Parker-Hannifin Corp. (NYSE:PH)

The financial data reveals several notable trends over the six-year period ending June 30, 2022. The net operating profit after taxes (NOPAT) showed fluctuations, generally increasing from 2017 through 2021, reaching a peak in 2021, but then substantially decreasing in 2022. This suggests varying operational efficiency and profitability, with 2022 experiencing a significant downturn compared to the prior year.

The cost of capital remained relatively stable but exhibited some variation, with a slight increase from 2017 to 2021 before a moderate decline in 2022. This indicates that the cost of financing invested capital did not drastically change but had a modest upward trend until 2021, affecting overall profitability assessments.

Invested capital increased steadily throughout the period, with significant growth seen particularly from 2020 onwards. This reflects increased resource deployment in the business, potentially aimed at growth or expansion initiatives. The rise from approximately 13 billion US dollars in 2017 to nearly 22 billion US dollars in 2022 represents a considerable increase in the capital base.

Economic profit remained negative in all years, indicating that the returns generated did not exceed the cost of capital. Despite some improvement from 2017 through 2019, economic profit worsened considerably in 2020 and remained deeply negative through 2022, with the largest deficit occurring in 2022. This pattern highlights challenges in generating shareholder value and suggests that the company’s investments have not consistently delivered returns above their cost.

Net Operating Profit After Taxes (NOPAT)

Increased overall from 2017 to 2021 with a peak in 2021, followed by a sharp decrease in 2022.

Cost of Capital

Relatively stable with a slight upward trend until 2021, then a decrease in 2022.

Invested Capital

Steadily increased year over year, with significant growth especially during 2020–2022.

Economic Profit

Negative throughout the period, improving slightly before deteriorating substantially in 2020 and remaining deeply negative afterward.

Overall, the data suggest that while the company expanded its invested capital significantly and had periods of improved net operating profit, it struggled to generate economic profit, failing to cover its cost of capital consistently. The sharp decline in operating profit and deterioration in economic profit in recent years calls for a careful review of investment effectiveness and operational strategies.

Net Income Attributable to Common Shareholders

The net income attributable to common shareholders demonstrates a generally positive trend from June 30, 2017, to June 30, 2021, increasing from approximately 983 million US dollars to over 1.74 billion US dollars. This represents a significant growth over this four-year period, highlighting strong profitability. However, there is a notable decline in the year ending June 30, 2022, where net income falls to roughly 1.32 billion US dollars, which suggests some challenges or increased expenses affecting profitability in the most recent period.

Net Operating Profit After Taxes (NOPAT)

NOPAT follows a similar upward trajectory from June 30, 2017, through June 30, 2021, rising from about 1.13 billion US dollars to approximately 1.90 billion US dollars. This consistent increase reflects improving operating efficiency and effective tax management during this period. However, there is a significant reduction in NOPAT in the year ending June 30, 2022, falling to nearly 1.17 billion US dollars, indicating a considerable drop in operating profitability or increased tax expenses most recently.

Summary of Trends

Both net income and NOPAT demonstrate strong growth over the initial five-year period, suggesting favorable operational performance and profitability enhancements. The peak values recorded in the year ending June 30, 2021, indicate the company's highest profitability during the timeframe examined. The sharp declines in both metrics for the year ending June 30, 2022, signal a reversal of this trend and may imply emerging financial challenges or external factors impacting profitability. The divergence in the magnitude of decrease between net income and NOPAT in 2022 could also point to changes in non-operating items or tax effects during that period.

Income Taxes

The income taxes show a fluctuating trend over the six-year period. Beginning at 344,797 thousand US dollars in 2017, the figure notably increased to 640,962 thousand US dollars in 2018. After this peak, there was a decline in 2019, with the value dropping to 420,494 thousand US dollars. The downward trajectory continued into 2020, reaching a low of 305,924 thousand US dollars. However, a substantial recovery occurred in 2021, rising again to 500,096 thousand US dollars. In 2022, income taxes decreased to 298,040 thousand US dollars, marking one of the lower points across the given years.

Cash Operating Taxes

Cash operating taxes exhibit more volatility and a generally increasing trend throughout the same period. Starting at 367,985 thousand US dollars in 2017, values soared to a high of 745,009 thousand US dollars in 2018, the largest increase observed. In 2019, these taxes declined to 429,023 thousand US dollars but remained higher than the 2017 baseline. The downward movement persisted into 2020, registering 357,562 thousand US dollars. However, in contrast to income taxes, cash operating taxes surged significantly in 2021, reaching 604,610 thousand US dollars, and escalated further to 703,301 thousand US dollars in 2022.

