Parker-Hannifin Corp. (NYSE:PH)

Finished Products

The value of finished products exhibited a generally upward trend over the six-year period. Starting at 642,788 thousand US dollars in 2017, it experienced some fluctuations but ultimately increased to 811,702 thousand US dollars by 2022. The most notable increase occurred between 2020 and 2022.

Work in Process

Work in process inventory showed consistent growth throughout the period under review. Beginning at 723,133 thousand US dollars in 2017, it rose steadily each year, reaching 1,128,501 thousand US dollars in 2022. The most significant increments were observed from 2020 onward, indicating an expansion in ongoing production activities.

Raw Materials

The raw materials inventory demonstrated some variability but an overall increasing tendency. After a slight decline from 183,573 thousand US dollars in 2017 to 164,286 thousand in 2019, there was a considerable increase in 2020 and subsequent years. By 2022, the raw materials inventory attained 274,350 thousand US dollars, representing strong accumulation of inputs.

Inventories (Total)

The aggregate inventory levels, comprising finished products, work in process, and raw materials, showed a clear and sustained upward trajectory. Total inventories rose from 1,549,494 thousand US dollars in 2017 to 2,214,553 thousand US dollars in 2022. This steady growth reflects increasing stock levels across all categories, with particularly pronounced increases post-2020.

Overall Trends and Insights

The data indicates a broad increase in inventory holdings across all categories over the six-year timeline. Work in process experienced the most rapid growth, suggesting higher production volumes or possibly longer production cycles. Finished products and raw materials also increased, though with some minor fluctuations early in the period. The upward inventory trend might imply expansion efforts, rising demand anticipation, or changes in supply chain management. However, the buildup of inventories warrants monitoring to avoid potential overstocking and associated carrying costs.

The financial data over the analyzed six-year period exhibits several noteworthy trends in both reported and LIFO reserve adjusted figures. These trends reflect the company's asset base, equity position, income generation, and inventory management dynamics.

Inventories

Both reported and adjusted inventory levels show a consistent upward trajectory from 2017 through 2022. Reported inventories increased from approximately $1.55 billion to $2.21 billion, while adjusted inventories, which account for the LIFO reserve, show a similar rise from around $1.74 billion to $2.21 billion. The gap between reported and adjusted inventories narrows over time, indicating changes in inventory valuation impacts.

Current Assets

Reported current assets exhibit fluctuations, with significant increases in 2019 and 2022, raising from about $4.78 billion in 2017 to over $12 billion by 2022. Adjusted current assets follow this pattern closely but consistently remain higher than reported figures, reflecting the added value from inventory adjustments. The spike in 2019 and 2022 suggests possible asset acquisitions or changes in working capital components.

Total Assets

Total assets, both reported and adjusted, show a steady growth trend, increasing from approximately $15.49 billion reported in 2017 to about $25.94 billion in 2022. Adjusted total assets maintain a higher valuation across all years due to inventory adjustments. The growth pattern indicates expansion in asset base over time, with notable jumps in 2019 and 2022 corroborating current assets trends.

Shareholders' Equity

Shareholders’ equity has risen from around $5.26 billion reported in 2017 to approximately $8.85 billion by 2022. Adjusted equity figures remain consistently above reported values, reflecting the inventory reserve effect. Equity growth is steady, with a significant increase observed between 2020 and 2021, suggesting improved retained earnings or capital injections during this period.

Net Income Attributable to Common Shareholders

Net income demonstrates variability across the years, with reported net income increasing from about $983 million in 2017 to a peak of $1.75 billion in 2021 before declining to roughly $1.32 billion in 2022. Adjusted net income follows a similar pattern, generally slightly higher than reported figures until 2021, when both values converge. The income fluctuations indicate cyclical earnings performance and possible impacts from market conditions or operational efficiency changes.

Overall, the data reveals a pattern of growth in inventory levels and asset base, supported by increasing equity. Income shows cyclicality with a peak in 2021 followed by a decline in 2022. The adjustments for the inventory LIFO reserve consistently increase asset and equity valuations but have a diminishing differential effect over time in some categories. This analysis suggests a company expanding its scale while experiencing variability in profitability.

The analysis reveals several noteworthy trends and fluctuations in the financial metrics over the examined period.

