On Friday, Goldman Sachs adjusted its outlook on Parker-Hannifin Corporation (NYSE:PH) shares, a global leader in motion and control technologies. The firm increased its price target on the company's shares to $700 from $655 while maintaining a Conviction Buy rating.
The adjustment followed the company's investor day held on May 16, 2024, in New York, which featured presentations from Parker-Hannifin's top executives.
During the event, the management team, including Chairman and CEO Jenny Parmentier, President and COO Andy Ross, EVP and CFO Todd Leombruno, and VP of IR Jeff Miller, shared insights into the company's strategic direction.
The team outlined new financial targets for fiscal year 2029, aiming for 4-6% organic growth, 28% EBITDA margins, 17% free cash flow margins, and a 10% or more compound annual growth rate in earnings per share, potentially reaching over $40 in EPS by FY29.
Goldman Sachs voiced confidence in Parker-Hannifin's decade-long transformation and its positioning to capitalize on the next phase of its growth.
The new FY29 targets align with expectations set by the firm earlier in February 2024 and are anticipated to support a continued re-rating of the company's stock value.
The analyst highlighted Parker-Hannifin's alignment with several secular growth trends such as Electrification, Clean Technology, and Digitization.
Furthermore, the investment firm noted the company's financial strength, pointing out an additional $20-$26 billion in capital deployment opportunities over the next five years due to its improved balance sheet, now at approximately 2.0x net leverage. This financial flexibility is seen as a complement to the company's growth targets.
Goldman Sachs concluded its assessment by emphasizing Parker-Hannifin's consistent track record of surpassing expectations and its readiness for a potential increase in U.S. mega project activities.
The raised price target to $700 signifies an approximate 4.5% free cash flow yield for fiscal year 2026, underpinning the firm's conviction in the company's prospects.
InvestingPro Insights
As Parker-Hannifin Corporation (NYSE:PH) continues to make headlines with its strategic growth targets and financial strength, real-time data from InvestingPro offers a closer look at the company's current market position. With a market capitalization of $69.35 billion and a P/E ratio of 25.19, Parker-Hannifin stands out in the Machinery industry. The company's commitment to shareholder returns is evident through its impressive track record, having raised its dividend for 7 consecutive years and maintained payments for 54 years, reflecting a deep-rooted stability in its financial practices.
InvestingPro Tips highlight that analysts are optimistic about Parker-Hannifin's future, with 7 analysts revising their earnings upwards for the upcoming period. Furthermore, the company's stock has experienced a high return over the last year, with a 65.18% one-year price total return as of the latest data. This aligns with the positive outlook shared by Goldman Sachs and underscores the potential for the company's stock value to continue its upward trajectory.
To gain a deeper understanding of Parker-Hannifin's performance and for more detailed analysis, readers can explore additional InvestingPro Tips at https://www.investing.com/pro/PH. There are in total 15 additional tips available that could provide further insights into the company's financial health and stock performance. For those interested in a comprehensive investment tool, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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