Solid Fiscal Second Quarter From Parker Inspires Confidence, but Our Thesis Remains Unchanged

Parker Hannifin is a well-run diversified industrial conglomerate with exposure to a wide variety of end markets. Over time, we believe the firm can achieve its goals of outpacing industrial production and margin expansion on the heels of its newest Win Strategy and large acquisitions of Lord, Exotic Metals, and Meggitt (which closed in the fiscal first quarter of 2023). We believe part of Parker’s strength lies in its broad range of motion and control technologies with a wide variety of applications, including hydraulics and pneumatics, fluid and gas handling, and sealing. According to Parker representatives, about 85% of the revenue from these technologies has intellectual property protection, which we believe helps cement Parker’s competitive position, given the long product lifecycles and low reinvestment needs of this business. Parker's acquisitions brought in technologies that filled major gaps in its existing portfolio, including in filtration, engineered materials, and vibration technologies. With these acquisitions, Parker gains an even stronger foothold in the highly attractive higher-margin aftermarket, and doubles down on long-cycled businesses.