10-QPeriod: Q1 FY2018

Parker-Hannifin Corp Quarterly Report for Q1 Ended Sep 30, 2017

Filed November 8, 2017For Securities:PH

Summary

Parker-Hannifin Corporation's 10-Q filing for the period ending September 29, 2017, reveals a strong rebound in financial performance compared to the prior year. The company reported a significant increase in net sales and net income, driven primarily by robust growth in the Diversified Industrial segment, particularly in North America, and further boosted by recent acquisitions. This indicates a positive operational trend and effective integration of acquired businesses. While the Aerospace Systems segment saw a slight decrease in net sales, the company's overall profitability improved, reflected in a higher gross profit margin and net income as a percentage of sales. Management's strategic focus on customer service, operational efficiency, and targeted growth areas, alongside prudent financial management including share repurchases and maintaining a solid credit rating, positions Parker-Hannifin favorably for continued performance improvement.

Financial Highlights

54 data points
Beta

Revenue

$3.36B

25.0% Gross Margin

Net Income

$285.54M

8.5% Net Margin

EPS (Diluted)

$2.10

Total Assets

$15.73B

Cash & Equivalents

$874.77M

Free Cash Flow

$158.66M

Financial Statements
Beta
Revenue$3.36B
Cost of Revenue$2.52B
Gross Profit$841.36M
SG&A Expenses$396.98M
Operating Income$525.25M
Interest Expense$53.55M
Net Income$285.54M
EPS (Basic)$2.14
EPS (Diluted)$2.10
Shares Outstanding (Basic)133.18M
Shares Outstanding (Diluted)135.79M

Key Highlights

  • 1Net sales surged by approximately 23% year-over-year to $3.36 billion for the three months ended September 30, 2017.
  • 2Net income attributable to common shareholders increased significantly by 36% to $285.4 million, or $2.10 per diluted share.
  • 3The Diversified Industrial segment showed substantial growth, with North America sales up 36.7% and International sales up 22.0%, bolstered by recent acquisitions.
  • 4Gross profit margin improved to 24.7% from 23.2% in the prior-year period, reflecting higher sales volume and cost efficiencies.
  • 5The company generated $239 million in cash from operating activities, a significant increase from $113.9 million in the comparable prior-year period.
  • 6Shareholders' equity increased to $5.53 billion, driven by net income and partially offset by share repurchases.
  • 7The company maintained a strong liquidity position with $1.43 billion available under its revolving credit facility.

Frequently Asked Questions

The primary driver of the increased revenue was higher sales in both the Diversified Industrial North American and Diversified Industrial International businesses. Recent acquisitions also contributed significantly to the sales growth.

Profitability improved significantly. Net income attributable to common shareholders increased by 36% to $285.4 million, and the gross profit margin expanded to 24.7% from 23.2% in the prior year, indicating better operational efficiency and pricing power.

For the Diversified Industrial segment, sales are expected to increase significantly in fiscal 2018, driven by acquisitions, with operating margins projected to be between 16.2%-16.6% for North America and 14.1%-14.5% for International. For the Aerospace Systems segment, sales are expected to be flat to up 2% in fiscal 2018, with operating margins projected between 15.4%-15.8%.

The company aims to maintain an 'A' rating on its senior debt and has a $2 billion revolving credit facility, of which $1.43 billion was available. The company is in compliance with its debt covenants and maintains a debt-to-equity ratio of 0.52 to 1.0, which is within covenant limits.