2024-06-10 15:57:29 ET
Summary
- Parker's management team has been methodically transforming their business into a resilient and longer cycle company. Investors have been reaping the rewards of their efforts.
- For the 2014 to 2023 fiscal period, for every dollar retained by management, market value has increased by $4.11.
- At a PEG ratio of 1.84, the stock is trading at about a 7% discount to their 2014-2023 PEG ratio of 1.98 and this is a reasonable entry point for long-term investors.
Introduction
Parker-Hannifin ( PH ) is in a multi-year initiative to transform their business into a more resilient company that is less prone to the cycles that is a feature of their industry. The acquisition of Clarcor in 2017 increased Parker’s revenue exposure to the filtration aftermarket. The aftermarket business has different economic drivers than the OEM (original manufactured equipment) business. Generally, the OEM business is when Parker sells a component to a manufacturer. For aftermarket, Parker sells parts to the end user. With the aftermarket, customers typically have an immediate need for a specific part regardless of the business cycle or budgets. With the Lord acquisition, Parker acquired a company with a product mix that would extend the overall lead time of Parker’s business. With the Meggit acquisition, Parker increased their aerospace aftermarket business but also positioned itself to benefit from secular trends in global aerospace. Commercial aerospace is expected to see a 3.8% compound annual growth rate in revenue passenger kilometer through 2041. On the military side of aerospace, analysts expect increased defense spending globally. Parker sells a host of products to aerospace manufacturers and end users, including heat sensors, braking systems, engine valves and many others....
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Parker-Hannifin: Track Record Of Creating Value Makes This A Buy