Parker-Hannifin (PH) Q1 2015 earnings summary

Executive summary

• Record Q1 FY2015 sales were $3,269.9M, up 1.4% reported; adjusted for the prior-year GE Aviation JV, sales grew 2.9%, with organic growth of 3.7%.

• Orders increased 5% across all segments; adjusted diluted EPS rose to $1.89 from $1.67, and adjusted segment margin increased to 16.1% from 15.0%.

• FY2015 adjusted EPS guidance midpoint rose to $7.75, supported by Q1 results and restructuring savings, partly offset by expected currency effects.

Financial highlights

• Net sales were $3,269.9M versus $3,226.1M; gross profit was $810.1M versus $749.7M, and gross margin improved to 24.8% from 23.2%.

• Reported diluted EPS was $1.85 versus $1.61; adjusted EPS excluding restructuring charges was $1.89 versus $1.67.

• Segment operating income was $519.4M reported and $525.2M adjusted, versus $464.9M a year earlier; adjusted income excludes $5.8M of restructuring charges.

• Operating cash flow was $260.9M, or 8.0% of sales, versus $282.7M and 8.8% a year earlier.

Outlook and guidance

• FY2015 adjusted EPS guidance was $7.45–$8.05, midpoint $7.75; reported EPS guidance was $7.20–$7.80, with $0.25 per share of restructuring charges excluded from adjusted EPS.

• Adjusted sales growth guidance was 0%–3%; regional and segment ranges were North America 3%–7%, International down 4%–1%, and Aerospace 2%–3%.

• Adjusted segment margin guidance was 15.7%–16.1% overall, with ranges of 16.9%–17.3% for North America, 15.3%–15.7% for International, and 13.3%–13.8% for Aerospace.

• Guidance assumed a ~29% tax rate; approximately $36M of additional realignment charges were expected during the remainder of FY2015.