Home Technology Notable Trader Alert: Parker Hannifin Corporation (NYSE:PH)

Notable Trader Alert: Parker Hannifin Corporation (NYSE:PH)

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Parker Hannifin Corporation (NYSE: PH), the worldwide leader in motion and control technologies, today reported consequences for the fiscal 2K18 2nd-quarter finished December 31, 2K17.

  • Sales increased 26.0 percent to $3.370 billion, a 2nd-quarter record
  • Organic sales increased 10.0 percent; order rates increased 13.0 percent
  • As reported EPS were $0.410; or $2.150 adjusted
  • As reported EPS include a one-time tax cost adjustment of $1.650
  • Total segment operating margins were 14.20 percent, or 14.90 percent adjusted
  • Adjusted EBITDA margins increased from 15.20 percent to 16.30 percent, excluding divestiture gain in prior year
  • Company increases fiscal 2K18 full-year guidance for adjusted EPS

Fiscal 2K18 2nd-quarter sales increased 26.0 percent to $3.370 billion compared with $2.670 billion in the prior-year quarter.  Net income was $56.30M compared with $241.40M in the fiscal 2K17 2nd-quarter.  Fiscal 2K18 2nd-quarter earnings for each share were $0.410, compared with $1.780 in the prior-year quarter.

Adjusted earnings for each share were $2.150, compared with adjusted earnings for each share of $1.910 in the prior year quarter, which included a divestiture resulting in a pre-tax gain of $45.00M or $0.210 for each share.

Throughout the fiscal 2K18 2nd-quarter, the company recognized a net one-time adjustment to income tax cost of $224.50M, or $1.650 for each share related to U.S. Tax Reform and recorded a net pre-tax gain on the sale and write-down of assets of $8.40M, or $0.050 for each share.

Business realignment costs and CLARCOR costs to achieve totaled $25.40M, or $0.140 for each share in the current quarter.  A reconciliation of earnings for each share to adjusted earnings for each share is included in the financial tables of this press release.

Cash flow from operations for the first half of fiscal 2K18 was $460.30M or 6.80 percent of sales, compared with $404.20M or 7.50 percent of sales in the prior year period, or 11.50 percent excluding a discretionary pension contribution in fiscal 2K17.

“Improved market conditions together with the ongoing benefits of implementing the new Win StrategyTM continue to deliver widespread improvements across our company,” said Chairman and Chief Executive Officer, Tom Williams.  “Sales were a 2nd-quarter record and increased 10.0 percent organically, while order rates increased 13.0 percent year-over-year.  Solid margin performance continued.  We are firmly positioned to build on the financial progress that we have made in recent years and to deliver record sales and earnings in fiscal 2K18.”

2nd-Quarter Fiscal 2K18 Segment Results  
Diversified Industrial Segment:  North American 2nd-quarter sales increased 40.0 percent to $1.60 billion and operating income increased 23.0 percent to $225.80M, compared with $184.00M in the same period a year ago.  International 2nd-quarter sales increased 25.0 percent to $1.30 billion and operating income increased 29 percent to $164.80M, compared with $127.50M in the same period a year ago.

Aerospace Systems Segment:  2nd-quarter sales were $549.70M, compared with $543.80M in the prior year period and operating income increased 20.0 percent to $87.10M, compared with $72.50M in the same period a year ago.

Parker reported the following orders for the quarter ending December 31, 2K17, compared with the same quarter a year ago:

  • Orders increased 13.0 percent for total Parker
  • Orders increased 15.0 percent in the Diversified Industrial North America businesses
  • Orders increased 13.0 percent in the Diversified Industrial International businesses
  • Orders increased 8.0 percent in the Aerospace Systems Segment on a rolling 12-month average basis

Outlook
For the fiscal year ending June 30, 2K18, the company has revised guidance for earnings from continuing operations to the range of $7.380 to $7.780 for each share, or $9.650 to $10.050 for each share on an adjusted basis.

The revised fiscal 2K18 earnings guidance reflects a reduction in the U.S. Federal income tax rate, which has lowered the average effective tax rate for Parker in fiscal 2K18.  On an adjusted basis, forecasted earnings reflect the net one-time adjustment in income tax cost of $224.50M, or $1.650 for each share recorded in the 2nd-quarter of fiscal 2K18, as well as expected business realignment costs of approximately $58.0M and CLARCOR costs to achieve of approximately $52.0M.