Financial Survey: Kadant (NYSE:KAI) and Parker-Hannifin (NYSE:PH)

Parker-Hannifin (NYSE:PH) and Kadant (NYSE:KAI) are both industrials companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, institutional ownership, risk, earnings, profitability, analyst recommendations and valuation.

Institutional and Insider Ownership

82.4% of Parker-Hannifin shares are owned by institutional investors. Comparatively, 96.1% of Kadant shares are owned by institutional investors. 0.3% of Parker-Hannifin shares are owned by company insiders. Comparatively, 1.3% of Kadant shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Parker-Hannifin and Kadant, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Parker-Hannifin	0	4	17	1	2.86
Kadant	0	3	1	0	2.25

Parker-Hannifin currently has a consensus target price of $1,021.05, indicating a potential upside of 5.49%. Kadant has a consensus target price of $341.50, indicating a potential upside of 5.48%. Given Parker-Hannifin’s stronger consensus rating and higher possible upside, analysts clearly believe Parker-Hannifin is more favorable than Kadant.

Dividends

Parker-Hannifin pays an annual dividend of $8.00 per share and has a dividend yield of 0.8%. Kadant pays an annual dividend of $1.44 per share and has a dividend yield of 0.4%. Parker-Hannifin pays out 29.5% of its earnings in the form of a dividend. Kadant pays out 16.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Parker-Hannifin has raised its dividend for 70 consecutive years and Kadant has raised its dividend for 12 consecutive years. Parker-Hannifin is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Parker-Hannifin has a beta of 1.14, meaning that its stock price is 14% more volatile than the S&P 500. Comparatively, Kadant has a beta of 1.2, meaning that its stock price is 20% more volatile than the S&P 500.

Earnings and Valuation

This table compares Parker-Hannifin and Kadant”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Parker-Hannifin	$19.85 billion	6.15	$3.53 billion	$27.11	35.70
Kadant	$1.05 billion	3.63	$101.97 million	$8.77	36.92

Parker-Hannifin has higher revenue and earnings than Kadant. Parker-Hannifin is trading at a lower price-to-earnings ratio than Kadant, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Parker-Hannifin and Kadant’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Parker-Hannifin	16.58%	27.97%	13.00%
Kadant	9.45%	12.13%	7.33%

Summary

Parker-Hannifin beats Kadant on 13 of the 18 factors compared between the two stocks.

About Parker-Hannifin

Parker-Hannifin Corporation manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates through two segments: Diversified Industrial and Aerospace Systems. The Diversified Industrial segment offers sealing, shielding, thermal products and systems, adhesives, coatings, and noise vibration and harshness solutions; filters, systems, and diagnostics solutions to ensure purity and remove contaminants from fuel, air, oil, water, and other liquids and gases; connectors used in fluid and gas handling; and hydraulic, pneumatic, and electromechanical components and systems for builders and users of mobile and industrial machinery and equipment. This segment sells its products to original equipment manufacturers (OEMs) and distributors who serve the replacement markets in manufacturing, packaging, processing, transportation, construction, refrigeration and air conditioning, agricultural, and military machinery and equipment industries. The Aerospace Systems segment offers products for use in commercial and military airframe and engine programs, such as control actuation systems and components, engine build-up ducting, engine exhaust nozzles and assemblies, engine systems and components, fluid conveyance systems and components, fuel systems and components, fuel tank inerting systems, hydraulic systems and components, lubrication components, avionics, sensors, pneumatic control components, thermal management products, fire detection and suppression systems and components, and wheels and brakes, as well as fluid metering, delivery, and atomization devices. This segment markets its products directly to OEMs and end users. The company markets its products through direct-sales employees, independent distributors, and sales representatives. Parker-Hannifin Corporation was founded in 1917 and is headquartered in Cleveland, Ohio.

About Kadant

Kadant Inc. supplies technologies and engineered systems worldwide. It operates in three segments: Flow Control, Industrial Processing, and Material Handling. The Flow Control segment develops, manufactures, and markets fluid-handling systems and equipment, such as rotary joints, syphons, turbulator bars, expansion joints, and engineered steam and condensate systems; and doctoring, cleaning, and filtration systems and related consumables consisting of doctor systems and holders, doctor blades, cleaning shower and fabric-conditioning systems, forming systems and wear surfaces, and water-filtration systems. The Industrial Processing segment develops, manufactures, and markets ring and rotary debarkers, stranders, chippers, engineered knife systems, industrial automation and control, recycling and approach flow systems, and virgin pulping process equipment for use in the packaging, tissue, wood products, and alternative fuel industries. The Material Handling segment offers conveying and vibratory equipment, and baling products; and manufactures and sells biodegradable absorbent granules for carriers in agricultural, home lawn and garden, professional lawn, turf, and ornamental applications, as well as for oil and grease absorption. The company markets and sells its products, services, and systems through direct sales, independent sales agents, and distributors. The company was formerly known as Thermo Fibertek, Inc. and changed its name to Kadant Inc. in July 2001. Kadant Inc. was incorporated in 1991 and is headquartered in Westford, Massachusetts.