Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Parker-Hannifin Corp., solvency ratios
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).
The solvency profile of the entity is characterized by cyclical fluctuations in leverage and debt servicing capacity between 2017 and 2022. A recurring pattern of increasing debt levels followed by rapid deleveraging is evident, with a notable peak in leverage occurring in 2020 and a subsequent sharp correction in 2021.
- Leverage and Capital Structure
- The debt-to-equity ratio exhibited significant volatility, rising from 1.12 in 2017 to a peak of 1.38 in 2020, before dropping to a period low of 0.78 in 2021 and returning to 1.30 by June 30, 2022. This volatility is mirrored in the debt-to-assets ratio, which reached its highest point of 0.44 in 2022, indicating that a larger portion of the asset base is financed through debt compared to the 2018 and 2021 lows of 0.32. Debt-to-capital ratios remained relatively stable within a range of 0.44 to 0.58, suggesting a consistent strategic balance between debt and equity financing despite annual fluctuations.
- Debt Servicing Capacity
- Interest coverage and fixed charge coverage ratios indicate a strong ability to meet financial obligations, although performance dipped during the 2020 fiscal year. Interest coverage reached a peak of 11.17 in 2019 before declining to 5.91 in 2020, subsequently recovering to 9.99 in 2021 and settling at 7.32 in 2022. Fixed charge coverage followed a similar trajectory, peaking at 8.53 in 2021. The synchronization of these dips with the peak in leverage suggests a temporary tightening of financial flexibility in 2020.
- Financial Leverage and Lease Impact
- Financial leverage peaked at 3.23 in 2020 and reached its lowest point of 2.42 in 2021, ending the period at 2.93. The inclusion of operating lease liabilities has a negligible impact on all solvency metrics, as the ratios including these liabilities consistently track within 0.01 to 0.03 of the standard ratios, indicating that lease obligations constitute a minimal portion of the total debt burden.
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Debt to Equity
Parker-Hannifin Corp., debt to equity calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Notes payable and long-term debt payable within one year | 1,724,310) | 2,824) | 809,529) | 587,014) | 638,466) | 1,008,465) | |
| Long-term debt, excluding payable within one year | 9,755,825) | 6,582,053) | 7,652,256) | 6,520,831) | 4,318,559) | 4,861,895) | |
| Total debt | 11,480,135) | 6,584,877) | 8,461,785) | 7,107,845) | 4,957,025) | 5,870,360) | |
| Shareholders’ equity | 8,848,011) | 8,398,307) | 6,113,983) | 5,961,969) | 5,859,866) | 5,261,649) | |
| Solvency Ratio | |||||||
| Debt to equity1 | 1.30 | 0.78 | 1.38 | 1.19 | 0.85 | 1.12 | |
| Benchmarks | |||||||
| Debt to Equity, Competitors2 | |||||||
| Boeing Co. | — | — | — | — | — | — | |
| Caterpillar Inc. | 2.33 | 2.29 | — | — | — | — | |
| Eaton Corp. plc | 0.51 | 0.52 | — | — | — | — | |
| GE Aerospace | 0.89 | 0.87 | — | — | — | — | |
| Honeywell International Inc. | 1.17 | 1.06 | — | — | — | — | |
| Lockheed Martin Corp. | 1.68 | 1.07 | — | — | — | — | |
| RTX Corp. | 0.44 | 0.43 | — | — | — | — | |
| Debt to Equity, Sector | |||||||
| Capital Goods | 1.33 | 1.26 | — | — | — | — | |
| Debt to Equity, Industry | |||||||
| Industrials | 1.42 | 1.37 | — | — | — | — | |
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
Debt to equity = Total debt ÷ Shareholders’ equity
= 11,480,135 ÷ 8,848,011 = 1.30
2 Click competitor name to see calculations.
The solvency profile from June 30, 2017, to June 30, 2022, is characterized by significant volatility in total debt levels contrasted with a consistent upward trajectory in shareholders' equity.
