Perceptions change slowly. Not only has Parker-Hannifin (PH) taken far-reaching steps to fundamentally improve its cost structure (leading to significant uplift in margins versus prior recessions), the company's M&A activity has created a less cyclical business better capable of growing through the cycle.
And yet, Parker is still a frequent flier on "short-cycle industrial" lists. I'm guilty of it too, referring to Parker in my last piece as, "probably always a cyclical short-cycle industrial". Now, Parker still IS cyclical and still leveraged to short-cycle markets, but it has improved its quality and full-cycle stability to a meaningful degree.
I liked Parker back in early May, and the shares have jumped by about a third since then, beating the industrial sector by a wide margin. I still really like this business, and the valuation is now on par with other high-quality industrials with a prospective return in the mid-to-high single-digits, but I don't like how the sell-side is straining to justify ever-higher price targets. I don't sell quickly out of winners in my own portfolio, but I won't pound the table as hard now for new buyers to consider this one.
Follow this link to the full article:
Parker-Hannifin Showing That It Really Is Different This Time
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