Record FY12 for Parker-Hannifin (PH)

Zacks

Parker-Hannifin Corporation reported strong earnings for the fourth quarter and fiscal 2012. Quarterly earnings were $1.95 a share, which was 2.1% above the Zacks Consensus Estimate of $1.91 and up 9.5% year over year.

Profits were driven by the company’s Win Strategy, which helped it generate a record operating margin of 15% for the first time since its inception, and strong performance of the Industrial segment in North America.

For fiscal 2012, the company generated earnings of $7.45 a share, which was 17% above the prior year earnings.

Total Revenue

Parker-Hannifin posted sales of $3.4 billion, which were flat year over year. Organic sales growth came in at 3% driven by double-digit growth in the Industrial segment in North America. However, currency translation adversely impacted sales by 4% in the quarter, which was partially offset by 1% positive contribution from acquisitions. Orders declined 1% year over year.

Segment Revenue

On a segment basis, revenues from the Industrial segment in North America increased 9.0% to $1.34 billion. Industrial International segment declined 10.4% year over year to $1.24 billion.

Aerospace revenue increased 8.5% year over year to $566.0 million. Climate and Industrial Controls segment revenues declined 3.0% to $268.5 million.

Orders increased by 4% in the Industrial North America segment, but declined 9% in Industrial International. Aerospace reported an increase of 7% while Climate and Industrials Controls increased 1% year over year.

Income and Expenses

Net income for the quarter was $302.3 million, an increase of 2.6% year over year. Total segment operating margin reached a quarterly record of 15.5%, up from 14.8% in the previous quarter, propelled by strong operating margin in Industrial North America.

SG&A expense was $386.6 million in the quarter compared with $413.4 million in the fourth quarter of fiscal 2011.

Balance Sheet and Cash Flow

Exiting the year, the company had cash and cash equivalents of $838.3 million compared to $657.5 million at the end of the prior year. Long-term debt came in at $1.5 billion, down from $1.7 billion in the previous year.

The company generated cash flow from operations of $1.5 billion during the fourth quarter of fiscal 2012 compared to cash flow from operations of $1.2 billion in the year-ago period.

Outlook

For fiscal 2013, the company expects earnings from continuing operations in the range of $7.10 to $7.90 per diluted share. The guidance includes an expected increase in domestic qualified pension expense of approximately 35 cents per diluted share due to accounting regulations which require the use of a lower discount rate based on current market conditions.

Parker-Hannifin currently holds a Zacks Rank of # 3 which implies a short term Hold recommendation on the stock.

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