Parker-Hannifin Corp. (NYSE:PH)

The analysis of the financial data reveals several notable trends in the company's intangible assets and goodwill over the six-year period ending June 30, 2022.

Goodwill

The goodwill value exhibited a relative stability from 2017 through 2019, with a slight decline from approximately $5.59 billion to $5.45 billion. A significant increase occurred in 2020, rising to nearly $7.87 billion, followed by a continuing upward trend in 2021. However, in 2022, goodwill experienced a decrease to about $7.74 billion. This indicates a substantial acquisition or reassessment event around 2020, with some subsequent reduction by 2022.

Patents and Technology

The value of patents and technology remained relatively constant around $254 million to $266 million from 2017 to 2019. Similar to goodwill, there was a marked increase in 2020, reaching nearly $992 million, which slightly increased in 2021 and then showed a minor decrease in 2022. This pattern suggests significant capital investment or revaluation in technology assets occurring at the 2020 mark.

Trademarks

Trademarks demonstrated a modest decline over the period, starting at approximately $554 million in 2017 and gradually decreasing to around $728 million in 2022, with a temporary increase in 2020 and 2021. Despite this, the overall trend indicates moderate erosion or amortization impacting trademarks.

Customer Lists and Other Intangible Assets

Customer lists and related intangibles show a downward trend from 2017 to 2019, followed by a sharp increase in 2020 to approximately $3.79 billion, which remained elevated through 2021 before a slight decrease in 2022. This pattern aligns with the timing of asset acquisition indicated in other categories.

Intangible Assets, Gross Carrying Amount

The gross carrying amount of intangible assets portrays a significant jump in 2020 from approximately $3.24 billion in 2019 to about $5.53 billion, maintaining a high level in subsequent years. This suggests a major acquisition or revaluation event around 2020, substantially increasing the intangible asset base.

Accumulated Amortization

Accumulated amortization increased consistently each year, moving from negative $1.07 billion in 2017 to nearly negative $2.32 billion in 2022. This steady rise reflects systematic amortization of intangible assets over time, impacting net asset values.

Intangible Assets, Net

Net intangible assets declined from $2.31 billion in 2017 to $1.78 billion in 2019, followed by a dramatic increase to nearly $3.80 billion in 2020, then a decrease in the following years through 2022 to approximately $3.14 billion. This aligns with the gross carrying amount and accumulated amortization trends, indicating that despite ongoing amortization, the 2020 acquisition or revaluation greatly expanded net intangible assets.

Goodwill and Intangible Assets Combined

The total combination of goodwill and intangible assets remained relatively steady from 2017 through 2019 at around $7.89 billion to $7.24 billion. A pronounced increase occurred in 2020 to approximately $11.67 billion, marginally declining in the subsequent two years to about $10.88 billion in 2022. This increase reflects the previously noted acquisition or reassessment event leading to a substantial growth in these asset categories, with a slight contraction thereafter.

Overall, the financial data reveal a significant event around 2020 resulting in a notable increase in goodwill and intangible assets, suggesting acquisitions or asset revaluations during that period. Following this peak, a modest decline in these assets occurred, possibly due to impairment, amortization, or divestitures. Accumulated amortization consistently increased, showing ongoing systematic asset expensing. The data indicate a shift in the company's asset composition with an emphasis on acquiring or valuing intangible assets significantly higher from 2020 onward.

The data displays financial metrics for six consecutive years, focusing on both reported and goodwill adjusted values for total assets and shareholders’ equity.

Total Assets

Reported total assets show a general upward trend over the period, increasing from approximately 15.5 billion USD in mid-2017 to about 25.9 billion USD by mid-2022. This rise is especially pronounced from 2021 to 2022.

Adjusted total assets, which exclude goodwill, also increase overall but show a steadier and more moderate growth compared to reported assets. Starting from around 9.9 billion USD in 2017, adjusted assets reach roughly 18.2 billion USD in 2022. The increase levels off somewhat between 2019 and 2021 before accelerating again in 2022.

Shareholders’ Equity

Reported shareholders’ equity rises consistently throughout the period, moving from about 5.3 billion USD in 2017 to nearly 8.8 billion USD in 2022. A significant increase is observed between 2020 and 2021, indicating a possible capital injection, retained earnings growth, or asset revaluation effects.

The adjusted shareholders’ equity figures exhibit considerable volatility, with negative equity reported in 2017 and 2020. The value shifts from a negative 325 million USD in 2017 to a positive 355 million USD in 2018, then fluctuates again, reaching a negative 1.75 billion USD in 2020. After 2020, the adjusted equity improves to positive territory, reaching about 1.1 billion USD by 2022. This volatility suggests significant adjustments related to goodwill impairments or revaluations impacting net equity.

Overall, the company’s reported total assets and shareholders’ equity demonstrate a steady expansion over the measured period, reflecting growth and strengthening financial position from a reporting standpoint. However, the adjusted figures, which remove goodwill, reveal more variability, particularly in shareholders’ equity, indicating that goodwill and related intangible assets materially affect the company’s financial structure and may introduce volatility in equity valuation when adjustments are considered.

