Stifel Upgrades Parker-Hannifin On Potential Synergies, Industry Recovery Prospects

After Parker-Hannifin Corp PH significantly lowered its fiscal 2020 outlook, the current outlook appears de-risked, while the industrial economy seems poised to return to growth in the second quarter of next year, according to Stifel.

The Analyst

Stifel’s Nathan Jones upgraded Parker-Hannifin from Hold to Buy while raising the price target from $199 to $229.

The Thesis

Current macro trends suggest that the industrial recession would be a shallow one and growth in the industrial economy could resume in the second quarter of 2020, Jones said in the note.

Since Parker-Hannifin is “an early cycle company with exposure to inventory cycles,” it could experience early recovery, the analyst mentioned. He added that this de-risks Parker-Hannifin’s outlook and should inspire investor confidence in the company achieving the current guidance and growth returning in fiscal 2021.

Parker-Hannifin has a track record of generating strong cash flows and this could grow “considerably” as the industrial economy resumes its growth and the company generates synergies from its recent acquisitions of Lord Corporation and Exotic Materials, Jones said.

He believes Parker-Hannifin’s stock represents “very good value for investors at this price.”

Price Action

Shares of Parker-Hannifin were trading lower by 0.80% at $205.95 at the time of publishing Tuesday.

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