Motion and fluid control systems maker Parker Hannifin Corporation (PH) Tuesday reported a sharp decline in net profit for the first quarter, reflecting lower revenues across all business segments, amid the current economic downturn. However, earnings per share basis beat Street estimates. The company also raised its earnings guidance for fiscal 2010.
For the first quarter, Cleveland, Ohio-based Parker's net income attributable to common shareholders was $73.49 million or $0.45 per share, down 71% from $250.18 million or $1.50 per share in the previous-year quarter.
On an average, 15 analysts polled by Thomson Reuters expected the company to earn $0.17 per share for the quarter. Analysts estimates typically exclude special items.
Net sales for the three-month period plunged to $2.24 billion from $3.06 billion in the first quarter of fiscal 2009. Analysts expected Parker to generate revenues of $2.17 billion during the quarter.
Don Washkewicz, Chairman, CEO and President, said, "Our results this quarter continue to reflect the impact of the global recession on our business, coupled with the fact that we are comparing current results with the record performance we achieved in the first quarter a year ago."
On a segmental basis, sales from Industrial North America was $783.09 million versus $1.11 billion, and Industrial International segment sales fell to $850.25 million from $1.22 billion a year ago. Sales from Aerospace segment was $416.86 million as against $478.47 million, and Climate and Industrial Controls business posted sales of $186.97 million compared to $255.95 million in the prior-year quarter.
Sales was down 28% organically in the quarter, while foreign currency translation negatively impacted sales by 1% and acquisitions contributed 2% to sales.
In addition, the company's total orders for the quarter dropped 25% from the last-year period. Segment-wise, orders in Industrial North America segment declined 27%, and orders in Industrial International segment fell 25% from the comparable period prior year. Orders in Aerospace segment slipped 23%, and Climate and Industrial Controls segment orders were down 17% from the prior-year period.
"We were pleased to note that orders, although down year-over-year, have steadily improved sequentially from the levels we witnessed in the June quarter, and our actions to reduce costs have begun to have a positive effect on margins," Washkewicz added.
During the quarter, selling, general and administrative expenses incurred by Parker reduced to $301.84 million from $332.68 million in the prior year.
Washkewicz said, "We continue to take additional actions to reduce costs and generate strong cash flows. These actions have helped us attain an impressive decremental marginal return on sales of 30 percent during the quarter."
For the fourth quarter of fiscal 2009, Parker had reported a net income of $49.52 million or $0.31 per share as against $252.57 million or $1.47 per share in the prior-year quarter. Net sales dropped to $2.21 billion from $3.35 billion in the same quarter last year.
Looking ahead, Washkewicz stated, "While we do not believe we will see material changes in trends for the remainder of the calendar year 2009, we are cautiously optimistic that we are at the bottom of the cycle."
For fiscal 2010, Parker now forecasts earnings from continuing operations to be between $1.55 and $2.05 per share, up from its prior estimate of $1.25 to $1.75 per share. Analysts currently expect the company to earn $1.69 per share on revenues of $9.20 billion for fiscal 2010.
In fiscal 2009, the company has earned $3.13 per share on net sales of $10.31 billion.
PH is currently trading at $57.09 per share, up 3.31% on a volume of nearly 1.9 million shares on the New York Stock Exchange. For the past 52 weeks, the stock has traded in a range of $27.69 to $59.36.
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