- Total Debt Trends
- Total debt experienced multiple fluctuations over the analyzed period. Following a decrease to 4.96 billion US$ in 2018, debt levels rose steadily to 8.46 billion US$ by June 30, 2020. A reduction to 6.58 billion US$ was observed in 2021, which was subsequently followed by a sharp increase to 11.48 billion US$ in 2022, representing the highest debt obligation within the six-year window.
- Shareholders' Equity Growth
- Shareholders' equity demonstrated a stable and positive growth trend, increasing from 5.26 billion US$ in 2017 to 8.85 billion US$ in 2022. A significant expansion occurred between 2020 and 2021, during which equity grew from 6.11 billion US$ to 8.40 billion US$, indicating a substantial increase in the company's net asset base.
- Debt to Equity Ratio Interpretation
- The debt to equity ratio exhibits a non-linear pattern, reflecting the interplay between shifting debt levels and growing equity. The ratio reached a peak of 1.38 in 2020 before dropping to its lowest point of 0.78 in 2021. This decline in 2021 resulted from the simultaneous reduction in total debt and the spike in shareholders' equity. However, the ratio increased again to 1.30 by June 30, 2022, driven primarily by the substantial accumulation of debt in the final year of the period.
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Debt to Equity (including Operating Lease Liability)
Parker-Hannifin Corp., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Notes payable and long-term debt payable within one year | 1,724,310) | 2,824) | 809,529) | 587,014) | 638,466) | 1,008,465) | |
| Long-term debt, excluding payable within one year | 9,755,825) | 6,582,053) | 7,652,256) | 6,520,831) | 4,318,559) | 4,861,895) | |
| Total debt | 11,480,135) | 6,584,877) | 8,461,785) | 7,107,845) | 4,957,025) | 5,870,360) | |
| Current operating lease liabilities (included within Other accrued liabilities) | 36,023) | 40,193) | 43,327) | —) | —) | —) | |
| Long-term operating lease liabilities (included within Other liabilities) | 100,337) | 93,904) | 96,446) | —) | —) | —) | |
| Total debt (including operating lease liability) | 11,616,495) | 6,718,974) | 8,601,558) | 7,107,845) | 4,957,025) | 5,870,360) | |
| Shareholders’ equity | 8,848,011) | 8,398,307) | 6,113,983) | 5,961,969) | 5,859,866) | 5,261,649) | |
| Solvency Ratio | |||||||
| Debt to equity (including operating lease liability)1 | 1.31 | 0.80 | 1.41 | 1.19 | 0.85 | 1.12 | |
| Benchmarks | |||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | |||||||
| Boeing Co. | — | — | — | — | — | — | |
| Caterpillar Inc. | 2.37 | 2.33 | — | — | — | — | |
| Eaton Corp. plc | 0.54 | 0.55 | — | — | — | — | |
| GE Aerospace | 0.96 | 0.94 | — | — | — | — | |
| Honeywell International Inc. | 1.23 | 1.11 | — | — | — | — | |
| Lockheed Martin Corp. | 1.81 | 1.19 | — | — | — | — | |
| RTX Corp. | 0.47 | 0.46 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | |||||||
| Capital Goods | 1.39 | 1.32 | — | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | |||||||
| Industrials | 1.59 | 1.54 | — | — | — | — | |
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
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Shareholders’ equity
= 11,616,495 ÷ 8,848,011 = 1.31
2 Click competitor name to see calculations.
The solvency profile exhibits significant volatility in leverage levels over the six-year period from 2017 to 2022, characterized by fluctuating debt obligations against a steadily growing equity base.
- Total Debt Obligations
- Total debt, including operating lease liabilities, demonstrates a non-linear trend. After an initial decrease in 2018, debt levels climbed to $8.6 billion by June 2020. A subsequent reduction occurred in 2021, followed by a sharp increase to a period peak of $11.6 billion in June 2022, representing a substantial expansion of liabilities in the final year of the period.
- Shareholders' Equity Growth
- Equity has maintained a consistent upward trajectory, increasing from $5.26 billion in 2017 to $8.85 billion in 2022. This steady growth indicates a strengthening of the capital base, providing a more robust cushion against total liabilities over time.
