Parker Hannifin — Fiscal 2027 First Quarter Earnings Summary

Financial Performance:

• Reported sales increased 18% year-over-year to a record $6.0 billion; organic sales grew 11.5% while acquisitions contributed 7%.
• Net income was $0.9 billion, up 9% year-over-year; adjusted net income was $1.1 billion, up 23%.
• Diluted EPS increased 10% to $6.92; adjusted diluted EPS rose 23% to a record $8.90.
• Segment operating margin was 24.4%, an increase of 20 basis points; adjusted segment operating margin was 28.6%, an increase of 120 basis points.
• Consolidated net sales were $5,992 million compared to $5,084 million in the prior year period.
• Cash provided by operating activities was $752 million for the quarter.
• Acquisitions, net of cash acquired, resulted in a cash outflow of $9,102 million.
• Capital expenditures were $109 million.
• Cash and cash equivalents increased to $711 million from $501 million at the beginning of the period.
• Total debt (notes payable and current portion of long-term debt plus long-term debt) increased to $17,478 million from $8,520 million at the start of the period.

Guidance and Future Outlook:

• Raised full-year fiscal 2027 guidance for organic sales growth, adjusted segment operating margin, adjusted EPS, and free cash flow.
• New FY27 reported sales growth guidance is 16.0% to 19.0%.
• New FY27 organic sales growth guidance is 7.5% to 10.5%, with acquisitions expected to contribute 9% and currency (0.5%).
• New FY27 segment operating margin guidance is 23.6% to 24.0% (adjusted 27.7% to 28.1%).
• New FY27 EPS guidance is $29.65 to $30.45 (adjusted $36.45 to $37.25).
• New FY27 free cash flow guidance is $3,500 million to $4,000 million.
• FY27 cash flow from operations is forecasted at $4,125 million to $4,625 million.

Business Segments and Product Lines:

• Diversified Industrial Segment:
  • North America Businesses: Sales of $2,445 million (up 19.6%); organic growth of 9.4%; adjusted segment operating margin of 27.6% (up 60 bps).
  • International Businesses: Sales of $1,707 million (up 22.0%); organic growth of 11.6%; adjusted segment operating margin of 27.7% (up 270 bps).
  • International organic growth breakdown: APAC +23%, EMEA +4%, Latin America (1%).
  • Record adjusted segment operating margin of 27.6% for the total Diversified Industrial segment.
• Aerospace Systems Segment:
  • Sales of $1,867 million (up 13.8%); organic growth of 13.9%.
  • Record adjusted segment operating margin of 30.7% (up 70 bps).
  • Double-digit growth in both OEM and Aftermarket sectors.
  • Backlog reached a new record of $13.7 billion.
• Completed the acquisition of Filtration Group Corporation, expanding filtration offerings and the aftermarket business.
• Order rates for the 12 months ended September 30, 2026, increased +13% for Parker overall; +11% for Diversified Industrial North America; +14% for Diversified Industrial International; and +14% for Aerospace Systems.

Market and Competitive Landscape:

• Experienced increased demand across all market verticals.
• Strong market conditions contributed to record backlog levels and double-digit organic sales growth.
• The company is a global leader in motion and control technologies.

Risks and Challenges:

• Risks include uncertainties surrounding the timing, completion, or integration of acquisitions, specifically the pending acquisition of CIRCOR International Inc.'s Commercial and Defense Aerospace business and the integration of Filtration Group Corporation and Curtis Instruments, Inc.
• Potential impacts from supply chain and labor disruptions, including tariffs and labor shortages.
• Geopolitical tensions, international conflicts, and cybersecurity risks.
• Fluctuations in currency exchange rates, raw material costs, and economic conditions such as inflation and interest rates.
• Legal and regulatory developments, including environmental protection compliance costs and outcomes of outstanding legal proceedings.
• Risks associated with divestitures and business realignment activities.

Management Commentary and Tone:

• Jenny Parmentier, Chairman and CEO, described the quarter as "exceptional" with "record performance" and an "impressive start" to the fiscal year.
• Management noted that "The Win Strategy™" execution delivered record adjusted segment operating margin and earnings growth.
• The tone is confident, citing strong order rates and the successful completion of the Filtration Group acquisition as drivers for the raised guidance.

Other Key Points:

• Cash dividends per common share were $2.00 for the quarter, compared to $1.80 in the prior year period.
• Payments for common shares (buybacks) were $118 million in the quarter.
• Net sales were reduced by $27 million for IEEPA tariff-related returns to customers, partially offset by $6 million received from the U.S. government.
• The company reported $1,138 million in adjusted net income, excluding amortization of acquired intangibles, business realignment charges, integration costs, acquisition-related expenses, and tariff refunds.
• The press release includes reconciliations for non-GAAP financial measures including adjusted net income, adjusted EPS, adjusted segment operating margin, and organic sales growth.