Parker-Hannifin (PH) Q1 2017 earnings summary

Executive summary

• Q1 FY17 sales were $2,743.1M, down 4.4% reported and 4.6% organically; total orders rose 2%, the first quarterly increase since December 2014.

• Net income attributable to common shareholders rose to $210.1M from $195.0M; diluted EPS was $1.55 reported and $1.61 adjusted, up from $1.41 and $1.52.

• Adjusted segment operating margin improved to 15.4% from 15.3%; FY17 guidance was maintained amid weak but stabilizing markets.

Financial highlights

• Net sales were $2,743.1M versus $2,869.3M; acquisitions added 0.3% and currency reduced sales 0.1%.

• Adjusted segment operating income was $421.8M versus $438M; simplification and restructuring savings partly offset weaker industrial demand.

• Adjusted EPS of $1.61 versus $1.52 excluded realignment charges of $0.06 per share, compared with $0.11 a year earlier.

• Gross margin was 23.2% versus 23.3%; SG&A fell to $323.0M from $370.2M, while operating income before interest and other expense rose to $380.1M from $363.0M.

Outlook and guidance

• FY17 sales guidance remained -1.5% to +2.1% YoY, with near-flat organic growth at the midpoint.

• FY17 EPS guidance was $6.15–$6.85 reported and $6.40–$7.10 adjusted, with midpoints of $6.50 and $6.75; adjusted guidance excludes $0.25 per share of realignment charges.

• FY17 segment margin guidance was 14.8%–15.2% reported and 15.2%–15.6% adjusted; adjusted guidance excludes $48M of expected realignment charges.

• Adjusted FY17 segment margin guidance: North America 17.3%–17.7%, International 13.1%–13.5%, and Aerospace 14.9%–15.3%.

• FY17 included estimated realignment savings of $30M; Q2 adjusted EPS midpoint was $1.36, excluding $0.10 of expected realignment expense.