Parker-Hannifin (PH) Q2 2017 earnings summary

Executive summary

• Q2 sales were $2,670.8M, down 1.3% YoY; total orders rose 5%, while reported segment margin reached a record 14.4% and adjusted margin was 14.7%.

• Adjusted diluted EPS rose 26% to $1.91; FY17 adjusted EPS midpoint increased to $7.30.

• H2 organic growth outlook increased to 3.3% at the midpoint, while currency headwinds left full-year reported sales growth essentially flat.

Financial highlights

• Q2 net sales were $2,670.8M vs. $2,705.6M; organic sales fell 0.5%, acquisitions added 0.3%, and currency reduced sales 1.1%.

• Q2 net income was $241.4M vs. $183.1M; diluted EPS was $1.78 vs. $1.33, and adjusted EPS was $1.91 vs. $1.52.

• Adjusted segment operating income was $392M vs. $366M; adjusted margin was 14.7% vs. 13.5%, up 120 bps.

• Q2 gross profit was $626.3M vs. $565.0M; gross margin was 23.5% vs. 20.9%.

• H1 net sales were $5,413.9M vs. $5,574.9M; net income was $451.6M vs. $378.2M.

Outlook and guidance

• FY17 reported EPS guidance was $6.71–$7.21, midpoint $6.96; adjusted EPS was $7.05–$7.55, midpoint $7.30.

• FY17 sales guidance was -2.3% to +1.3% YoY; organic growth midpoint was 0.4%, acquisitions add 0.4%, and currency is a 1.3% headwind.

• FY17 adjusted segment margin guidance was 15.5%–15.9%; segment ranges were 17.5%–17.9% North America, 13.6%–14.0% International, and 15.0%–15.2% Aerospace.

• Adjusted guidance excludes $0.25/share of expected realignment charges and $0.09/share of CLARCOR acquisition expenses; Q3 adjusted EPS midpoint was $1.74, excluding $0.09/share of realignment costs.

• Guidance excludes Q3–Q4 benefits or costs from CLARCOR and Helac; expected realignment charges were $48M, with $30M of savings reflected in margin guidance.