Current Ratio

The reported current ratio exhibited variability, starting at 1.41 in 2017, rising to a peak of 2.43 in 2019, then declining to 1.55 in 2020 before gradually increasing again to 2.06 by 2022. The LIFO reserve adjustment resulted in slightly higher current ratios throughout the timeline, maintaining parallel trends that indicate an overall strengthening liquidity position over the period, especially notable in 2019 and the gradual recovery post-2020.

Net Profit Margin

Both reported and adjusted net profit margins followed closely aligned trajectories. Starting at approximately 8% in 2017, there was a moderate dip to the low 7% range in 2018, followed by a significant increase peaking at 12.17% in 2021. This apex was succeeded by a decline to 8.29% in 2022, indicating volatility influenced by varying operating performance or external market factors during these years.

Total Asset Turnover

The total asset turnover ratio demonstrated a downward trend overall. Starting at roughly 0.78 in 2017 and peaking slightly to 0.93 in 2018, the ratio then dropped notably to 0.61 by 2022. This decline suggests a decreasing efficiency in using assets to generate sales, with adjusted figures closely tracking reported values, indicating minimal impact from inventory accounting changes.

Financial Leverage

Financial leverage fluctuated during the period, initially declining from 2.94 in 2017 to 2.61 in 2018, then increasing to a high of 3.23 in 2020. Subsequently, it fell sharply to 2.42 in 2021 before rising again to 2.93 in 2022. The adjusted financial leverage followed a similar pattern, consistently slightly lower than the reported figures, reflecting the impact of the LIFO reserve adjustments on the debt-to-equity structure.

Return on Equity (ROE)

ROE displayed significant variability, rising from 18.69% in 2017 to a crescendo of approximately 25% in 2019. This was followed by a decline to 14.87% in 2022, marking a pronounced drop in shareholder returns towards the end of the period. The adjusted ROE values were marginally lower but mirrored the overall trend, underscoring the relevance of the inventory accounting adjustments in equity profitability assessments.

Return on Assets (ROA)

ROA mirrored the patterns observed in ROE but at lower absolute values. Initially at 6.35% in 2017, it increased to 8.6% by 2019, dipped to 6.11% in 2020, then showed a brief recovery to 8.58% in 2021 before falling sharply to 5.07% in 2022. Adjusted ROA closely followed these trends, indicating sustained profitability changes relative to asset base over the period.

In summary, the financial data reflect varying liquidity strength, fluctuating profitability, and decreasing asset turnover efficiency over time. Adjustments for the inventory LIFO reserve slightly improved current liquidity figures and marginally reduced leverage and profitability ratios, providing a nuanced understanding of the company’s financial position. The notable decline in both ROE and ROA in the most recent year is indicative of challenges impacting profitability and asset utilization.

Over the observed period from June 30, 2017, to June 30, 2022, current assets demonstrated a varying but generally upward trend. Reported current assets initially increased from approximately 4.78 billion USD in 2017 to a peak of about 7.67 billion USD in 2019, followed by a decline to 4.89 billion USD in 2020. Subsequently, there was a steady increase reaching 12.05 billion USD by 2022. Adjusted current assets, which account for inventory LIFO reserve adjustments, followed a similar pattern, with values consistently slightly higher than reported current assets, reflecting the inventory reserve adjustments.

Examining the current ratios, both reported and adjusted metrics displayed analogous trends with the adjusted ratios being uniformly marginally higher. The reported current ratio rose from 1.41 in 2017 to a high of 2.43 in 2019, reflecting improved short-term liquidity and a stronger ability to meet current liabilities. This was followed by a decrease to 1.55 in 2020, indicating a reduction in liquidity, before improving again to 2.06 in 2022. The adjusted current ratio mirrored these movements, suggesting the inventory adjustments had a consistent but small impact on liquidity measurement over time.

Overall, the data shows a pattern of growth in current assets and liquidity ratios until 2019, a contraction coinciding with 2020, and a robust recovery to higher levels by 2022. This indicates that despite a temporary dip in liquidity and asset levels, the company restored and improved its working capital position significantly by the end of the period. The close alignment between reported and adjusted figures implies that inventory LIFO reserves had a stable, moderate influence on the financial metrics throughout the years analyzed.

The financial performance over the periods under review demonstrates notable fluctuations in profitability and net income figures.

