Real Recoveries Are Flowing Into Parker-Hannifin's Numbers

Despite its reputation as a high-quality short-cycle play, not to mention one with significant self-help potential through business simplification and the integration of CLARCOR, Parker-Hannifin (NYSE:PH) has cooled off a bit since my last update. Although these shares have outperformed Eaton (NYSE:ETN), a fellow player in hydraulics, they've lagged other industrial stocks like Honeywell (NYSE:HON), Emerson (NYSE:EMR), and Illinois Tool Works (NYSE:ITW), as well as the S&P 500.

With fiscal 2017 in the books and improving trends across a large swath of its end-markets, Parker-Hannifin may be worth another look now. I'm worried about the overall health/valuation of the market, and I don't think Parker-Hannifin would be immune to a wide correction, but mid-single-digit revenue growth and mid-to-high FCF growth can support a fair value around $160, suggesting a high single-digit annual return even from these levels.

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Real Recoveries Are Flowing Into Parker-Hannifin's Numbers