Parker-Hannifin Corporation PH has been benefiting from strength in its Aerospace Systems segment. Benefits from acquired assets are likely to drive its performance in the quarters ahead.
Based in Cleveland, OH, Parker-Hannifin is a global diversified manufacturer of motion and control technologies and systems. The company provides precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets.
Let’s discuss the factors that should influence investors to retain the stock for the time being.
Growth Catalysts of PH
Business Strength: Parker-Hannifin’s Aerospace Systems segment is gaining from steady demand across end markets and higher orders. Strong momentum in commercial and military end markets across both OEM and aftermarket channels also bodes well. In the quarters ahead, the Aerospace Systems segment is poised to gain from strong demand for its products and aftermarket support services in the general aviation market, driven by growth in air transport activities.
Strength in its defense end market, owing to stable U.S. and international defense spending volumes, is also likely to be beneficial. Parker-Hannifin expects the Aerospace Systems segment’s organic sales to increase 10% from the year-ago level in fiscal 2025 (ending June 2025).
Acquisitions: Parker-Hannifin has been strengthening its business through acquisitions. In September 2022, the company completed the acquisition of Meggitt plc, a global leader in motion and control technologies. The acquisition expanded Parker-Hannifin’s presence in the United Kingdom, positioning it well to provide a broader suite of solutions for aircraft and aero-engine components and systems.
Rewards to Shareholders: The company is committed to rewarding its shareholders through dividends. In April 2024, the company hiked its dividend by 10% to $1.63 per share (annually: $6.52). In the first three months of fiscal 2025 (ended September 2024), Parker-Hannifin rewarded its shareholders with dividends of $209.9 million, up 10.3%. Also, in fiscal 2024, the company paid out cash dividends of $782 million, up 11.1% year over year.
PH currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 38.2% compared with the industry’s 9.2% growth.
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Headwinds for PH
Segmental Weakness: The company is witnessing weakness across the Diversified Industrial segment. Challenging conditions in the off-highway end market, due to softness in construction and agricultural sectors, have been affecting both the North America and international businesses of the segment. Weakness in the transportation end market, arising from lower demand for automotive cars, is ailing the North America business as well.
Forex Woes: Parker-Hannifin intends to boost its revenues and profitability through overseas business expansion. However, this exposes the company's financial performance to various risks like political, environmental and foreign currency exchange rate fluctuations. In the first quarter of fiscal 2025, foreign currency translation lowered sales by approximately 0.2%. Foreign currency headwinds may affect the company’s top line in the quarters ahead.
Stocks to Consider
Some better-ranked companies from the same space are discussed below.
Graham Corporation GHM currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GHM delivered a trailing four-quarter average earnings surprise of 101.9%. In the past 60 days, the Zacks Consensus Estimate for Graham’s fiscal 2025 earnings has increased 8.4%.
RBC Bearings Incorporated RBC presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter average earnings surprise of 2.5%.
In the past 60 days, the consensus estimate for RBC’s fiscal 2025 earnings has increased 0.5%.
Kadant Inc. KAI presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 17.2%.
The Zacks Consensus Estimate for KAI’s 2024 earnings has increased 1.8% in the past 60 days.
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