Will Parker Hannifin Hit Its Outlook?

At the end of its fiscal year, Parker Hannifin (NYSE:PH) gives yearly guidance. Last time it did so, the stock got pummeled. The transgression: Parker Hannifin gave guidance for 2012 of between $6.70 to $7.50, under analyst consensus of $7.51.

That got me thinking: "Exactly how good is this guidance? How well does the company deliver on its outlook?" The answer: not well.

Parker always gives guidance in its Q4 report for the following year. Over the last six years, it hasn't been able to predict the upcoming year's earnings. Not once. Not even close. Now that's not to say it's a bad company. It's a great company. In fact, it often beats its guidance by a whopping amount. Whether it delivers or misses, the guidance is useless. Look at the last six years' guidance and you'll see what I mean.

During the last 9 months, Parker has been lowering and raising its outlook. On a strong quarter, PH lifted its guidance to $7.30-$7.50 for the year after surprising with a $2.01 EPS.

Will Parker finally fulfill a Q4 prediction for year earnings? Analysts predict a $1.91 for final quarter of the year, setting Parker up for $7.24 for the year.

This may be the first time in 6 years Parker's Q4 year forecast may be accurate. Parker isn't alone: Most cyclicals cannot reliably predict next year. When Parker gives its 2013 outlook, it's more likely than not to be outside the range.

Disclosure: I am long PH.