Parker Hannifin Lowers Guidance, But Investors Assuming The Worst Is Already In Sight

As is the case with many industrials now, the Street seems to have quickly shifted to a view that the worst of this downturn is in sight for Parker Hannifin (PH). The shares are far closer to the 52-week high than the low, and have rebounded more than 10% from a pre-earnings dip in September, despite a significant revision to FY 2020 earnings expectations with the fiscal first quarter earnings report.

Industrials have done well as a group over the last three months, with Parker on the high end of the curve at nearly 20% Emerson (EMR) is one of the few that have done better). That outperformance is more than I expected, particularly in the context of management’s guidance, but the Street wants to believe in a 2020 industrial rebound story and doesn’t want to miss out. I like the steps Parker has taken to shift the business toward less-cyclical, higher-margin segments, but the expected return at today’s share price isn’t that special relative to what investors could expect from the likes of Dover (DOV), Honeywell (HON), and Rockwell (ROK) as industrial recovery stories.

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Parker Hannifin Lowers Guidance, But Investors Assuming The Worst Is Already In Sight