- Debt to Equity Ratio Dynamics
- The debt to equity ratio reflects the instability of the debt levels, oscillating between a low of 0.80 in 2021 and a peak of 1.41 in 2020. While the growth in equity acted as a stabilizing force, the surge in total debt in 2022 drove the ratio back up to 1.31. This suggests a recent shift toward higher financial leverage, as the increase in debt outpaced the growth in equity during the most recent fiscal year.
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Debt to Capital
Parker-Hannifin Corp., debt to capital calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Notes payable and long-term debt payable within one year | 1,724,310) | 2,824) | 809,529) | 587,014) | 638,466) | 1,008,465) | |
| Long-term debt, excluding payable within one year | 9,755,825) | 6,582,053) | 7,652,256) | 6,520,831) | 4,318,559) | 4,861,895) | |
| Total debt | 11,480,135) | 6,584,877) | 8,461,785) | 7,107,845) | 4,957,025) | 5,870,360) | |
| Shareholders’ equity | 8,848,011) | 8,398,307) | 6,113,983) | 5,961,969) | 5,859,866) | 5,261,649) | |
| Total capital | 20,328,146) | 14,983,184) | 14,575,768) | 13,069,814) | 10,816,891) | 11,132,009) | |
| Solvency Ratio | |||||||
| Debt to capital1 | 0.56 | 0.44 | 0.58 | 0.54 | 0.46 | 0.53 | |
| Benchmarks | |||||||
| Debt to Capital, Competitors2 | |||||||
| Boeing Co. | 1.39 | 1.35 | — | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | — | |
| Eaton Corp. plc | 0.34 | 0.34 | — | — | — | — | |
| GE Aerospace | 0.47 | 0.47 | — | — | — | — | |
| Honeywell International Inc. | 0.54 | 0.51 | — | — | — | — | |
| Lockheed Martin Corp. | 0.63 | 0.52 | — | — | — | — | |
| RTX Corp. | 0.31 | 0.30 | — | — | — | — | |
| Debt to Capital, Sector | |||||||
| Capital Goods | 0.57 | 0.56 | — | — | — | — | |
| Debt to Capital, Industry | |||||||
| Industrials | 0.59 | 0.58 | — | — | — | — | |
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
Debt to capital = Total debt ÷ Total capital
= 11,480,135 ÷ 20,328,146 = 0.56
2 Click competitor name to see calculations.
The solvency profile from 2017 to 2022 is characterized by fluctuating leverage levels, with the debt-to-capital ratio ranging from a low of 0.44 to a peak of 0.58.
- Debt to Capital Ratio Analysis
- The ratio exhibited a non-linear trend over the period. After an initial decrease from 0.53 in 2017 to 0.46 in 2018, leverage increased for two consecutive years, reaching 0.58 by June 30, 2020. A sharp correction occurred in 2021, bringing the ratio to its six-year minimum of 0.44, before it rose again to 0.56 in 2022.
- Total Debt Dynamics
- Total debt obligations demonstrated significant volatility. Debt levels decreased to 4.96 billion USD in 2018 but climbed steadily to 8.46 billion USD by 2020. While a reduction to 6.58 billion USD was noted in 2021, the most substantial increase occurred in 2022, with total debt rising to 11.48 billion USD, marking the highest level of indebtedness within the analyzed timeframe.
- Total Capital Evolution
- Total capital followed a general upward trajectory, growing from 11.13 billion USD in 2017 to 20.33 billion USD in 2022. The most aggressive expansion in capital occurred between 2021 and 2022, coinciding with the surge in total debt, which suggests that the increase in capital during this period was heavily driven by debt financing rather than equity growth.
