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Parker-Hannifin (PH) Exhibits Solid Prospects Amid Risks

·3 min read

Parker-Hannifin Corporation PH has been benefiting from solid demand for its products and solutions across its end markets. Improvement in the company’s commercial aerospace end market and its unique Win Strategy (version 3.0) have also been proving beneficial. For fiscal 2022 (ending June 2022), the company anticipates organic sales to grow 11% year over year, backed by improving product orders.

The company focuses on strengthening its businesses through the addition of assets. 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. Also, in May 2022, it entered into a deal with Kaman Corporation to divest its Aircraft Wheel and Brake Business for $440 million. The divestiture is in sync with its strategy of restructuring its business portfolio and concentrating more on core businesses.

PH remains focused on rewarding shareholders through dividend payments and share buybacks. In the first nine months of fiscal 2022, it used $398.1 million for paying out dividends, reflecting an increase of 16.5% year over year. In April 2022, it hiked its quarterly dividend rate by 29%. Also, in the first nine months of fiscal 2022, it bought back shares worth $330 million.

However, Parker-Hannifin has been dealing with rising costs and expenses over the past few quarters. In third-quarter fiscal 2022 (ended March 2022), the company’s cost of sales and selling, general and administrative expenses increased 7.9% and 6.6%, respectively, on a year-over-year basis.

Its high-debt profile also poses a concern. Exiting the fiscal third quarter, its long-term debt balance remained high at $6,229.6 million. Considering the company’s high debt profile, its cash and cash equivalents of $467.7 million do not seem impressive.

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Zacks Investment Research

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In the past three months, this Zacks Rank #3 (Hold) stock has gained 4.5% against the industry’s decline of 1.6%.

Stocks to Consider

Some better-ranked companies from the same space are discussed below:

Applied Industrial Technologies, Inc. AIT presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

AIT’s earnings estimates have been stable for fiscal 2022 (ending June 2022) in the past 30 days. Its shares have rallied 6.1% in the past three months.

RBC Bearings Incorporated ROLL presently sports a Zacks Rank #1. ROLL delivered a trailing four-quarter earnings surprise of 3.4%, on average.

ROLL’s earnings estimates have increased 10.5% for fiscal 2023 (ending March 2023) in the past 30 days. Its shares have increased 4.7% in the past three months.

Nordson Corporation NDSN presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 4.5%, on average.

In the past 30 days, NDSN’s earnings estimates have increased 3.1% for 2022. The stock has gained 3.2% in the past three months.

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RBC Bearings Incorporated (ROLL) : Free Stock Analysis Report
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