EUR 850.00 For Business Accounts Only

Morningstar | Parker's ambitions to increase system integration capability is aided by the Clarcor acquisition.

Parker Hannifin manufactures thousands of individual industrial parts, primarily fitting into the broad categories of motion, flow, and process control (electromechanical, hydraulic, and pneumatic) and fluid systems (connectors, hoses, and filters). The company has two main reporting segments: aerospace, which serves the specialized needs of both commercial and military aircraft manufacturers; and diversified industrial, which derives approximately 50% of sales through an independent distributor network. Parker supports and trains these networks to provide highly technical aftermarket parts and services. Diversified industrial is further split into North American and international reporting units, with North America generating about 45% of sales.Historically, Parker’s fortunes followed the trajectory of the global industrial economy, increasing sales at a modest multiple of the industrial economy as customers allocate both maintenance and growth capital expenditures to procuring Parker parts. This cyclicality has been especially apparent in recent quarters, as demand from end markets that rely on natural resources waned. However, in addition to selling single components or groups of parts, Parker Hannifin works its way up the value chain by acting as a systems integrator, leveraging extensive engineering expertise to combine proprietary parts into customizable systems for its customers. In our view, this ability is an important differentiator among producers of unspecialized parts. Systems have come to represent over 25% of Parker’s sales and often lead to profitable recurring maintenance service contracts that support customer retention.In the aftermarket, Parker sells through a global network of about 13,000 independent distributors, some of which run branded ParkerStores with personnel who are specially trained to help customers get the most out of Parker’s extensive product line. This industrial network of nearly 3,000 stores worldwide helps Parker get its supply chain even closer to customers in more remote locations, with plenty of opportunity to expand internationally where ParkerStore penetration is less robust than where it began in North America.