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Debt to Capital (including Operating Lease Liability)
Parker-Hannifin Corp., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Notes payable and long-term debt payable within one year | 1,724,310) | 2,824) | 809,529) | 587,014) | 638,466) | 1,008,465) | |
| Long-term debt, excluding payable within one year | 9,755,825) | 6,582,053) | 7,652,256) | 6,520,831) | 4,318,559) | 4,861,895) | |
| Total debt | 11,480,135) | 6,584,877) | 8,461,785) | 7,107,845) | 4,957,025) | 5,870,360) | |
| Current operating lease liabilities (included within Other accrued liabilities) | 36,023) | 40,193) | 43,327) | —) | —) | —) | |
| Long-term operating lease liabilities (included within Other liabilities) | 100,337) | 93,904) | 96,446) | —) | —) | —) | |
| Total debt (including operating lease liability) | 11,616,495) | 6,718,974) | 8,601,558) | 7,107,845) | 4,957,025) | 5,870,360) | |
| Shareholders’ equity | 8,848,011) | 8,398,307) | 6,113,983) | 5,961,969) | 5,859,866) | 5,261,649) | |
| Total capital (including operating lease liability) | 20,464,506) | 15,117,281) | 14,715,541) | 13,069,814) | 10,816,891) | 11,132,009) | |
| Solvency Ratio | |||||||
| Debt to capital (including operating lease liability)1 | 0.57 | 0.44 | 0.58 | 0.54 | 0.46 | 0.53 | |
| Benchmarks | |||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | |||||||
| Boeing Co. | 1.37 | 1.34 | — | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | — | |
| Eaton Corp. plc | 0.35 | 0.36 | — | — | — | — | |
| GE Aerospace | 0.49 | 0.49 | — | — | — | — | |
| Honeywell International Inc. | 0.55 | 0.53 | — | — | — | — | |
| Lockheed Martin Corp. | 0.64 | 0.54 | — | — | — | — | |
| RTX Corp. | 0.32 | 0.31 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | |||||||
| Capital Goods | 0.58 | 0.57 | — | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | |||||||
| Industrials | 0.61 | 0.61 | — | — | — | — | |
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
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 11,616,495 ÷ 20,464,506 = 0.57
2 Click competitor name to see calculations.
The solvency profile over the period from 2017 to 2022 is characterized by significant fluctuations in leverage and a substantial expansion of the overall capital base. While total capital exhibited a general upward trajectory, total debt followed a more volatile path, resulting in a debt-to-capital ratio that varied between a low of 0.44 and a high of 0.58.
- Total Debt Trends
- Total debt, inclusive of operating lease liabilities, showed an inconsistent trend. After a decrease from 5.87 billion US$ in 2017 to 4.96 billion US$ in 2018, debt levels climbed for two consecutive years, reaching 8.60 billion US$ by June 30, 2020. A significant reduction to 6.72 billion US$ was observed in 2021, followed by a sharp increase to 11.62 billion US$ in 2022, marking the highest debt level in the analyzed period.
- Total Capital Growth
- Total capital increased from 11.13 billion US$ in 2017 to 20.46 billion US$ in 2022. Except for a slight contraction in 2018, the capital base grew steadily each year. The most pronounced growth occurred between 2021 and 2022, where capital expanded by approximately 5.35 billion US$, corresponding with the increase in total debt.
- Debt to Capital Ratio Interpretation
- The debt to capital ratio indicates alternating periods of deleveraging and increased borrowing. The ratio reached its zenith of 0.58 in 2020 and its nadir of 0.44 in 2021. The rise to 0.57 in 2022 suggests that the increase in debt obligations grew at a faster rate than the total capital base during the final year, returning the solvency position to levels similar to those seen in 2019 and 2020.
