Parker-Hannifin's Earnings: An Early Look

2013 is here, and earnings season has already started ramping up. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Parker-Hannifin (PH 0.06%). The fluid power systems manufacturer has seen decent share-price gains lately, as prospects for the U.S. economy have gotten somewhat better in recent months. Yet earnings estimates suggest a less optimistic picture for the company. Let's take an early look at what's been happening with Parker-Hannifin over the past quarter and what we're likely to see in its quarterly report Friday morning.

Stats on Parker-Hannifin

Source: Yahoo! Finance.

Will Parker-Hannifin beat earnings expectations?
Over the past three months, analysts have gotten a lot more pessimistic about Parker-Hannifin's prospects. They've reined in EPS estimates by $0.44 per share, turning what might have been a year-over-year gain into a big drop in income. Despite those concerns, shareholders haven't been displeased, with the stock having risen about 12% since mid-October.

Part of Parker-Hannifin's recent success has come from the aerospace industry. Back in October, the company found out that its flight control systems received FAA certification for Gulfstream G650 jets that Lockheed Martin (LMT -1.17%) subsidiary produces. Then in November, Parker's aerospace division entered into a joint venture with General Electric's (GE -0.33%) GE Aviation segment to improve engine performance for commercial aircraft. Given the relative strength in aerospace orders recently, Parker's exposure to the segment marks a big part of its growth potential for the future.

From a financial standpoint, Parker-Hannifin got some great news in early December, when Fitch Ratings affirmed its bond rating of A. Despite concerns about acquisitions and share repurchases, Fitch believed that Parker has a good mix of sales that should help it overcome weak economic conditions.

For Parker-Hannifin to justify its recent share-price increases, beating estimates on Friday would be an important step. Otherwise, shareholders could see their gains over the past quarter go up in smoke.

Click here to add Parker-Hannifin to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.