General Observations

There is a noticeable divergence in the trends of income taxes and cash operating taxes, particularly evident in the later years. While income taxes fell sharply in 2022 relative to the prior year, cash operating taxes continued to experience substantial growth. This discrepancy may indicate differences in accounting treatment, timing of tax payments, or underlying operational cash flow changes. The initial spike for both tax measures in 2018 suggests extraordinary activities or tax events occurred in that year, followed by varying recoveries and declines in subsequent periods. Overall, the analysis reveals a dynamic tax expense environment with significant annual fluctuations.

Total reported debt & leases

The total reported debt and leases fluctuated significantly over the period analyzed. It initially decreased from approximately 6.08 billion USD in mid-2017 to about 5.16 billion USD in mid-2018. Subsequently, it experienced a sharp increase to roughly 7.23 billion USD in mid-2019, continuing to rise to around 8.60 billion USD in mid-2020. A notable decline occurred in mid-2021, dropping to approximately 6.72 billion USD, followed by a substantial increase to nearly 11.62 billion USD by mid-2022. This trend indicates considerable volatility and an overall increasing debt load in recent years, particularly the marked increase between mid-2021 and mid-2022.

Shareholders’ equity

Shareholders' equity showed a consistent upward trend throughout the analyzed period. Starting at around 5.26 billion USD in mid-2017, it steadily increased each year, reaching approximately 5.86 billion USD in mid-2018, 5.96 billion USD in mid-2019, and 6.11 billion USD in mid-2020. A significant rise occurred between mid-2020 and mid-2021, where equity increased sharply to about 8.40 billion USD. The growth continued at a slower pace, reaching approximately 8.85 billion USD by mid-2022. This steady increase suggests strengthening equity capital and potentially retained earnings accumulated over the years.

Invested capital

Invested capital, representing the aggregate of debt and equity financing, exhibited considerable growth. Beginning at approximately 13.51 billion USD in mid-2017, it slightly declined to roughly 13.02 billion USD in mid-2018. Thereafter, a consistent upward trajectory is evident: rising to about 15.27 billion USD in mid-2019, followed by 17.53 billion USD in mid-2020. A marginal decrease to approximately 16.93 billion USD was noted in mid-2021, but invested capital surged substantially to nearly 22.0 billion USD by mid-2022. The data indicate increased resource deployment backed by both debt and equity, with particularly robust growth in the most recent year.

Economic Profit

The economic profit figures consistently show negative values throughout the analyzed period, indicating that the company did not generate economic profits in any year from 2017 to 2022. The magnitude of the negative economic profit fluctuated but generally increased in absolute terms, with a significant deterioration observed in 2020 and again in 2022. The lowest economic profit occurred in 2022 at approximately -2,376,620 thousand US dollars, representing a substantial decline from previous years.

Invested Capital

Invested capital demonstrated a generally upward trend over the six-year span. Starting at around 13,507,821 thousand US dollars in 2017, the figure saw some variability, with a notable increase in 2019 and the highest value recorded in 2022 at approximately 21,994,132 thousand US dollars. This upward trend suggests continued investment or asset growth during this period despite fluctuating economic performance.

Economic Spread Ratio

The economic spread ratio remained negative across all years, indicating that the company's return on invested capital was consistently lower than its cost of capital. The ratio saw a minor improvement in 2019, reaching its least negative value (-4.21%), but deteriorated again significantly by 2022, falling to -10.81%. This declining spread ratio suggests worsening efficiency in generating returns above capital costs over time, highlighting ongoing challenges in value creation.

Net Sales

Net sales exhibit an overall upward trend from 2017 to 2022, increasing from approximately 12.03 billion USD to 15.86 billion USD. Despite a slight decrease between 2019 and 2020, sales rebounded in the following years, reflecting growth efforts and market resilience.

Economic Profit

The economic profit figures are consistently negative throughout the period, indicating the company has not generated economic profit in these years. The losses fluctuate, reaching the lowest point in 2022 with a deficit exceeding 2.37 billion USD. The largest improvement occurred in 2019, though still negative, while 2020 and 2022 saw significant deterioration in economic profit.

Economic Profit Margin

The economic profit margin remains negative each year, paralleling the economic profit trend. The margin improved slightly from -8.61% in 2017 to -4.49% in 2019, suggesting marginally better profitability relative to sales. However, this improvement reversed sharply in 2020 and again in 2022, where the margin dropped to -14.98%, indicating worsening economic losses relative to sales volume.