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Debt to Assets
Parker-Hannifin Corp., debt to assets calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Notes payable and long-term debt payable within one year | 1,724,310) | 2,824) | 809,529) | 587,014) | 638,466) | 1,008,465) | |
| Long-term debt, excluding payable within one year | 9,755,825) | 6,582,053) | 7,652,256) | 6,520,831) | 4,318,559) | 4,861,895) | |
| Total debt | 11,480,135) | 6,584,877) | 8,461,785) | 7,107,845) | 4,957,025) | 5,870,360) | |
| Total assets | 25,943,943) | 20,341,200) | 19,738,189) | 17,576,690) | 15,320,087) | 15,489,904) | |
| Solvency Ratio | |||||||
| Debt to assets1 | 0.44 | 0.32 | 0.43 | 0.40 | 0.32 | 0.38 | |
| Benchmarks | |||||||
| Debt to Assets, Competitors2 | |||||||
| Boeing Co. | 0.42 | 0.42 | — | — | — | — | |
| Caterpillar Inc. | 0.45 | 0.46 | — | — | — | — | |
| Eaton Corp. plc | 0.25 | 0.25 | — | — | — | — | |
| GE Aerospace | 0.17 | 0.18 | — | — | — | — | |
| Honeywell International Inc. | 0.31 | 0.30 | — | — | — | — | |
| Lockheed Martin Corp. | 0.29 | 0.23 | — | — | — | — | |
| RTX Corp. | 0.20 | 0.20 | — | — | — | — | |
| Debt to Assets, Sector | |||||||
| Capital Goods | 0.28 | 0.28 | — | — | — | — | |
| Debt to Assets, Industry | |||||||
| Industrials | 0.31 | 0.30 | — | — | — | — | |
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
Debt to assets = Total debt ÷ Total assets
= 11,480,135 ÷ 25,943,943 = 0.44
2 Click competitor name to see calculations.
The solvency profile exhibits a pattern of fluctuating leverage between June 30, 2017, and June 30, 2022. The debt-to-assets ratio does not follow a linear trajectory, instead oscillating between a low of 0.32 and a peak of 0.44, indicating periodic shifts in the balance between debt financing and asset accumulation.
- Total Debt Volatility
- Total debt levels demonstrated significant variability over the analyzed period. After an initial decrease to $4.96 billion in 2018, debt increased steadily through 2020, reaching $8.46 billion. A subsequent reduction occurred in 2021 to $6.58 billion, followed by a sharp increase to $11.48 billion by June 30, 2022, marking the highest debt level in the six-year series.
- Total Asset Growth
- Total assets showed a strong overall growth trend, expanding from $15.49 billion in 2017 to $25.94 billion in 2022. Aside from a negligible dip in 2018, the asset base grew consistently year-over-year, with the most substantial increase occurring between 2021 and 2022, where assets rose by approximately $5.6 billion.
- Debt to Assets Ratio Analysis
- The debt-to-assets ratio fluctuated, reflecting the interplay between borrowing and asset growth. The ratio decreased to 0.32 in 2018 and again in 2021, indicating periods of deleveraging or faster asset growth relative to debt. Conversely, the ratio peaked at 0.44 in 2022, coinciding with a simultaneous spike in both total debt and total assets, suggesting that the increase in leverage was utilized to fund a significant expansion of the balance sheet.
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Debt to Assets (including Operating Lease Liability)
Parker-Hannifin Corp., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Notes payable and long-term debt payable within one year | 1,724,310) | 2,824) | 809,529) | 587,014) | 638,466) | 1,008,465) | |
| Long-term debt, excluding payable within one year | 9,755,825) | 6,582,053) | 7,652,256) | 6,520,831) | 4,318,559) | 4,861,895) | |
| Total debt | 11,480,135) | 6,584,877) | 8,461,785) | 7,107,845) | 4,957,025) | 5,870,360) | |
| Current operating lease liabilities (included within Other accrued liabilities) | 36,023) | 40,193) | 43,327) | —) | —) | —) | |
| Long-term operating lease liabilities (included within Other liabilities) | 100,337) | 93,904) | 96,446) | —) | —) | —) | |
| Total debt (including operating lease liability) | 11,616,495) | 6,718,974) | 8,601,558) | 7,107,845) | 4,957,025) | 5,870,360) | |
| Total assets | 25,943,943) | 20,341,200) | 19,738,189) | 17,576,690) | 15,320,087) | 15,489,904) | |
| Solvency Ratio | |||||||
| Debt to assets (including operating lease liability)1 | 0.45 | 0.33 | 0.44 | 0.40 | 0.32 | 0.38 | |
| Benchmarks | |||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | |||||||
| Boeing Co. | 0.43 | 0.43 | — | — | — | — | |
| Caterpillar Inc. | 0.46 | 0.46 | — | — | — | — | |
| Eaton Corp. plc | 0.26 | 0.27 | — | — | — | — | |
| GE Aerospace | 0.19 | 0.19 | — | — | — | — | |
| Honeywell International Inc. | 0.33 | 0.32 | — | — | — | — | |
| Lockheed Martin Corp. | 0.32 | 0.26 | — | — | — | — | |
| RTX Corp. | 0.21 | 0.21 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | |||||||
| Capital Goods | 0.30 | 0.29 | — | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | |||||||
| Industrials | 0.34 | 0.34 | — | — | — | — | |
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
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 11,616,495 ÷ 25,943,943 = 0.45
