Monday, January 24, 2011

Parker-Hannifin's (NYSE:PH) Margin Sustainability Uncertain

Parker-Hannifin's (NYSE:PH) looks like they'll enjoy organic growth of about 22 percent in 2011, but could meet a major headwind in relationship to sustainability of margins.

Barclays says, "While 2Q11 organic growth of 22% and a 29% increase in total orders suggest continued momentum with the industrial recovery, we think the recurring concerns over the sustainability of margins could remain an investor focus and a near-term headwind for the stock. However, we believe that a solid pickup in capital expenditures by original equipment manufacturers and aerospace aftermarket sales could drive upside to expectations over the next 18 months.

"In our view, despite concerns around segment margins, we think strong end market demand could drive results to the high end of guidance or above. We raise our FY11 and FY12 EPS estimates to $6.15 and $7.20 respectively."

Barclays maintains an "Equalweight" rating on Parker-Hannifin (PH), which closed Friday at $86.00, up $0.49, or 0.57 percent. Barclays boosted their price target on Parker-Hannifin from $87 to $92.

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