Parker Hannifin Corporation Stock Buy Recommendation Reiterated (PH)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Parker Hannifin Corporation (NYSE: PH) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
  • PH, with its decline in revenue, slightly underperformed the industry average of 0.5%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Machinery industry and the overall market, PARKER-HANNIFIN CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • PARKER-HANNIFIN CORP's earnings per share declined by 17.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PARKER-HANNIFIN CORP increased its bottom line by earning $7.44 versus $6.37 in the prior year. For the next year, the market is expecting a contraction of 13.8% in earnings ($6.42 versus $7.44).
  • In its most recent trading session, PH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

Parker Hannifin Corporation manufactures fluid power systems, electromechanical controls, and related components worldwide. Parker Hannifin has a market cap of $12.46 billion and is part of the industrial goods sector and industrial industry. The company has a P/E ratio of 11.7, below the S&P 500 P/E ratio of 17.7. Shares are up 9.5% year to date as of the close of trading on Monday.

You can view the full Parker Hannifin Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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