The analysis of the financial performance reveals significant variations in key metrics over the reviewed periods, reflecting changes in operational efficiency, leverage, and profitability.

Total Asset Turnover

The reported total asset turnover exhibited a generally declining trend from 0.78 in 2017 to 0.61 in 2022, after peaking at 0.93 in 2018. This indicates a decreasing efficiency in generating sales from total assets in the reported data. In contrast, the adjusted total asset turnover, which accounts for goodwill, showed much higher values initially, peaking at 1.46 in 2018 but then declined notably to 0.87 in 2022. Despite the adjustment, the trend points toward decreasing asset utilization efficiency in recent years.

Financial Leverage

Reported financial leverage fluctuated over time, decreasing from 2.94 in 2017 to a low of 2.42 in 2021 before rising again to 2.93 in 2022. This suggests some variability in the company’s use of debt relative to equity. The adjusted financial leverage, however, shows extremely elevated and volatile figures, with values such as 27.62 in 2018, descending to 16.43 in 2022, and peaking dramatically at 36.27 in 2021. This extreme volatility in the adjusted measure implies significant impact from goodwill adjustments on the capital structure, possibly reflecting impairments or revaluations affecting equity and debt relationships.

Return on Equity (ROE)

The reported ROE had mixed movements: after a slight decline from 18.69% in 2017 to 18.1% in 2018, it rose to 25.37% in 2019, then decreased thereafter to 14.87% in 2022. This pattern indicates fluctuations in profitability relative to shareholder equity over the period. The adjusted ROE values, incorporating goodwill effects, were markedly higher and highly volatile, with extraordinarily high percentages such as 298.44% in 2018 and 515.65% in 2021, dropping sharply to 118.74% in 2022. These elevated adjusted figures suggest that goodwill adjustments significantly magnify equity returns, but the variability points to underlying instability or accounting changes impacting these metrics.

Return on Assets (ROA)

The reported ROA increased from 6.35% in 2017 to 8.6% in 2019, followed by a decline to 5.07% in 2022, reflecting varying efficiency in asset utilization to generate profits. The adjusted ROA also showed a similar trend but at higher levels, rising from 9.93% in 2017 to a peak of 14.22% in 2021 before falling to 7.23% in 2022. This indicates better underlying operational performance when goodwill is accounted for, although the downward trend in recent years suggests emerging challenges in profitability or asset management.

Overall, the data portrays a company experiencing fluctuations in operational efficiency, financial leverage, and profitability, with the adjustments for goodwill dramatically affecting leverage and return metrics. The trends suggest increasing pressures on asset utilization and equity profitability in the latter years, as well as significant accounting influences impacting the financial ratios involving goodwill.

Total Assets

Reported total assets demonstrate an overall increasing trend from 15,489,904 thousand USD in mid-2017 to 25,943,943 thousand USD in mid-2022. The growth is steady with a significant acceleration observed between 2021 and 2022.

Adjusted total assets, which factor out goodwill, follow a similar upward trajectory but with lower absolute values. Starting at 9,903,026 thousand USD in 2017, adjusted assets increased moderately until 2021, followed by a marked increase to 18,203,861 thousand USD in 2022.

Total Asset Turnover

The reported total asset turnover ratio exhibits volatility across the periods, peaking at 0.93 in 2018, then declining to 0.61 by 2022. This suggests decreasing efficiency in generating revenue relative to total assets reported.

Adjusted total asset turnover remains higher than the reported ratio throughout all periods, indicating better revenue generation relative to adjusted asset values. It peaks at 1.46 in 2018, remains relatively stable with minor fluctuations until 2021, and then decreases to 0.87 in 2022.

Overall Insights

The increasing asset base, particularly the sharp rise in reported total assets in the latest period, may suggest significant asset acquisitions or revaluations. The lower and declining turnover ratios imply that revenue growth did not keep pace with asset growth, especially when considering reported assets including goodwill.

The consistently higher adjusted asset turnover ratios reflect a more favorable view of asset efficiency when goodwill is excluded. However, the decline in adjusted turnover in 2022 could indicate emerging challenges in leveraging assets for revenue generation.

The data reveals several key trends and fluctuations in the financial position of the company over the period from June 30, 2017, to June 30, 2022.

Total Assets

Reported total assets generally increased over the six-year period, starting at approximately 15.49 billion USD in 2017 and rising to about 25.94 billion USD by 2022. This indicates overall growth in the company's asset base.

Adjusted total assets, which presumably exclude goodwill and other adjustments, were significantly lower than reported totals, starting at roughly 9.90 billion USD in 2017 and increasing to around 18.20 billion USD in 2022. While the adjusted assets follow a positive trend, the growth is less pronounced than that of the reported figures, especially noting a dip in 2020 before picking back up.

Shareholders’ Equity

Reported shareholders’ equity showed steady growth from approximately 5.26 billion USD in 2017 to 8.85 billion USD in 2022, reflecting strengthening book value and retained earnings over time.

