Parker Hannifin Creates Hybrid Engine - Analyst Blog

Parker Hannifin Corporation (PH) has developed hydraulic hybrid technologies that exceed new federal fuel efficiency and emissions standards.

Extensive testing and field use has indicated that Parker's RunWise advanced series hydraulic hybrid technology is the most effective system for reducing emissions and fuel consumption by up to 50% in addition to improved drivability and performance.  

Parker's advanced hydraulic system disengages the engine from the rear wheels of the vehicle.  This offers several advantages including the ability to recover and store as much as 70% percent of braking energy, reduced brake wear and tear and an engine management system that optimizes the performance of the engine for lower fuel consumption.

We believe Parker-Hannifin is a strong company and is showing good execution through its cost saving efforts. Although Parker-Hannifin stands to benefit from any recovery in global manufacturing activity, the company's increased scale in its international business (where Europe represents by far the largest geography) as well as its meaningful aerospace presence increases its late-cycle exposure relative to past economic cycles.

We expect MRO (Maintenance, Repair and Overhaul) to get a boost from continued deferral of capital investment in new machines. Parker-Hannifin's strong exposure to MRO-type products and ability to convert net income into free cash flow will benefit future earnings.

Although Parker-Hannifin operates in fragmented and cyclical markets, its strong distribution system provides an edge over competitors. We believe this distribution system is likely to result in asset turnover and returns on invested capital above those of its peers, despite the impact of the weak economy. In addition, to stay ahead of competition, the company emphasizes product innovation and technological improvement.

Parker-Hannifin is a leading worldwide full-line diversified manufacturer of motion and control technologies and systems, including fluid power systems, electromechanical controls and related components. In addition to motion and control products, the company also is a leading worldwide producer of fluid purification, fluid and fuel control, process instrumentation, air conditioning, refrigeration, electromagnetic shielding and thermal management products and systems. Eaton Corporation (ETN) is a major competitor.

We currently have a Neutral recommendation on Parker-Hannifin Corp.

 
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