When the companies that buy your products are in financial trouble, you're in financial trouble. But that doesn't mean you have to give up.
Not giving up
Last week, Parker reported financial results for its fiscal 2009 second quarter. Although the company beat consensus estimates, earnings were a shell of their former selves. There simply isn't much you can do when your customers start shutting down, and that's exactly what happened to Parker in December. With some of those shutdowns continuing into January, shareholders can expect to see lingering effects when the company announces results next quarter.
Still, the company hasn't been sitting tight. Parker completed eight acquisitions over the quarter, which partially offset what could have been a disastrous decline in overall revenues. That brings the total number of acquisitions for Parker in fiscal 2009 to nine, and although management says it's through buying companies for the remainder of the year, you have to wonder about a mid-cap company that goes on a buying spree in the middle of the worst credit crisis in more than 50 years.
Whether it will be able to digest all of these companies successfully remains to be seen, but it will definitely be interesting to watch. Earnings fell 27% to $155.4 million -- $0.96 per share -- on $2.7 billion in sales, which were down 5%.
Parker's best bet may be to just wait out the storm. Uncertainty surrounding global markets has caused spending to slow to a trickle, and it appears it will stay that way until we're clearly out of this economic mess. Management teams at some companies -- W.W. Grainger
Management hails Parker's aerospace division as its diamond in the rough, with a Rolls Royce contract expected to generate $2.5 billion over its lifetime. Total aerospace contracts awarded over the past two years add up to $12 billion for Parker. We've seen similar aerospace-related strength from industrial systems supplier Woodward Governor
I think Parker-Hannifin will be among the companies emerging stronger than ever when the recession ends.
Fool contributor Chris Jones has neither long nor short positions involving any company mentioned in this article. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool's disclosure policy thinks financial crunch is a breakfast cereal.