2 Click competitor name to see calculations.
The solvency analysis from June 30, 2017, to June 30, 2022, reveals a fluctuating trend in financial leverage, characterized by periods of debt accumulation followed by strategic deleveraging, ending with a significant increase in both total liabilities and assets.
- Total Debt Dynamics
- Total debt, including operating lease liabilities, exhibited substantial volatility over the six-year period. Starting at US$ 5.87 billion in 2017, the balance peaked at US$ 11.62 billion by 2022. A notable contraction occurred between 2020 and 2021, where debt decreased from US$ 8.60 billion to US$ 6.72 billion, before surging by approximately US$ 4.90 billion in the final year of the analysis.
- Total Asset Expansion
- Total assets demonstrated a consistent upward trajectory, growing from US$ 15.49 billion in 2017 to US$ 25.94 billion in 2022. The growth was most pronounced between 2021 and 2022, with assets increasing by US$ 5.60 billion, suggesting significant capital investment or acquisition activity during this period.
- Debt to Assets Ratio Analysis
- The debt to assets ratio fluctuated between a low of 0.32 in 2018 and a high of 0.45 in 2022. The ratio remained relatively stable between 0.32 and 0.44 from 2017 to 2021, indicating a controlled balance between debt and asset growth. However, the rise to 0.45 in 2022 indicates that debt grew at a slightly faster rate than assets during the final year, resulting in the highest level of financial leverage observed in the provided timeframe.
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Financial Leverage
Parker-Hannifin Corp., financial leverage calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Total assets | 25,943,943) | 20,341,200) | 19,738,189) | 17,576,690) | 15,320,087) | 15,489,904) | |
| Shareholders’ equity | 8,848,011) | 8,398,307) | 6,113,983) | 5,961,969) | 5,859,866) | 5,261,649) | |
| Solvency Ratio | |||||||
| Financial leverage1 | 2.93 | 2.42 | 3.23 | 2.95 | 2.61 | 2.94 | |
| Benchmarks | |||||||
| Financial Leverage, Competitors2 | |||||||
| Boeing Co. | — | — | — | — | — | — | |
| Caterpillar Inc. | 5.16 | 5.02 | — | — | — | — | |
| Eaton Corp. plc | 2.06 | 2.07 | — | — | — | — | |
| GE Aerospace | 5.16 | 4.93 | — | — | — | — | |
| Honeywell International Inc. | 3.73 | 3.47 | — | — | — | — | |
| Lockheed Martin Corp. | 5.71 | 4.64 | — | — | — | — | |
| RTX Corp. | 2.19 | 2.21 | — | — | — | — | |
| Financial Leverage, Sector | |||||||
| Capital Goods | 4.71 | 4.55 | — | — | — | — | |
| Financial Leverage, Industry | |||||||
| Industrials | 4.65 | 4.52 | — | — | — | — | |
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
Financial leverage = Total assets ÷ Shareholders’ equity
= 25,943,943 ÷ 8,848,011 = 2.93
2 Click competitor name to see calculations.
An examination of the balance sheet from 2017 to 2022 reveals a consistent expansion in the company's financial position. Total assets grew from 15.49 billion USD to 25.94 billion USD, with a particularly sharp acceleration observed between 2021 and 2022. Concurrently, shareholders' equity followed a general upward trajectory, increasing from 5.26 billion USD to 8.85 billion USD, including a notable surge in equity between 2020 and 2021.
