Parker-Hannifin Corporation (PH) reported strong first quarter fiscal 2015 financial results. For the fiscal first quarter, the company reported adjusted earnings per share of $1.89, well above the Zacks Consensus Estimate of $1.66. Quarterly earnings were also up 13.2% year over year.
Profits for the quarter were primarily driven by restructuring activities undertaken in the prior year.
Total Revenue
Total revenue in the fiscal first quarter increased 3% to $3.27 billion from $3.23 billion in the prior-year quarter. Revenues were below the Zacks Consensus Estimate of $3.3 billion.
The company reported a 5% increase in orders in the reported quarter, reflecting the fifth consecutive quarter of order growth.
Segment Performance
Parker’s Industrial Sales segment comprises two sub-segments – Diversified Industrial and Aerospace.
Under the Diversified Industrial Segment North American fiscal first quarter sales increased 6% to $1.47 billion. Operating income also increased 12.8% to $264.2 million in the quarter. Meanwhile, the segment reported a 6% year-over-year increase in orders. However, International fiscal first quarter sales decreased 1% to $1.26 billion, while operating income increased 9.5% year over year to $189.8 million. On the other hand, orders for the segment also grew 2% year over year.
Revenues in the Aerospace Systems segment declined 6% year over year to $534.6 million despite a healthy 12% increase in orders. This decline can be primarily attributed to the negative impact of the company’s joint venture business with GE Aviation. Operating income stood at $65.3 million compared with $57.3 million in the same quarter a year ago.
Balance Sheet, Dividend and Share Repurchase
At the end of the fiscal first quarter (Sep 30, 2014), Parker’s cash and cash equivalents were $1.1 billion, compared with $1.9 billion at the end of Sep 30, 2013. The company’s long-term debt remained steady at $1.5 billion at the end of the fiscal first quarter.
Exiting the reported quarter, net cash from operating activities were $260.8 million, down 7.7% year over year. Capital expenditures for the first quarter totalled $54.7 million.
On Oct 22, the board of directors approved a 31% increase in the quarterly cash dividend to 63 cents a share. The new dividend is payable to shareholders on record as of Nov 10 2014. This apart, the board also authorized a new share repurchase program for the buyback of up to 35 million shares of common stock.
Guidance for Fiscal 2015
Encouraged by the company’s performance in the first quarter, management has raised the lower end of its fiscal 2015 adjusted earnings guidance. Parker-Hannifin now expects adjusted earnings in the range of $7.45 to $8.05 per diluted share compared to $7.25 to $8.05 mentioned earlier. The earnings guidance includes the adjustment of restructuring expenses of approximately 25 cents a share.
Other Stocks to Consider
Parker’s shares carry a Zacks Rank #4 (Sell), so it may not be an ideal investment option right now. However, some better-ranked stocks in the sector worth considering include Carlisle Companies Inc. (CSL), CLARCOR Inc. (CLC) and Compass Diversified Holdings (CODI).While Carlisle carries a Zacks Rank #1 (Strong Buy), CLARCOR and Compass Diversified hold a Zacks Rank #2 (Buy).
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