TD (TSX:TD) Cowen has updated its financial model for Parker-Hannifin Corporation (NYSE: NYSE:PH) and increased the price target to $520 from the previous $500 while keeping a hold rating on the stock.
The adjustment reflects the anticipated sale of the company's composites business in the second quarter, which is expected to have a negative impact of 15 cents on the second-half earnings, assuming 15% margins.
The company had previously reported a stronger-than-anticipated order volume last quarter, which caught investors by surprise. However, the analyst pointed out that despite this positive development, the recent ISM readings have continued to show weakness. The firm suggested that if Parker-Hannifin's orders can defy this downward trend, the stock is likely to see a favorable reaction in the market.
The analyst emphasized that while it is challenging to predict the company's order trend, the execution of its business operations is anticipated to remain robust. This expectation is factored into the new price target of $520.
In other recent news, Parker Hannifin Corporation reported significant growth in its Aerospace segment and overall financial performance for fiscal year 2024. The company announced record fourth-quarter sales of $5.2 billion, an 18% growth in earnings per share, and a record-free cash flow of $3 billion.
Parker Hannifin's Board of Directors also approved a regular quarterly cash dividend of $1.63 per share, marking the company's 297th consecutive quarterly dividend.
The Aerospace segment sales surpassed $5 billion, reflecting double-digit growth across all market segments. Looking ahead, Parker Hannifin forecasted organic sales growth between 2% to 5% for fiscal years 2025 and 2029, with Aerospace expected to grow at 8.5%.
Despite a weak outlook for Europe, the company experienced positive order rates in Asia, contributing to a significant improvement in international business.
These recent developments highlight Parker Hannifin's continued focus on portfolio optimization, as demonstrated by the divestment of the North American composites business.
The company's aftermarket business, known for high margins, also continues to perform strongly.
InvestingPro Insights
As Parker-Hannifin Corporation (NYSE:PH) navigates the sale of its composites business and the challenges of a fluctuating market, recent data from InvestingPro offers additional context for investors. The company boasts a notable track record, having raised its dividend for an impressive 7 consecutive years and maintained dividend payments for 54 years straight, which may appeal to income-focused investors. Moreover, Parker-Hannifin is trading at a relatively low P/E ratio of 25.72 when considering near-term earnings growth, indicating potential undervaluation.
InvestingPro data highlights a market capitalization of $74.73 billion and a PEG ratio of 0.73, suggesting that the company's earnings growth could be undervalued relative to its peers in the Machinery industry, of which it is a prominent player. With a steady revenue growth of 4.53% over the last twelve months as of Q4 2024, Parker-Hannifin demonstrates a solid financial foundation. Additionally, the company's gross profit margin stands at 35.94%, reinforcing the strength of its business model.
Investors may find further insights by exploring the additional 11 InvestingPro Tips available, which provide a deeper analysis of Parker-Hannifin's financial health and market position. For those seeking comprehensive investment analysis, these tips can be accessed through InvestingPro's detailed reports at https://www.investing.com/pro/PH.
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