Parker Hannifin (NYSE:PH): One of the world’s top motion control manufacturers

Parker Hannifin (NYSE:PH) is one of the world’s top industrial companies and is a specialist in so-called ‘motion control technologies’ – every technology under the sun related to the movement of objects.

We think this is one of the most under-rated opportunity to gain exposure to the growth in defence and EV sectors – sectors that all investors want a piece of, but they don’t realise Parker Hannifin has a major foothold in…yet.

 

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Introduction to Parker Hannifin

This company, capitalised at over $90bn and making over $20bn in sales, is more than a century old and is headquartered in Cleveland, Ohio (a state that is home to other high-quality companies too such as Sherwin Williams).

Motion control technologies is an enormous industry, worth US$145bn globally. It encompasses several other industries aerospace, water, climate control, process control and even renewable energy.

Examples of this technology include hydraulics, pneumatics, electro-mechanical mechanisms, filtration, fluid & gas handling, process control and engineered materials. Many of these overlap – case in point, 2/3 of Parker Hannifin’s revenue comes from customers who buy 4 or more technologies. But if you were wondering which is number one – 33% comes from aerospace and defence.

 

A growing, global presence

Parker Hannifin is one of the world’s top players with operations in 45 countries across 6 continents. It claims that by the end of 2025, it will have grown revenues by $4bn (from $15.9bn to $19.8bn), its operating margin by over 300 basis points (i.e. 3%), as well its EPS and FCF by nearly 50%.

The company purports to lead the market given its innovative products, its decentralised business structure, the interconnected nature of its technologies, technical expertise and distribution network.

There’s a good ESG element to this company, with a significant proportion of its portfolio enabling clean technologies. It is targeting a 50% reduction in emissions by 2030 and achieving carbon neutrality by 2040.

 

Still room for growth

Parker has set the following targets for FY29.

• 4-6% organic CAGR growth,
• a 27% adjusted operating margin,
• A 28% adjusted EBITDA margin,
• A 17% FCF margin, and
• >10% Adjusted EPS CAGR growth.

There are other goals too including increasing its market share. It has only a 13% share globally and plans on reaching 20%. Moreover, it is also continuing the move away from shorter cycle revenue trends towards longer cycle trends and sales from the industrial aftermarket.

EVs are an important part of this because they mean twice as much content as combustion engine vehicles. Among other things, Parker Hannifin makes flame-resistant coatings, environmental and hermetic sealing, high temperature materials and vibration dampening.

Parker Hannifin has plenty of organic growth but isn’t one to shy away from M&A activity that will bring substantial synergies – unless such a business is above its yardstick of 11x EV/EBITDA. It plans $30bn in capital deployment up to FY27.

 

How analysts think Parker Hannifin can perform?

Parker Hannifin is covered by 20 analysts in the US and their mean target price is US$779.80 per share, up from US$729.96 now. They concur with the company’s revenue and EPS targets for 2025.

In 2026, they call for $20.6bn revenue, but a retreat in EPS to $25.44. Then in 2027, they expect $21.7bn revenue and $28.77 EPS. The company’s P/E of 25.1x and its PEG is 3.4x.

 

The key risks with Parker Hannifin are:

• The risk of major industrial accidents,
• The company being hit by higher interest rates given its high level of debt, and
• Adverse equity market conditions.

But, as with all companies we take deep dives into, even though there is some short-term risk, we think investors that hang around for the long-term will be just as disappointed as those who’ve stuck around for the last 5 years with Parker Hannifin.

 

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