- Financial Leverage Volatility
- The financial leverage ratio exhibited fluctuations over the analyzed period, ranging from a minimum of 2.42 to a peak of 3.23. A rising trend was observed between 2018 and 2020, where the ratio reached its maximum level, indicating a period of increased reliance on debt relative to equity to fund assets.
- Solvency Improvement in 2021
- A significant contraction in financial leverage occurred in 2021, with the ratio dropping to 2.42. This improvement in the solvency profile correlates directly with a substantial increase in shareholders' equity, which rose from 6.11 billion USD to 8.39 billion USD, thereby reducing the proportion of debt-funded assets.
- Asset-Driven Leverage Increase in 2022
- In 2022, the leverage ratio returned to 2.93. This increase was driven by a rapid expansion of total assets, which grew by approximately 5.6 billion USD in a single year, while the corresponding increase in shareholders' equity was comparatively modest. This suggests that the most recent growth in the asset base was primarily financed through liabilities rather than equity.
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Interest Coverage
Parker-Hannifin Corp., interest coverage calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net income attributable to common shareholders | 1,315,605) | 1,746,100) | 1,206,341) | 1,512,364) | 1,060,801) | 983,412) | |
| Add: Net income attributable to noncontrolling interest | 581) | 761) | 362) | 567) | 514) | 432) | |
| Add: Income tax expense | 298,040) | 500,096) | 305,924) | 420,494) | 640,962) | 344,797) | |
| Add: Interest expense | 255,252) | 250,036) | 308,161) | 190,138) | 213,873) | 162,436) | |
| Earnings before interest and tax (EBIT) | 1,869,478) | 2,496,993) | 1,820,788) | 2,123,563) | 1,916,150) | 1,491,077) | |
| Solvency Ratio | |||||||
| Interest coverage1 | 7.32 | 9.99 | 5.91 | 11.17 | 8.96 | 9.18 | |
| Benchmarks | |||||||
| Interest Coverage, Competitors2 | |||||||
| Boeing Co. | -0.98 | -0.88 | — | — | — | — | |
| Caterpillar Inc. | 20.80 | 17.88 | — | — | — | — | |
| Eaton Corp. plc | 21.22 | 21.11 | — | — | — | — | |
| GE Aerospace | 1.88 | -0.96 | — | — | — | — | |
| Honeywell International Inc. | 16.41 | 22.09 | — | — | — | — | |
| Lockheed Martin Corp. | 11.72 | 14.27 | — | — | — | — | |
| RTX Corp. | 5.64 | 4.71 | — | — | — | — | |
| Interest Coverage, Sector | |||||||
| Capital Goods | 4.84 | 3.98 | — | — | — | — | |
| Interest Coverage, Industry | |||||||
| Industrials | 4.98 | 5.14 | — | — | — | — | |
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
Interest coverage = EBIT ÷ Interest expense
= 1,869,478 ÷ 255,252 = 7.32
2 Click competitor name to see calculations.
The analysis of solvency metrics between 2017 and 2022 reveals a consistent ability to service debt obligations, although the interest coverage ratio experienced notable volatility during this period.
- Earnings Before Interest and Tax (EBIT)
- Operating earnings demonstrated a general upward trend from 2017 to 2019, rising from 1.49 billion USD to 2.12 billion USD. A contraction occurred in 2020, with earnings falling to 1.82 billion USD, followed by a significant peak in 2021 at 2.50 billion USD. By June 30, 2022, EBIT decreased to 1.87 billion USD.
- Interest Expense
- Debt servicing costs increased overall from 162 million USD in 2017 to 255 million USD in 2022. A significant spike was observed in 2020, where interest expenses reached a period high of 308 million USD, before stabilizing in the 250 million USD range during 2021 and 2022.
- Interest Coverage Ratio
- The interest coverage ratio fluctuated between a peak of 11.17 in 2019 and a low of 5.91 in 2020. The sharp decline in 2020 is attributable to the simultaneous reduction in EBIT and the peak in interest expenses. A strong recovery was evident in 2021, with the ratio returning to 9.99, before moderating to 7.32 in 2022.
The observed patterns indicate that while the capacity to cover interest payments remains robust, the margin of safety is sensitive to fluctuations in operating profitability and changes in the cost of debt.
