10-QPeriod: Q3 FY2021

Parker-Hannifin Corp Quarterly Report for Q3 Ended Mar 31, 2021

Filed May 6, 2021For Securities:PH

Summary

Parker-Hannifin Corporation (PH) reported solid results for the third quarter and first nine months of fiscal year 2021, demonstrating resilience amidst ongoing economic uncertainty. Net sales for the three months ended March 31, 2021, remained relatively flat year-over-year, while the nine-month period saw a slight decrease. However, profitability significantly improved, with net income attributable to common shareholders increasing by approximately 28% for the quarter and 36% for the nine-month period compared to the prior year. This improvement was driven by higher gross profit margins, effectively managed selling, general, and administrative expenses, and a decrease in interest expense. The company's Diversified Industrial segment showed strength, particularly in its international operations, with notable sales growth driven by the Asia Pacific and Europe regions. The Aerospace Systems segment, while experiencing lower sales due to the pandemic's impact on commercial aviation, saw some offset from increased military demand. Management's focus on cost controls, efficiency initiatives, and strategic investments positions the company for continued recovery and growth, supported by a healthy backlog and a robust liquidity position.

Financial Highlights

55 data points
Beta

Revenue

$3.75B

27.6% Gross Margin

Net Income

$473.24M

12.6% Net Margin

EPS (Diluted)

$3.60

Total Assets

$19.84B

Cash & Equivalents

$489.60M

Free Cash Flow

$484.26M

Financial Statements
Beta
Revenue$3.75B
Cost of Revenue$2.71B
Gross Profit$1.03B
SG&A Expenses$386.83M
Operating Income$665.23M
Interest Expense$60.83M
Net Income$473.24M
EPS (Basic)$3.67
EPS (Diluted)$3.60
Shares Outstanding (Basic)129.09M
Shares Outstanding (Diluted)131.38M

Key Highlights

  • 1Net income attributable to common shareholders increased by 28% to $471.6 million for the three months ended March 31, 2021, compared to $367.3 million in the prior year.
  • 2Diluted earnings per share rose to $3.59 for the quarter, up from $2.83 in the same period last year.
  • 3Gross profit margin improved to 27.5% for the quarter, up from 25.3% in the prior year, indicating better operational efficiency and pricing power.
  • 4Selling, general, and administrative expenses as a percentage of sales decreased to 10.3% from 11.2% in the prior year's quarter, showcasing effective cost management.
  • 5The Diversified Industrial segment's international operations saw robust sales growth, up 17.5% in the current quarter.
  • 6Total backlog stood at $6,185 million as of March 31, 2021, providing a strong foundation for future revenue.
  • 7The company reinitiated its share repurchase program in February 2021, demonstrating confidence in its financial position and future prospects.

Frequently Asked Questions

For the three months ended March 31, 2021, net sales were $3,746.3 million, a slight increase from $3,702.4 million in the prior year's quarter. For the nine months ended March 31, 2021, net sales were $10,388.8 million, a slight decrease from $10,534.9 million in the comparable prior year period. The Diversified Industrial segment's international business showed strong growth, partially offsetting declines in Aerospace Systems and Diversified Industrial North America.

The substantial increase in net income was primarily driven by an improvement in gross profit margin, which rose to 27.5% from 25.3% year-over-year for the quarter. This was supported by effective management of selling, general, and administrative (SG&A) expenses, which decreased as a percentage of sales, and a reduction in interest expense. The company also benefited from the absence of certain acquisition-related expenses that were present in the prior year.

The Aerospace Systems segment experienced a decrease in net sales primarily due to lower volume in its commercial aftermarket and original equipment manufacturer (OEM) businesses, a direct consequence of market conditions stemming from COVID-19. However, this decline was partially offset by higher military OEM and aftermarket volume. The company is actively managing operations in this segment and anticipates cost savings from workforce reductions will positively impact operating income.

The company demonstrates strong financial health with improved profitability and effective cost controls. A significant backlog of $6,185 million provides visibility for future revenue. The company reinitiated its share repurchase program, and its liquidity position is described as stable and adequate. Management is focused on strategic growth opportunities in key markets and operational efficiencies.