Stock Analysis on Net
Stock Analysis on Net

Parker-Hannifin Corp. (NYSE:PH)

$22.49

This company has been moved to the archive! The financial data has not been updated since February 7, 2023.

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.

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Balance-Sheet-Based Accruals Ratio

Parker-Hannifin Corp., balance sheet computation of aggregate accruals

US$ in thousands

Microsoft Excel
Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017
Operating Assets
Total assets
Less: Cash and cash equivalents
Less: Marketable securities and other investments
Operating assets
Operating Liabilities
Total liabilities
Less: Notes payable and long-term debt payable within one year
Less: Long-term debt, excluding payable within one year
Operating liabilities
 
Net operating assets1
Balance-sheet-based aggregate accruals2
Financial Ratio
Balance-sheet-based accruals ratio3
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Boeing Co.
Caterpillar Inc.
Eaton Corp. plc
GE Aerospace
Honeywell International Inc.
Lockheed Martin Corp.
RTX Corp.
Balance-Sheet-Based Accruals Ratio, Sector
Capital Goods
Balance-Sheet-Based Accruals Ratio, Industry
Industrials

Based on: 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30).

1 2022 Calculation
Net operating assets = Operating assets – Operating liabilities
= – =

2 2022 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2022 – Net operating assets2021
= – =

3 2022 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

4 Click competitor name to see calculations.

Net Operating Assets
Net operating assets demonstrated a fluctuating upward trend over the five-year period. Starting from approximately 9.97 billion US dollars in mid-2018, there was a slight decline in 2019 to about 9.71 billion. However, from 2020 onwards, the metric showed significant growth, reaching over 19.77 billion by mid-2022. This represents substantial asset expansion, particularly notable in the last two years of the period.
Balance-sheet-based Aggregate Accruals
Aggregate accruals experienced high volatility during the timeframe. Negative values were recorded in 2018 and 2019, indicating outflows or reversals amounting to roughly -246 million and -262 million US dollars respectively. In 2020, there was a dramatic shift to a large positive value exceeding 4.1 billion, followed by a sharp decrease in 2021 to around 392 million. The accumulation surged again in 2022, reaching approximately 5.55 billion US dollars, highlighting significant fluctuations year over year in the accrual components of the balance sheet.
Balance-sheet-based Accruals Ratio
The accruals ratio mirrored the volatility seen in aggregate accruals. Initially negative in 2018 and 2019, at -2.44% and -2.66% respectively, the ratio spiked sharply to 35.08% in 2020. This was followed by a sharp decline in 2021 to 2.80%, and then another substantial increase to 32.64% in 2022. These swings suggest periods of markedly different earnings quality and potential changes in accounting estimates or accrual policies influencing the financial reporting quality across these years.

Cash-Flow-Statement-Based Accruals Ratio

Parker-Hannifin Corp., cash flow statement computation of aggregate accruals

US$ in thousands

Microsoft Excel
Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017
Net income attributable to common shareholders
Less: Net cash provided by operating activities
Less: Net cash (used in) provided by investing activities
Cash-flow-statement-based aggregate accruals
Financial Ratio
Cash-flow-statement-based accruals ratio1
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Boeing Co.
Caterpillar Inc.
Eaton Corp. plc
GE Aerospace
Honeywell International Inc.
Lockheed Martin Corp.
RTX Corp.
Cash-Flow-Statement-Based Accruals Ratio, Sector
Capital Goods
Cash-Flow-Statement-Based Accruals Ratio, Industry
Industrials

Based on: 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30).

1 2022 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × ÷ [( + ) ÷ 2] =

2 Click competitor name to see calculations.

Net operating assets
The net operating assets demonstrated an overall upward trend from June 30, 2018, to June 30, 2022. The value increased from approximately 9.97 billion US dollars in 2018 to nearly 19.78 billion US dollars in 2022. Notably, there was a significant rise between 2019 and 2020, where the figure jumped from around 9.71 billion to approximately 13.83 billion US dollars. This upward momentum continued, albeit more moderately, through 2021, followed by another substantial increase by mid-2022.
Cash-flow-statement-based aggregate accruals
The aggregate accruals, measured in thousands of US dollars, exhibited considerable variability across the time span. The figure started negative at about -560 million in mid-2018, representing a cash inflow from accruals, then moved near to zero in 2019. A pronounced spike occurred in mid-2020, with aggregate accruals peaking at approximately 4.16 billion, indicating a large cash outflow due to accruals. However, this was followed by a reversal to negative territory in 2021 and 2022, reflecting a return to cash-inflow conditions related to accruals but at smaller absolute values compared to earlier periods.
Cash-flow-statement-based accruals ratio
The accruals ratio reflected the same volatility, peaking dramatically at 35.34% in 2020, up from near zero in the prior year. This sharp increase suggests that accruals represented a significant proportion of net operating assets at that time. Subsequently, the ratio moved back to negative values in 2021 and 2022, specifically -5.91% and -4.16%, respectively. The negative ratios in these two years indicate accruals contributed positively to cash flows relative to net operating assets, contrasting with the substantial ratio spike seen in 2020.