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Parker Hannifin Falls After Outlook Cut on Weak Sales Abroad

Parker Hannifin Corp. (PH), a maker of fluid power systems and air-conditioning products, dropped the most in more than two months after paring its forecast for full- year earnings because international demand is slowing.

The shares dropped 4.1 percent to $81.52 at the close, the biggest decline since Nov. 9. The slide was the fifth-worst in the Standard & Poor’s 500 Index, and manufacturers such as Honeywell International Inc. (HON) and Eaton Corp. (ETN) also slumped.

“Internationally, we are seeing some softening in business conditions consistent with global macroeconomic indicators,” Don Washkewicz, chief executive officer of Cleveland-based Parker Hannifin, said today in a statement.

Industrial companies are struggling with sagging demand as economic growth in Europe slowed to 1.6 percent in 2011 from 1.9 percent the year before and is predicted to contract 0.2 percent this year, the average of 21 economists’ forecasts in a Bloomberg survey. Parker Hannifin last fiscal year got at least 42 percent of sales and more than half of pretax income from outside the U.S., according to data compiled by Bloomberg.

“European weakness will not be fully offset by resiliency in North America,” Jeffrey Hammond, an analyst with KeyBanc Capital Markets, wrote in a note today. “Order rates suggest further deceleration across the businesses in December.”

Parker Hannifin said in the statement that profit from continuing operations would be $6.90 to $7.30 a share for the year ending in June, less than its previous forecast of $7.25 to $7.85. Earnings in the fiscal second quarter ended in December also fell short of analysts’ estimates.

The company said net income for the second quarter rose to $1.56 a share, from $1.39 a year ago. The earnings were short of the $1.63 average of analysts’ estimates in a Bloomberg survey.

To contact the reporter on this story: Thomas Black in Dallas at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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