Parker Hannifin sees major weakness in key markets
Cleveland OH – Motion and control technologies manufacturer Parker Hannifin Corp. saw major weakness in its main markets – including 13% lower sales in its industrial segment – in reporting results for its fiscal 2016 first quarter ended September 30, 2015.
Fiscal 2016 first quarter sales were $2.87 billion, compared with $3.27 billion in the prior year quarter (all figures in US dollars). Net income was $195.0 million compared with $280.2 million in the first quarter of fiscal 2015. Fiscal 2016 first quarter earnings per share were $1.41, compared with $1.85 in the prior year quarter. Adjusted earnings per share were $1.52, compared with $1.89 in the prior year quarter.
“Despite ongoing headwinds from a strong dollar and further weakness in key end markets that pressured sales, we delivered adjusted segment operating margins of 15.3%.” said chief executive officer Tom Williams. “This type of margin performance is unprecedented in our recent history during previous down cycles and reflects the benefit of our prior-year restructuring initiatives, rapid response on cost controls and savings resulting from our Simplification initiatives.
“Our previously announced restructuring initiatives for this year are underway to align costs with current demand and will position us well as the business environment improves. Simplification initiatives continue to expand as part of a broader effort to reduce complexity, increase speed, reduce costs and better serve our customers.
“We also introduced the new Win Strategy, designed to take Parker’s performance to the next level as we target actions aimed at driving increased sales growth and achieving segment operating margins of 17% in the next five years.”
During the first quarter of fiscal 2016, the company repurchased $310 million in Parker shares. A total of $1.6 billion worth of shares have been purchased under a previously announced authorization to repurchase between $2 billion and $3 billion in shares over two years, beginning in October 2014.
Diversified Industrial Segment: North American first quarter sales decreased 13% to $1.3 billion, and operating income was $212.7 million compared with $264.2 million in the same period a year ago. International first quarter sales decreased 18% to $1.0 billion, the majority of the decline in sales was the result of foreign currency rate changes. International operating income was $129.3 million compared with $189.8 million in the same period a year ago.
Aerospace Systems Segment: First quarter sales increased 2% to $544.6 million, and operating income was $74.0 million compared with $65.3 million in the same period a year ago.
Parker reported a decrease in orders of 11% for the quarter ending September 30, 2015, compared with the same quarter a year ago. The company reported the following orders by business:
– Orders decreased 12% in the Diversified Industrial North America businesses compared with the same quarter a year ago.
– Orders decreased 8% in the Diversified Industrial International businesses compared with the same quarter a year ago.
– Orders decreased 16% in the Aerospace Systems segment on a rolling 12-month average basis.
For the fiscal year ending June 30, 2016, the company has revised guidance for earnings from continuing operations to the range of $5.30 to $5.90 per share, or $5.80 to $6.40 per share on an adjusted basis. Fiscal year 2016 guidance is adjusted for expected business realignment expenses of approximately $0.50 per share, of which $0.30 per share relates to the company’s Simplification initiatives.
Williams added, “The change in our guidance largely reflects continued weakening in our end markets as evidenced by deteriorating order trends. We also do not expect any meaningful recovery in our markets through the end of our fiscal year. Aggressive actions are well underway to align our costs with the realities of current conditions. Looking forward, the continued execution of the new Win Strategy will help to position us to achieve new financial and operational performance targets designed to positively impact our customers and our shareholders.”