Company Reports

Narrow-moat-rated Parker Hannifin reported strong fiscal second-quarter results. Revenue rose 3% year over year on an organic basis. Adjusted segment operating margins rose 300 basis points to an impressive 24.5%, led by continued strength in the company’s aerospace business. The North America and international industrial segments also experienced adjusted operating margin expansion during the quarter. Parker continues to execute its cost-savings initiatives while capitalizing on end-market demand, a trend we think will drive margin expansion for the remainder of the fiscal year. As such, we've increased our fair value estimate to $417 from $411 per share due to higher near-term profitability in our forecast.

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 Clarcor, Lord, Exotic Metals, and Meggitt. 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. Parker says about 85% of the revenue from these technologies has intellectual property protection, which we believe helps cement its 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, the firm gains an even stronger foothold in the highly attractive higher-margin aftermarket and doubles down on long-cycle businesses.

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 Clarcor, Lord, Exotic Metals, and Meggitt. 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. Parker says about 85% of the revenue from these technologies has intellectual property protection, which we believe helps cement its 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, the firm gains an even stronger foothold in the highly attractive higher-margin aftermarket and doubles down on long-cycle businesses.

Parker Hannifin put forth a stellar fiscal first-quarter earnings report. The narrow-moat-rated firm crushed both our prior sales and earnings estimates. Consequently, we raised our fair value estimate by 7% to $411. That said, the stock still doesn’t strike us as a bargain.

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 Clarcor, Lord, Exotic Metals, and Meggitt. 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. Parker says about 85% of the revenue from these technologies has intellectual property protection, which we believe helps cement its 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, the firm gains an even stronger foothold in the highly attractive higher-margin aftermarket and doubles down on long-cycle businesses.

After reviewing narrow-moat Parker Hannifin’s fiscal fourth quarter and full-year results, we lift our fair value estimate by 15% to $384. The primary driver of our strong raise stems from the additional year of revenue contribution following our annual model roll. The additional year has outsize benefits given our view Parker can maintain structurally better-operating margins as it continues implementing its Win Strategy 3.0. However, we also lifted our revenue assumptions in the outer years of our model following a reassessment of Parker’s end markets and its competitive position within those markets.

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 Clarcor, Lord, Exotic Metals, and Meggitt. 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. Parker says about 85% of the revenue from these technologies has intellectual property protection, which we believe helps cement its 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, the firm gains an even stronger foothold in the highly attractive higher-margin aftermarket and doubles down on long-cycle businesses.

Following our review of narrow-moat-rated Parker Hannifin’s fiscal third-quarter results, nothing materially alters our fundamental long-term view. Parker paced slightly ahead of our expectations for revenue (1.5% variance) and adjusted EPS (about a 4% variance). However, the impact of the quarterly beat and its implications in management’s guidance was minimal on our valuation. We've raised our fair value estimate to $333 per share from $328, but that’s only due to the time value of money.

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 Clarcor, Lord, Exotic Metals, and Meggitt. 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. Parker says about 85% of the revenue from these technologies has intellectual property protection, which we believe helps cement its 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, the firm gains an even stronger foothold in the highly attractive higher-margin aftermarket and doubles down on long-cycle businesses.

Narrow-moat-rated Parker Hannifin had a very solid fiscal second quarter that outperformed our expectations. We raise our fair value estimate to $328 from $325, due solely to time value of money, somewhat offset by a higher share repurchase price assumption. During the quarter, total revenue rose over 22% on a reported basis to $4.675 billion or 11% on an organic basis. Organic sales results were led by the diversified industrial segment, which grew in double-digits in both North America and international, though North America led the way. Results were broad-based, however, as all businesses grew their top line organically (aerospace grew organic revenue midsingle digits).

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.

Narrow-moat-rated Parker Hannifin’s guide came in below our expectations on both the top and bottom lines, but we see no reason to alter our $325 fair value estimate. During the quarter, organic sales rose a resounding 14%, led by an 18% year-on-year increase from diversified industrials North America. On a reported basis, revenue rose to $4.23 billion, or 12.5% year on year. Furthermore, EPS rose by over 11% to $4.74.

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.

While we made some tweaks as we rolled our model following narrow-moat-rated Parker Hannifin’s fiscal fourth quarter and full-year results, we see no reason to change our $325 fair value estimate. The company smashed through the high end of FactSet consensus estimates on multiple counts, including revenue, adjusted operating margins, and adjusted EPS, with broad-based, solid performance and unexpected upside in all segments.

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 (expected to close 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.

We see no reason to change our fair value estimate of $325 following narrow-moat-rated Parker Hannifin's fiscal third-quarter results. Sales of $4.09 billion (up 9% year on year, or 11% on an organic basis) during the quarter marginally exceeded our expectations by just over $30 million, while adjusted EPS of $4.83 (up 17% year on year) was right in line with what we were forecasting during the quarter. Because of the difficult operating environment, we marginally decreased our full-year sales expectations by just under $60 million (now $15.76 billion), but we did lift adjusted EPS by 11 cents to $18.30 (less than a 1% variance from before) and kept adjusted segment operating margins roughly the same.

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 (expected to close August 2022). 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 a stronger foothold in the highly attractive higher-margin aftermarket.

After reviewing narrow-moat-rated Parker Hannifin’s fiscal 2022 second-quarter results, we are lifting our fair value estimate to $325 per share from $296. Most of the change is due to our reduced long-term tax assumption, responsible for a more than 6% tailwind to our valuation. We reduced our corporate tax assumption since we now believe U.S. rates are unlikely to move higher to fund the Biden administration’s human infrastructure bill. Time value of money and management’s raised guidance made up the remainder of our valuation change.

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 (expected to close August 2022). 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 a stronger foothold in the highly attractive higher-margin aftermarket.

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 the industrial production and margin expansion on the heels of its newest Win Strategy and large acquisitions of Lord, Exotic Metals, and Meggitt (expected to close August 2022). 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. Importantly, 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 in major gaps in its existing portfolio, including in filtration, engineered materials, and vibration technologies, among others. With these acquisitions, Parker gains a stronger foothold in the highly desirous higher-margin aftermarket.