Motion and fluid control systems maker Parker Hannifin Corp. (PH) Tuesday reported a 32.7% decline in profit for the second quarter from last year, reflecting lower revenues across all business segments. However, the results smashed analyst expectations and improved sequentially from the first quarter.
Looking ahead to fiscal year 2010, the company raised its earnings guidance, citing early signs of a recovery emerging.
For the second quarter, Cleveland, Ohio-based Parker's net income attributable to common shareholders was $104.55 million or $0.64 per share, down from $155.40 million or $0.96 per share in the previous-year quarter.
On average, 15 analysts polled by Thomson Reuters expected the company to earn $0.36 per share for the quarter. Analysts estimates typically exclude special items.
On a sequential basis, net income surged 42.3% from $73.49 million in the first quarter, while earnings per share increased 41.6% from $0.45.
Net sales for the second quarter declined 12.4% to $2.35 billion from $2.69 billion in the year-ago period, but increased 5.3% from $2.24 billion in the preceding first quarter. Analysts expected Parker to generate revenues of $2.25 billion during the quarter.
Don Washkewicz, Chairman, CEO and President of Parker Hannifin, said, "This quarter's results largely reflect the execution of our Win Strategy including the benefits of actions we have taken to restructure our operations since the recession began. Notably, our performance has improved significantly relative to the first quarter of the year. Considering that our second quarter is typically our weakest, our margin performance this quarter was most impressive with decremental margins at just 10.6 percent."
Washkewicz added, "Total segment operating margins exceeded 10 percent at this low point in the cycle and were equal to last year. These are strong indicators that we are managing through this unprecedented downturn very effectively."
Parker's peer, Cleveland, Ohio-based Eaton Corp. (ETN) is slated to report its financial results for the fourth quarter on January 25, 2010. Analysts expect the company to report earnings of $1.23 per share on revenues of $3.07 billion.
On a segmental basis, Parker's sales from Industrial North America for the quarter declined 14.7% from the year-ago quarter to $847.21 million, while operating income increased 6.3% to $114.44 million.
Industrial International segment sales were $932.06 million, down 10.6% from the prior-year period. Operating income for the segment declined 28.2% to $82.64 million.
In the Aerospace segment, sales declined 15.4% from last year to $400.55 million, while operating income dropped 41.1% to $41.03 million.
Climate and Industrial Controls business posted sales of $174.89 million, down 2.4% from the year-ago period. However, operating income more than doubled to $6.14 million from the prior-year quarter.
The company's organic sales for the quarter were down 16%, while foreign currency translation positively impacted sales by about 4%.
In addition, the company's total orders for the quarter declined 7% from the prior-year period. Segment-wise, orders in the Industrial North America segment declined 3%, while orders in the Industrial International segment were unchanged with the comparable period of the prior year. Orders in the Aerospace segment slipped 27% on a rolling 12 month average business. Climate and Industrial Controls segment orders increased 6% from the prior-year period.
During the second quarter, selling, general and administrative expenses incurred by Parker declined to $309.84 million from $337.18 million in the previous-year quarter.
For the six-month period, Parker's net income attributable to common shareholders fell to $178.04 million or $1.10 per share from $405.58 million or $2.47 per share in the year-ago period.
Net sales for the half year were $4.59 billion, down from $5.75 billion in the same period of the prior year.
Parker Hannifin said it paid down outstanding debt by approximately $1 billion in the past year, bringing its debt-to-debt equity ratio below 30%.
For fiscal 2010, Parker now forecasts earnings from continuing operations between $2.40 and $2.80 per share, up from its prior estimate of $1.55-$2.05 per share. Analysts currently expect the company to earn $2.02 per share on revenues of $9.37 billion for fiscal 2010.
In fiscal 2009, the company had earned $3.13 per share on net sales of $10.31 billion.
Washkewicz said, "With our actions to drive strong margin and cash flow performance taking full effect, and what we believe to be the early signs of a recovery emerging, we are anticipating a strong second half to our fiscal year and have raised our guidance appropriately."
PH closed Friday's regular trading session at $58.56, down $0.23 on a volume of 1.71 million shares. In Tuesday's pre-market trading, the stock is trading at $61.00, up $2.44 or 4.17%. In the past 52 weeks, the stock has been trading in a range of $27.69-$59.36.
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