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Parker Hannifin Surges on Profit Forecast in Recovery

Parker Hannifin Corp., a maker of valves and pumps used in factory equipment, rose the third most of any stock in the Standard & Poor’s 500 Index after boosting its annual profit forecast amid a rebound in U.S. manufacturing.

Full-year earnings from continuing operations will be as much as $5.80 a share, the company said today, up from an August projection of at most $4.40. Profit more than tripled to $1.51 a share in the quarter ended Sept. 30, exceeding analysts’ average estimate of $1.06.

“The industrials have been leading this recovery and clearly there’s no sign of that slowing here,” said Stephen Volkmann, a New York-based analyst with Jefferies & Co. who recommends holding the shares.

Parker Hannifin, based in Cleveland, produces hundreds of thousands of parts used in factories, as well as in heavy trucks and aircraft. About 45 percent of sales come from outside the U.S., making it a barometer for the global industrial economy. Manufacturing has led the U.S. economy from the worst recession since the 1930s.

Parker Hannifin gained $2.66, or 3.7 percent, to $75.08 at 4 p.m. in New York Stock Exchange composite trading. The stock was the third-ranked gainer on the S&P 500 Index after Massey Energy Co. and Capital One Financial Corp.

Replenishing Inventory

Manufacturing during the recovery, which began in June 2009, was boosted by climbing exports, improving business investment and replenishing inventory. U.S. manufacturing grew more slowly in September than the month before, according to the Institute for Supply Management’s factory index.

Orders for the most recent quarter climbed 29 percent from a year earlier, Parker said. They rose 31 percent in the North American industrial segment and 34 percent in the international industrial segment.

The pace of growth has slowed from the quarter ended June 30, when overall orders increased 35 percent, and rose 46 percent in both the North American and global industrial divisions.

Parker Hannifin’s net income increased to $247.2 million, or $1.51 a share, from $73.5 million, or 45 cents, a year earlier, Parker said in a statement. Revenue rose 26 percent to $2.83 billion, exceeding analysts’ estimates of $2.65 billion.

‘Off the Charts’

Analysts had predicted earnings of $4.49, on average, for the year ending in June 2011, according to data compiled by Bloomberg.

“Most people expected a good quarter out of these guys, meaning some beat and some raise, but this is just off the charts,” said Volkmann.

Sales in the industrial North America division increased 36 percent to $1.06 billion, and revenue in the industrial international segment climbed 29 percent to $1.09 billion, according to the statement.

The company has about 55,000 workers. About half are employed by foreign subsidiaries, according to the company’s annual regulatory filing.

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