings ESP
Parker-Hannifin has an Earnings ESP of -1.25%, as the Most Accurate Estimate is pegged at $3.05, lower than the Zacks Consensus Estimate of $3.09.

Parker-Hannifin Corporation Price and EPS Surprise

Parker-Hannifin Corporation Price and EPS Surprise

Parker-Hannifin Corporation price-eps-surprise | Parker-Hannifin Corporation Quote

Zacks Rank: The company’s Zacks Rank of 3, which when combined with a negative Earnings ESP, makes surprise prediction inconclusive.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the Zacks Industrial Products sector you may want to consider as our model shows that these have the right mix of elements to beat estimates this earnings season:

Axon Enterprise, Inc. AAXN has an Earnings ESP of +10.21% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AptarGroup, Inc. ATR has an Earnings ESP of +0.56% and a Zacks Rank of 2.

MRC Global Inc. MRC has an Earnings ESP of +
2.55% and a Zacks Rank #3.

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