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Fixed Charge Coverage
Parker-Hannifin Corp., fixed charge coverage calculation, comparison to benchmarks
| Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | Jun 30, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net income attributable to common shareholders | 1,315,605) | 1,746,100) | 1,206,341) | 1,512,364) | 1,060,801) | 983,412) | |
| Add: Net income attributable to noncontrolling interest | 581) | 761) | 362) | 567) | 514) | 432) | |
| Add: Income tax expense | 298,040) | 500,096) | 305,924) | 420,494) | 640,962) | 344,797) | |
| Add: Interest expense | 255,252) | 250,036) | 308,161) | 190,138) | 213,873) | 162,436) | |
| Earnings before interest and tax (EBIT) | 1,869,478) | 2,496,993) | 1,820,788) | 2,123,563) | 1,916,150) | 1,491,077) | |
| Add: Operating lease expense | 46,026) | 48,171) | 50,267) | 126,752) | 126,940) | 118,723) | |
| Earnings before fixed charges and tax | 1,915,504) | 2,545,164) | 1,871,055) | 2,250,315) | 2,043,090) | 1,609,800) | |
| Interest expense | 255,252) | 250,036) | 308,161) | 190,138) | 213,873) | 162,436) | |
| Operating lease expense | 46,026) | 48,171) | 50,267) | 126,752) | 126,940) | 118,723) | |
| Fixed charges | 301,278) | 298,207) | 358,428) | 316,890) | 340,813) | 281,159) | |
| Solvency Ratio | |||||||
| Fixed charge coverage1 | 6.36 | 8.53 | 5.22 | 7.10 | 5.99 | 5.73 | |
| Benchmarks | |||||||
| Fixed Charge Coverage, Competitors2 | |||||||
| Boeing Co. | -0.70 | -0.64 | — | — | — | — | |
| Caterpillar Inc. | 14.92 | 12.73 | — | — | — | — | |
| Eaton Corp. plc | 10.01 | 10.40 | — | — | — | — | |
| GE Aerospace | 1.35 | -0.22 | — | — | — | — | |
| Honeywell International Inc. | 11.00 | 13.67 | — | — | — | — | |
| Lockheed Martin Corp. | 8.44 | 9.95 | — | — | — | — | |
| RTX Corp. | 4.40 | 3.66 | — | — | — | — | |
| Fixed Charge Coverage, Sector | |||||||
| Capital Goods | 3.61 | 3.06 | — | — | — | — | |
| Fixed Charge Coverage, Industry | |||||||
| Industrials | 3.30 | 3.44 | — | — | — | — | |
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
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 1,915,504 ÷ 301,278 = 6.36
2 Click competitor name to see calculations.
The company demonstrates a consistent ability to meet its fixed financial obligations over the six-year period analyzed. While there is observable volatility in annual earnings, the solvency margin remains substantial, with the coverage ratio never dropping below 5.00.
- Earnings Before Fixed Charges and Tax
- Earnings exhibited a fluctuating growth pattern, rising from 1,609,800 thousand USD in 2017 to a peak of 2,545,164 thousand USD in 2021. A notable contraction occurred in 2020, where earnings decreased to 1,871,055 thousand USD, followed by a sharp recovery in 2021 and a subsequent decline to 1,915,504 thousand USD by June 30, 2022.
- Fixed Charges
- Fixed charges remained relatively stable, fluctuating within a range of 281,159 thousand USD to 358,428 thousand USD. The highest expenditure on fixed charges was recorded in 2020, coinciding with the period of reduced earnings, which contributed to a temporary compression of the coverage ratio.
- Fixed Charge Coverage Ratio
- The coverage ratio shows significant variability, reflecting the volatility of the underlying earnings. The ratio improved from 5.73 in 2017 to a peak of 8.53 in 2021. The lowest coverage point occurred in 2020 at 5.22, driven by the combination of lower earnings and higher fixed charges. By June 30, 2022, the ratio settled at 6.36, indicating that earnings still exceed fixed obligations by a factor of more than six.
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