Parker-Hannifin (PH) Q3 2016 earnings summary

Executive summary

• Q3 FY16 net sales were $2,828.7M, down 10.6% YoY; organic sales fell 9.4%.

• Adjusted diluted EPS was $1.51 versus $2.06; reported EPS was $1.37 versus $2.02.

• Adjusted segment operating margin rose to 14.7% from 14.4%; FY16 adjusted EPS guidance midpoint increased by $0.20 to $6.30.

• Orders declined 6% YoY, with the rate of decline moderating; performance reflected progress on the New Win Strategy.

Financial highlights

• Q3 net income was $187.1M versus $285.5M; adjusted net income was $206.4M versus $291.8M.

• Q3 gross profit was $619.3M versus $789.3M; gross margin was 21.9% versus 25.0%.

• Nine-month sales were $8,403.6M versus $9,567.2M; net income was $565.3M versus $833.0M, and adjusted diluted EPS was $4.56 versus $5.81.

• Q3 sales included a $47M currency headwind and $9M from acquisitions; organic sales were $2,867M.

Outlook and guidance

• FY16 adjusted diluted EPS guidance rose to $6.20–$6.40, midpoint $6.30, from a prior midpoint of $6.10; reported EPS guidance was $5.57–$5.77.

• Adjusted EPS guidance excludes $0.63 per diluted share of business realignment charges, including $0.40 per share tied to Simplification initiatives.

• FY16 total sales guidance was down 9.9%–11.9%; adjusted segment margin guidance was 14.7%–14.9%.

• Adjusted segment margin guidance: North America 16.7%–16.9%, International 12.3%–12.5%, and Aerospace 14.8%–15.0%.

• FY16 effective tax rate was expected to be ~28%; Q4 organic sales guidance was down 7%.