Parker-Hannifin (PH) Tops Q4 EPS by $1.04, Revenues Beat; Offers FY21 EPS Guidance Above Consensus

Parker-Hannifin (NYSE: PH) reported Q4 EPS of $2.55, $1.04 better than the analyst estimate of $1.51. Revenue for the quarter came in at $3.16 billion versus the consensus estimate of $2.88 billion.

• Fourth quarter EPS were $2.27 as reported, or $2.55 adjusted
• Fourth quarter total segment operating margin was 15.8% as reported, or 17.4% adjusted
• Fourth quarter EBITDA margin was 18.7% as reported, or 20.4% adjusted
• Full year cash flow from operations was an all-time record at $2.1 billion, or 15.1% of sales
• Full year total segment operating margin was 15.6% as reported, or 16.8% adjusted
• Full year EBITDA margin was 17.2% as reported, or 19.3% adjusted

“In light of the economic crisis resulting from the ongoing COVID-19 pandemic, our global team delivered outstanding performance in the fiscal 2020 fourth quarter,” said Chairman and Chief Executive Officer, Tom Williams. “The improvement of Parker’s portfolio through transformative acquisitions, continued execution of The Win Strategy™, and near-term actions to reduce costs and preserve cash, have positioned us to achieve exceptional levels of performance during such a steep decline in demand. Despite an organic sales decline of 21%, adjusted total segment operating margin was 17.4% and our adjusted EBITDA margin was impressive at 20.4% in the quarter. Our full year cash flow from operations was a record, surpassing the $2 billion mark for the first time. We continued to aggressively reduce our debt by making repayments totaling $687 million in the fourth quarter and $1.3 billion year to date, which is approximately 25% of the acquisition related debt issued.”

Williams added, “Our global team has not only delivered outstanding financial performance but has also taken actions to manage the impact of the pandemic on our operations. Since the early stages of this global crisis, we have maintained manufacturing capacity across the enterprise, demonstrating the essential nature of Parker's technologies in every major country in the world. We continue to make the safety of our team members, their families and our communities our highest priority and have implemented rigorous safety protocols globally. My thanks to all Parker team members who continue to serve our customers, many of whom are on the front-line in the fight against the pandemic, and keep our operations running safely and efficiently.”

GUIDANCE:

Parker-Hannifin sees FY2021 EPS of $9.80-$10.80, versus the consensus of $9.69.

As previously communicated at our March 2020 Investor Meeting, going forward, Parker will include intangible asset amortization expense related to acquisitions as a line item in its adjustments to earnings. The company believes this change will lead to a better representation of its core operating earnings, especially since amortization expense has become much more material because of recent acquisitions.

For the fiscal year ending June 30, 2021, the company has issued guidance for earnings per share in the range of $7.41 to $8.41, or $9.80 to $10.80 on an adjusted basis. Fiscal year 2021 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $65 million, costs to achieve of approximately $19 million and acquisition-related intangible asset amortization of approximately $321 million. Guidance assumes an organic sales decline in the range of 13% to 9%. A reconciliation of forecasted earnings per share to adjusted forecasted earnings per share is included in the financial tables of this press release.

Commenting on the outlook, Williams added, “We expect that the global COVID-19 pandemic will continue to have a negative effect on economic activity in fiscal 2021. We will continue to manage our costs and preserve cash for the current environment and position ourselves for economic recovery. The actions we have taken under the Win Strategy to strengthen our portfolio and improve our performance have built a business that is better equipped than ever before to be resilient across macro-economic cycles. Importantly, we remain committed to achieving our long-term targets for sales growth, margins, earnings growth and cash flow that would solidify Parker as a top quartile performer. While significant challenges lie ahead, we are positioned to weather these conditions and emerge stronger than ever before. Guided by our purpose: Enabling Engineering Breakthroughs that lead to a Better Tomorrow, Parker has a very bright future."

For earnings history and earnings-related data on Parker-Hannifin (PH) click here.

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