In contrast, adjusted shareholders’ equity presents significant volatility and generally much lower values compared to reported equity. It was negative in 2017 (-325 million USD) and 2020 (-1.76 billion USD), with interim positive values in other years, ending at about 1.11 billion USD in 2022. This volatility suggests the adjustments, likely related to goodwill impairments or other accounting treatments, markedly affect the underlying equity position.

Financial Leverage

The reported financial leverage ratio fluctuated moderately, ranging from a low of 2.42 in 2021 to a high of 3.23 in 2020, with a value of 2.93 in 2022. This pattern indicates varying reliance on debt relative to equity but remains within a relatively stable range.

The adjusted financial leverage ratio, however, shows far greater volatility and much higher levels at certain points. For example, the ratio was 27.62 in 2018, decreased to 23.86 in 2019, jumped to 36.27 in 2021, and then declined sharply to 16.43 in 2022. These elevated levels and variability highlight a significant impact of goodwill and other adjustments on the company’s capital structure, implying potentially higher financial risk when such adjustments are considered.

In summary, while the reported figures suggest consistent growth in assets and equity along with moderate leverage, the adjusted data reveal considerable fluctuations and heightened financial leverage, underscoring the influence of accounting adjustments related to goodwill or other factors on the company's financial profile.

The analysis of the financial data reveals notable trends in both reported and goodwill adjusted financial metrics over the six-year period.

Shareholders' Equity

Reported shareholders' equity shows a consistent upward trend, increasing from approximately 5.26 billion USD in mid-2017 to nearly 8.85 billion USD by mid-2022. The most significant increase occurred between mid-2020 and mid-2021, where equity rose from about 6.11 billion USD to 8.40 billion USD, indicating substantial growth.

Adjusted shareholders' equity, which accounts for goodwill adjustments, exhibits more volatility. It began with a negative value in 2017, turning positive in 2018 and continuing to rise through 2019. However, there was a sharp decline in 2020 to a significant negative value (-1.76 billion USD), followed by a recovery to positive figures in 2021 and 2022. This volatility suggests underlying fluctuations in goodwill or other intangible asset valuations impacting adjusted equity.

Return on Equity (ROE)

Reported ROE remains relatively stable with some variations, fluctuating between approximately 14.87% and 25.37%. Specifically, it peaked in 2019 at 25.37% before decreasing sharply in the years following, reaching its lowest point in 2022 at 14.87%. This decrease may reflect changes in profitability, capital structure, or earnings efficiency.

Adjusted ROE, which takes into account equity adjustments, displays extreme volatility and unusually high values in several years. For example, it jumped to nearly 300% in 2018 and 2019, declined in 2020 with missing data, then surged again to over 515% in 2021 before falling to approximately 118.74% in 2022. These abnormally high figures suggest the adjusted equity base is significantly reduced or even negative at times, inflating the ROE calculation. The absence of data in 2017 and 2020 further indicates potential inconsistencies or complexities in adjusted financial metrics.

Overall, the data indicates solid growth in reported shareholders' equity accompanied by fluctuating profitability as measured by reported ROE. The adjusted metrics reveal considerable instability likely due to goodwill-related accounting impacts, rendering some of those ratios less comparable or consistent over time. Careful interpretation is necessary when considering adjusted equity and ROE due to the distortions introduced by goodwill adjustments.

The analysis of the reported and goodwill-adjusted financial data reveals several noteworthy trends over the six-year period ending June 30, 2022.

Total Assets

The reported total assets increased consistently from approximately $15.49 billion in 2017 to $25.94 billion in 2022, marking a substantial growth of about 67.5% over the period. This upward movement indicates a significant expansion in the company’s asset base.

In contrast, the adjusted total assets, which exclude goodwill, showed more moderate growth. They increased from roughly $9.90 billion in 2017 to $18.20 billion in 2022, representing an 83.9% increase. However, the adjusted assets experienced fluctuations, particularly a slight decline from 2019 to 2020 before recovering in subsequent years. This suggests variability in the core asset base excluding goodwill.

Return on Assets (ROA)

The reported ROA exhibited variability, starting at 6.35% in 2017, peaking at 8.60% in 2019, then declining sharply to 5.07% by 2022. Although there was a recovery to 8.58% in 2021, the overall trend indicates a waning efficiency in generating returns from reported assets towards the end of the period.

Adjusted ROA, reflecting the return on assets excluding goodwill, consistently outperformed the reported ROA across all years. It increased from 9.93% in 2017 to a high of 14.22% in 2021, before declining to 7.23% in 2022. Despite this decline, the adjusted ROA remained above the reported ROA, underscoring more efficient utilization of tangible and intangible assets excluding goodwill.

Comparative Insights

The larger base of reported total assets compared to adjusted assets indicates that goodwill constitutes a significant portion of total assets. The adjusted asset figures and corresponding ROA suggest the company’s core asset profitability was generally stronger than the overall reported figures suggest.

Nonetheless, the decline in both reported and adjusted ROA in the most recent year signals potential challenges affecting asset profitability, which warrants attention for strategic or operational adjustments.