Parker Hannifin FY 1Q16 Earnings Call Notes

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Taking down guidance for full year because orders weaker than expected, not expecting any recovery and now anticipating more softness in EM

“order entry levels are weaker than anticipated and have worsened sequentially through the quarter. Second, we are not forecasting any meaningful recovery in our natural resource-related end markets through the remaining of our fiscal year. And, third, we are now anticipating more softness in emerging markets and our distribution channel. ”

September was much worse than we expected

“what really changed during the quarter was order entry levels weakened more than we anticipated and September was much more worse than we had expected.”

September is usually a key month

“September is always a key month. It’s really a key indicator for how the quarter is going to be. July and August are always somewhat suspect because of the levels of vacation and holidays between North America and Europe. And September is your first good indicator for the quarter and also it’s a really good indicator for what the rest of the year potentially is going to look like. So September turned worse; that was the first influence.”

Not forecasting recovery in materials markets

“oil & gas, construction, ag, and mining are soft and actually are softer than we had expected and they’re going to continue that way through the remainder of the fiscal year.”

China and Brazil were soft and softened more

“We had anticipated China and Brazil; they were soft. They have softened worse through the course of the quarter. ”

Seeing destocking in the channel, expecting that to continue

“We do continue to see destocking in the channel. Our best bet is we’ll continue to see that destock through Q2.”

Seen continued weakness in construction equipment markets in China

“We’ve seen continued weakness in construction equipment markets there. I’m not sure it can go to zero, but it is getting close.”

October has been reflective of what we’ve done in our revised guidance

“September worsened. We saw July come out about how we expected. August turned a little bit better, so we were a little bit optimistic. Then September got worse and that continued. And basically what we’ve seen in October is reflective of what we’ve done in our revised guidance.”

Challenging environment for pricing but favorable for material costs

“overall, you’re right; it’s a challenging environment on pricing and it’s a favorable environment on material costs.”