Motion-control products manufacturer Parker-Hannifin (NYSE:PH) will report Q2 2007 financial results on Wednesday, Jan. 17. Here's a quick read on what to expect.

What analysts say:

  • Buy, sell, or waffle? Of the 17 analysts that cover Parker-Hannifin, 10 say to hold, six say it's in forward motion with a buy, and only one wants to reverse gears with a sell.
  • Revenues. On average, they expect second-quarter revenues to grow 13% to $2.4 billion.
  • Earnings. Profits, meanwhile, are expected to rise by almost 20%, to $1.39 per share.

What management says:
Parker-Hannifin describes itself as a manufacturer of various motion-control products serving the industrial, aerospace, and transportation industries, but nearly three-quarters of its revenues are derived from the industrial segment. Motion control moves materials, controls, machines, vehicles, and equipment, and positions materials during manufacturing.

Because of its reliance on the manufacturing segment of the economy, Parker-Hannifin closely monitors the Institute of Supply Management's index of manufacturing activity as a clue to how orders will flow to the company. In June of last year, it was at 53.8, while in September it had fallen to 52.9. However, anything greater than 50 suggests an expanding manufacturing climate. In December, it stood at 51.4, which would point to a slowing economy, but it was actually up from 49.5 in November, so orders should be on the rise again.

What management does:
Parker-Hannifin put a reorganization in motion last year to better reflect changes occurring in its markets. Part of its problem has been the weak financial condition of automakers Ford (NYSE:F) and General Motors (NYSE:GM), which caused them to cut back on the amount they order from the company, and generally flat Department of Defense spending. By realigning its business and shedding others (while also making some small acquisitions), the company has been able to increase gross profits while maintaining bottom-line results as well.

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All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Although the death of the manufacturing economy has been foretold for many, many years, in reality it continues to move apace, though it suffers from ebbs and flows. Certainly it has suffered from softness lately, and the ailing condition of car manufacturers has added to the ennui felt.

Yet there is a consistency to Parker-Hannifin's cycles, and it seems to be in an uptrend now. December orders rose by 6% over last year (though that's half of the increase reported a year ago), helped mainly by a 17% increase in international industrial orders, which make up 46% of the motion-control specialist's industrial segment. Aerospace is also up 10%, thanks primarily to an expected increase in deliveries expected by Boeing (NYSE:BA). So while U.S. heavy industry may be slowing, the steam is surging internationally, which should help Parker-Hannifin remain an object in motion.


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Fool contributor Rich Duprey owns shares of Ford, but does not own any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.