Parker Hannifin Corp. (PH) is stepping up its game in the tough economy, creating a “Win Strategy” to increase operational efficiencies and drive profits. The company’s recent Q2 results came in ahead of expectations.

Company Description

Parker Hannifin Corp. manufactures fluid power systems and electromechanical for a number of different industries worldwide. The company was founded in 1918 and has a market cap of $9.02 billion.

Second-Quarter Results

Sales were up 5.3% from last quarter to $2.4 billion. Earnings came in far better than expected at 64 cents, 30 cents ahead of the Zacks Consensus Estimate. The company has consistently produced exceptional results over the last three quarters, surprising by an average of 96%.

Parker CEO Don Washkewicz noted that the company is benefiting from its “Win Strategy,” an initiative designed to increase operational efficiencies in response to the weak economy. The new directive helped Parker eclipse its operating margin goal of 10% during the quarter. The company also acted to strengthen its balance sheet, paying down $1 billion of debt last year to bring its debt-to-equity level below 30%.

With a strong quarterly showing in hand and the economy on the mend, Parker was optimistic about its future, with Washkewic adding that, “we believe there are early signs of a recovery emerging, we are anticipating a strong second half to our fiscal year.”

The sentiment sent estimates higher, with the current year adding 67 cents to $2.66 in the last 2 weeks. The next-year estimate is up 54 cents in the same time to $3.67, a bullish 38% growth projection.

Valuation

After the recent gains, PH trades with a forward P/E multiple of 21X, a premium to the overall market.

The Chart

Shares of PH have been on the up swing for most of the last 10 months since bottoming out with the market in early March, recently pulling back from 52-week high at $62.85 to pressure an up trend line. The stochastic is signaling that shares are trading deep in oversold territory, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service.

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