How I Made $5000 in the Stock Market

Parker Hannifin Is Up More Than 20% Since our Recommendation. The Stock Is Still Cheap.

Oct 21, 2025 15:09:00 -0400 by Al Root | #Follow-Up

The catalysts from our bullish call remain in place.

Heavy equipment vehicles operate at a mine site in Amaruq, Nunavut, Canada. (Cole Burston/Bloomberg)

Key Points

From the sleek designs of military jets to the pleasing swoop of an airplane’s wing, humans have always found flight fascinating. The side-lock couplings and high-pressure swivel fittings? Maybe not so much.

Yet it’s those basic inputs that have made Parker Hannifin an industrial and aerospace powerhouse at a time when the aerospace industry is booming. And it’s taking the stock into the clouds with it.

The stock has risen more than 20% since Barron’s highlighted it in the summer of 2024. It’s a little more expensive than it was back then, but, in short, many of the catalysts then remain in place today. After all, flying may be exciting, but no one wants a Maverick when it comes to plane parts. Parker Hannifin shares aren’t likely to take investors on a bumpy ride.

Parker Hannifin is an industrial expert in nearly everything that moves, producing valves, pumps, motors, and many other behind-the-scenes parts. The essential nature of what it sells means that its products are nearly always in demand. That is particularly true of its aerospace business, which caters to commercial and military clients. The segment has nearly doubled, thanks to global demand for planes and smart acquisitions. Aerospace accounted for 31% of revenue in the recently completed fiscal 2025, up from 16% in fiscal 2022. The rest of the business serves industrial customers across the globe.

“Parker Hannifin has been repositioning itself toward more aerospace revenue, and that creates a higher floor around margins, less cyclicality, and stronger growth—that’s all the ingredients you need to create upward pressure on the stock,” says Matt Stucky, Chief Portfolio Manager, Equities at Northwestern Mutual Wealth Management Company. In addition, the company’s history of execution means “management has a lot of credibility in terms of hitting their long-term targets, and there could be upside to those numbers.”

Parker has been a strong performer for a long time, earning it the title of “compounder.” These growth-oriented companies are capable of generating double-digit earnings growth for years, typically through organic growth and smart, smaller bolt-on acquisitions that augment existing business.

Between 2014 and 2024, Parker grew sales and earnings by 4% and 20% a year, respectively. Operating profit margins went from roughly 10% to 20% over that span. Tom Williams, who ran Parker Hannifin from 2015 to 2023, was CEO during the period. The stock returned about 14% a year during his tenure.

He turned the reins over to longtime Parker employee Jenny Paramentier in early 2023. The company hasn’t missed a beat, integrating the Meggitt aerospace acquisition that closed in late 2022 and orchestrating the purchase of Kohler Energy’s Curtis Instruments acquisition in June.

Earnings are expected to grow at double-digit rates for the coming few years, with additional M&A potentially boosting results. There are “M&A levers to pull,” says Raymond James analyst Tim Thein.

He rates shares “Outperform” and has a $845 price target for the stock, up 14% from a recent $740.

His target values Parker stock at about 31 times estimated calendar year 2026 earnings. That is a risk. Industrial companies in the S&P 500 trade for roughly 23 times estimated 2026 earnings, and Parker has traded for closer to 26 times forward earnings for the past few years. Shares, however, rarely go on sale, and the company is becoming more profitable. A recently increased share repurchase plan of up to 20 million shares, and a 0.9% dividend yield, offer some support.

What’s more, Parker is seeing tailwinds in its defense business and the aerospace aftermarket, says Jefferies analyst Stephen Volkmann. “On the industrial side, Parker Hannifin is seeing some signs of recovery, though not yet broad-based,” Volkmann says.

Some macro indicators aren’t trending in Parker’s favor. The Institute for Supply Management’s Purchasing Managers’ Index, or ISM PMI, a key gauge of U.S. manufacturing activity, came in at 49.1 in September, up from 48.7 in August. A reading above 50 indicates growth. The September reading was the seventh consecutive reading below that level. The last positive reading, in January, snapping a streak of 26 consecutive months below 50, after all revisions.

There have been pockets of strength, mainly related to building AI data centers or commercial aircraft, but it has been a terrible stretch for many manufacturers. It’s a headwind that hopefully will become a tailwind for shares in the coming months.

An investment in Parker doesn’t depend on broad-based industrial improvement. The company “continues to see strong margin performance despite soft industrial end-markets…even during elongated downturns,” says Volkmann, who rates shares Buy and has a $880 price target for the stock, up 19% from recent levels. “We continue to view Parker Hannifin as a premium industrial name, deserving of a premium valuation, with a long-term earnings growth trajectory driven by less-cyclical exposure, disciplined M&A compounding, and their cornerstone [continuous improvement] strategy.”

And that might be enough to make Parker Hannifin a Top Gun for investors too.

Write to Al Root at allen.root@dowjones.com