Net Income Attributable to Common Shareholders

The reported net income shows an overall upward trajectory from 2017 through 2021, rising from approximately 983 million US dollars to a peak of nearly 1.75 billion US dollars in 2021. However, in 2022, this figure declined significantly to approximately 1.32 billion US dollars. The adjusted net income follows a similar pattern, though generally slightly higher than the reported figures, indicating adjustments related to the inventory LIFO reserve have a modest positive effect on net income figures except for the 2021 and 2022 periods, where adjusted and reported net incomes are identical, suggesting no impactful adjustments in these years.

Net Profit Margin

The reported net profit margin reveals a variable pattern, starting at 8.18% in 2017, experiencing a dip in 2018 to 7.42%, then rising sharply to a peak of 12.17% in 2021 before declining again to 8.29% in 2022. The adjusted net profit margin closely mirrors the reported margins, indicating minimal impact from adjustments related to the LIFO reserve on profitability ratios across the observed periods. The margins suggest volatility in profitability influenced by factors beyond inventory accounting adjustments, particularly visible in the 2021 peak followed by a notable decline in 2022.

In summary, both net income and profit margin demonstrate cyclical performance with a peak in 2021 followed by a downturn in 2022. The adjustments for inventory LIFO reserve have minimal impact on the overall trends, implying that reported figures largely represent the company's earnings capacity over time. The 2021 peak in profitability may warrant further investigation to identify contributing factors, as well as the subsequent decline in 2022 to understand risk exposures or market conditions influencing earnings.

The data reveals a general upward trend in total assets over the six-year period, both in reported terms and when adjusted for the inventory LIFO reserve. Reported total assets increased from approximately $15.49 billion in mid-2017 to about $25.94 billion by mid-2022. The adjusted total assets follow a similar trajectory with values consistently slightly higher than the reported figures, indicating the impact of the LIFO reserve adjustment is moderate but consistent across the years.

Regarding asset turnover, both reported and adjusted ratios exhibit a declining trend, starting relatively higher in the earlier years and decreasing over time. Specifically, the reported total asset turnover decreased from 0.78 in 2017 to 0.61 in 2022, with adjusted turnover figures mirroring this pattern closely. This suggests that while the company’s asset base has grown significantly, the efficiency in generating sales from total assets has diminished.

Total Assets

There is a substantial increase in total assets over the reviewed period, reflecting asset growth of approximately 67% from 2017 to 2022. The difference between adjusted and reported assets is consistent, highlighting the importance of considering the LIFO reserve for accurate asset valuation.

Asset Turnover Ratios

The declining asset turnover ratios indicate reduced operational efficiency in asset utilization to generate revenue. The steady decline from 0.78 (reported) to 0.61 suggests that the company is generating less sales per dollar of asset as time progresses, which could be a reflection of increased asset investments or shifting sales dynamics.

Overall, the increase in asset base coupled with the decrease in asset turnover ratio may warrant further investigation into how asset expansion is being managed relative to revenue generation. The consistent proximity between reported and adjusted figures indicates that the LIFO inventory adjustment has a steady but relatively minor impact on the overall financial ratios analyzed.

The data reveals several notable trends in the financial position and leverage of the company over the six-year period ending June 30, 2022.

Total Assets

Reported total assets increased overall from US$15.49 billion in 2017 to US$25.94 billion in 2022, showing a consistent upward trajectory with significant growth after 2019. The adjusted total assets, accounting for inventory LIFO reserve adjustments, follow a similar pattern but are slightly higher each year until 2022 when the adjusted and reported figures converge. This indicates an ongoing inventory valuation adjustment impact until the last reported period.

Shareholders’ Equity

Reported shareholders’ equity rose steadily from approximately US$5.26 billion in 2017 to around US$8.85 billion in 2022. Adjusted equity figures are consistently higher than the reported figures through 2021, reflecting the inventory LIFO reserve impact, while both reported and adjusted equity match in 2022. The equity increase suggests retained earnings growth or capital raising activities supporting financial stability.

Financial Leverage

The reported financial leverage ratio shows fluctuations, starting at 2.94 in 2017, reaching a low of 2.42 in 2021, and rising again to 2.93 in 2022. Adjusted financial leverage tracks closely, exhibiting marginally lower values in early years but converging with reported leverage by 2021 and 2022. The dip in leverage in 2021 indicates a temporary reduction in debt relative to equity or growth in equity capital, followed by a return to higher leverage levels in the most recent year.

