Parker Hannifin: Strong Growth, Bullish Forecasts

Parker Hannifin Corporation (PH) has increased its annual dividends for 52 consecutive years, among the top five longest-running dividend-increase records in the S&P 500 index. The company’s dividend yield of 1.1% is well above the industry average.

Growth is also abundant. In late April, the company announced record results in several areas, which included fiscal third-quarter sales of $3.2 billion, 14.4% higher than the year-prior $2.8 billion. Wall Street forecasts are bullish. Current earnings estimates for the year ending June 2008 are at $5.51 per share, up from the two months-ago level of $5.27. The most accurate projection is even higher at $5.54 per share.

Full Analysis

Parker Hannifin manufactures motion and control technologies and systems, providing precision-engineered solutions for a wide variety of commercial, mobile, industrial and aerospace markets. The company employs more than 57,000 people in 43 countries around the world.

A Long Record of Raising Dividends

Parker is certainly rewarding from an income perspective as it increased its annual dividends for 52 consecutive years, among the top five longest-running dividend-increase records in the S&P 500 index. The company’s dividend yield stands at 1.1% right now, well above the industry average as very few of its peers pay a dividend.

Strong Growth

Growth is also abundant. The company recently announced its acquisition of Titan Industries, which manufactures industrial rubber, custom made and composite hoses for fluid and material transfer as well as related products, services, and accessories.

Parker explained that Titan Industries racked up sales of $28 million last year, adding that this acquisition strengthens Parker's position in the industrial hose market by substantially expanding the product offering and providing entrance into the marine, aircraft, food and dock side refueling markets.

In late April, the company announced record results in several areas, which included fiscal third-quarter sales of $3.2 billion, 14.4% higher than the year-prior $2.8 billion. Third-quarter earnings per share of jumped from last year’s $1.19 per share to $1.49 per share. The earnings result was about 11% above the consensus estimate.

Earnings per share are expected to grow by 16% over the next 3 – 5 years, compared to the industry average expectation of 15%. Parker Hannifin offers a return on equity [ROE] of 19%, which tops the industry average of 17%.

Bullish Forecasts

The company hiked its earnings outlook to a range of $5.40 to $5.60 per share. The previous guidance for earnings was $5.15 to $5.40 per share.

"Since fiscal 2008 continues to be strong overall, we have again raised our earnings guidance," said Washkewicz. "Orders are growing in Europe, Asia, Latin America and North America. Many of our key markets, including Aerospace, continue to grow. For other markets, especially those in North America which have been in recession, we are positioned to benefit when they return to more normal growth levels."

Wall Street forecasts are in line with PH’s range. Current earnings estimates for the year ending June 2008 are at $5.51 per share, up from the two months-ago level of $5.27. The most accurate projection is even higher at $5.54 per share.