2024-04-02 07:42:23 ET
Summary
- Parker-Hannifin's Q2 2024 earnings report showed record sales as well as impressive gains in operating margin and EPS, producing a beat and raise.
- The Aerospace Systems segment performed exceptionally well with a 15% increase in sales and significant operating margin expansion thanks largely to the success of the company's integration of Meggitt.
- The Diversified Industrial segment saw modest declines in sales and orders but improved margins, with management expecting growth once cyclical headwinds subside.
- The improved operating margin is expected to be sustained with further opportunities to grow, which helped the stock price to gain ~21% YTD.
- I revisit the valuation of PH's stock price to determine whether it is still a Buy after its January-March rally.
Thesis
Back on December 31, 2023, I published an article when the share price was $458.58, estimating a conservative fair value at the time around $450 and explaining why I still considered the stock a buy at a modest valuation premium. In summary, I like Parker-Hannifin's (PH) profitability and cash flow, its allocation of capital, its history of successful acquisitions, its shareholder-friendly management, and the growth outlooks for the markets in which it operates. And of course, as a DGI investor, I really love this Dividend King's 67-year streak of raising dividends at a CAGR of 14.44% over the past five years....
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For further details see:
Parker-Hannifin: Valuation Is Now Flying Too High (Rating Downgrade)