Shares of Parker-Hannifin Corp. (PH) reached a new 52-week high of $100.58 on Monday, May 20, 2013. The new high was primarily driven by the company’s ability to consistently raise dividends and supported by its strong balance sheet. In addition, the company reported improved results for the third quarter of fiscal 2013.
The closing price of this fluid power systems and electromechanical controls manufacturer on May 20 was $100.58, representing a robust one-year return of about 21.53% and a decent year-to-date return of about 14.7%. Average volume of shares traded over the last three months was approximately 1,196K.
Parker has been delivering positive earnings surprises more often than not, although the last four quarters have averaged out at 0.06%. This Zacks Rank #3 (Hold) company has a market cap of $15.01 billion and a long-term expected earnings growth rate of 5.7%.
Parker’s Strengths
Parker has a strong balance sheet and generates strong cash flow. Over the past decade or so, Parker Hannifin has doubled its operating cash flow from just $0.5 billion in 2001 to $1.5 billion in 2012. In addition, Parker has returned value to shareholders in the form of share repurchases and dividends.
While dividend increases have been fairly consistent in the last few years, the company increased the dividend by a couple of cents (or roughly 5%) in each of the last two quarters.
In addition, Parker follows a “Win Strategy” that primarily aims to measure customer service excellence through efficient business and cash management strategies.
Improved 3Q13 Earnings
Parker-Hannifin reported third-quarter 2013 earnings per share of $1.68, a penny above the Zacks Consensus Estimate.
Total revenue in the third quarter however declined 2.5% year over year to $3.30 billion, down from $3.39 billion in the prior-year quarter. Weak international markets and not very good returns from the American market continued to affect revenue in the quarter.
Conclusion
Although the quarterly earnings as well as revenue were not very encouraging for Parker, the company expressed confidence about a better fiscal 2013 given the improvement in its order trends.
Other Stocks to Consider
Other stocks in the machinery industry that are currently performing well and have a good visibility include Graco Inc (GGG) with a Zacks Rank #1 (Strong Buy) and Broadwind Energy, Inc. (BWEN) and Altra Holdings Inc. (AIMC), both with a Zacks Rank #2 (Buy).
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