Overall, the company has experienced substantial asset growth, supported by increasing equity capital and stable but somewhat variable financial leverage. The LIFO reserve adjustments impact asset and equity values noticeably up to 2021, after which reported and adjusted figures align, implying a change or elimination of the LIFO reserve effect.

The financial performance and position indicate several notable trends over the analyzed periods. Net income attributable to common shareholders, both reported and adjusted for inventory LIFO reserve, demonstrates variability across the years. Starting with a reported net income of approximately 983 million USD in mid-2017, there was a general increasing trend reaching a peak near 1.75 billion USD in mid-2021, followed by a decline to about 1.32 billion USD by mid-2022. The adjusted net income values closely mirror the reported figures, with slight variations in earlier years, converging in later periods.

Shareholders' equity, both reported and adjusted, shows a consistent upward trajectory throughout the period. Reported equity increased from approximately 5.26 billion USD in mid-2017 to nearly 8.85 billion USD by mid-2022. The adjusted equity values are consistently higher than the reported figures in earlier years, reflecting the impact of inventory LIFO reserve adjustments, but they converge by mid-2021 and remain identical through mid-2022.

Return on Equity (ROE), expressed as a percentage and calculated on both reported and adjusted bases, exhibits notable fluctuation. The reported ROE started at approximately 18.7% in mid-2017, dipped slightly in 2018, surged to a high above 25% in 2019, then fell back in subsequent years to finish at around 14.9% in mid-2022. The adjusted ROE follows a similar pattern but remains marginally lower than the reported ROE in the initial years, before matching it precisely from mid-2021 onwards.

Net Income Trends

Both reported and adjusted net income grew substantially from 2017 through 2019, with a peak in 2021 followed by a decline in 2022. This pattern suggests that the company experienced strong profitability growth before a decline in the latest period analyzed.

Equity Growth

Shareholders’ equity increased steadily over the entire period, indicating ongoing capital accumulation or retained earnings growth. The adjustment for LIFO reserve inflated equity figures in earlier years but ceased to have an impact in the final two years, suggesting resolution or diminishing effect of inventory-related adjustments.

Return on Equity

ROE exhibited volatility, peaking notably in 2019, which may reflect improved operational efficiency or profitability during that year. The subsequent decline in ROE towards 2022 could be attributable to either reduced earnings or increased equity base, indicating changing financial dynamics.

Net Income Attributable to Common Shareholders

The reported net income shows fluctuations over the period, starting at $983 million in 2017, increasing to a peak of approximately $1.75 billion in 2021, followed by a decline to around $1.32 billion in 2022. The adjusted net income follows a very similar pattern, with slight variations due to inventory LIFO reserve adjustments, indicating overall consistency between reported and adjusted profitability figures.

Total Assets

The reported total assets exhibit steady growth over the six-year span, beginning at approximately $15.5 billion in 2017 and rising to nearly $25.9 billion by 2022. The adjusted total assets, which factor in inventory LIFO reserve adjustments, present a slightly higher base level but demonstrate the same growth trajectory. This suggests asset expansion over time, with a significant increase between 2021 and 2022.

Return on Assets (ROA)

Reported ROA displays variability, initially increasing from 6.35% in 2017 to a high of 8.60% in 2019, then declining to 6.11% in 2020, rebounding to 8.58% in 2021, and finally decreasing sharply to 5.07% in 2022. Adjusted ROA closely mirrors this pattern, reflecting that the inventory adjustments have minimal impact on this profitability metric. The sharp decline in 2022 ROA, despite asset growth, suggests decreased efficiency or profitability that year.

General Trends and Insights

Overall, the company experienced growth in assets and net income through 2021, indicating expansion and increasing profitability. However, 2022 saw a noticeable drop in net income and ROA despite a substantial increase in total assets, suggesting either lower operational efficiency or external challenges impacting profitability. The adjustments for inventory LIFO reserve show minor effects on net income and assets, affirming the robustness of reported figures. The data highlights the need to investigate factors contributing to the decreased returns in 2022 relative to the increasing asset base.