“Parker-Hannifin Corp. (PH – yield 2.20%)—This manufacturer of fluid and control systems for industrial and transportation use disappointed Wall Street on August 2. Although the company announced it had increased earnings by 32% in its fiscal fourth quarter over the same period a year ago, it came up a penny shy of analyst estimates. Furthermore, PH’s forecast for the next fiscal year was also below what analysts had been hoping for.
“One reason for PH’s conservative forecast may have been its order book. In the fiscal fourth quarter ended June 30, PH saw just a 15% increase in orders from last year compared with the 25% order growth it had seen in the previous quarter. But I believe Parker Hannifin could see more growth than the order book reveals. Roughly 20% of PH’s revenues come from the aerospace sector. ... Higher revenues from fees, stable fuel costs and lower borrowing costs have convinced the sector to finally go on a buying spree. On July 20, American Airlines ordered 460 new planes from Boeing (BA) and Airbus. On August 25, Delta Air Lines (DAL) placed an order for 100 new planes from Boeing. ... PH pleasantly surprised the market for many quarters. It picked a really bad quarter to disappoint. I suspect management is doing everything in its power—including guiding expectations lower—to keep from disappointing next quarter. ... If you do not already own PH and have moderate risk tolerance, you might consider buying a third of your position at the current market price and placing below-market limit orders to pick up more shares.”
Amy Calistri, StreetAuthority’s Stock of the Month, 8/30/11
