Parker Reports Fiscal 2025 First Quarter Results

Record sales, segment operating margin and earnings per share; EPS outlook increased

CLEVELAND, Oct. 31, 2024 (GLOBE NEWSWIRE) — Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the quarter ended September 30, 2024, that included the following highlights (compared with the prior year quarter):

Fiscal 2025 First Quarter Highlights:

  • Sales increased 1.2% to $4.9 billion; Organic sales growth was 1.4%
  • Net income was $698 million, an increase of 7%, or $810 million adjusted, an increase of 4%
  • EPS were $5.34, an increase of 7%, or $6.20 adjusted, an increase of 4%
  • Segment operating margin was 22.6%, an increase of 130 bps, or a record 25.7% adjusted, an increase of 80 bps
  • Cash flow from operations was 15.2% of sales, an increase of 14% to $744 million

“Through continued execution of The Win Strategy™, our global team produced outstanding results in the first quarter,” said Chairman and Chief Executive Officer, Jenny Parmentier. “We delivered records for sales, adjusted segment operating margin, adjusted earnings per share and year-to-date cash flow from operations. Our performance also reflects the strength of our transformed portfolio with our Aerospace Systems segment achieving exceptional results. Looking ahead to the full year, we anticipate near-term pressure in select industrial markets and accelerating growth in aerospace. Reflecting these conditions and our strong first quarter performance, we have raised our outlook for segment operating margin and earnings per share. We remain committed to our fiscal 2029 targets and continue to see a very promising future for Parker.”

This news release contains non-GAAP financial measures. Reconciliations of adjusted numbers and certain non-GAAP financial measures are included in the financial tables of this press release.

Outlook

Guidance for the fiscal year ending June 30, 2025 has been updated. Guidance now reflects divestiture activity in the Diversified Industrial Segment, North America Businesses expected to be completed during the second quarter of fiscal 2025. The company now expects:

  • Total sales growth in fiscal 2025 of 0.5% to 3.5%, with organic sales growth of 1.5% to 4.5%; divestitures of (1.5%) and favorable currency of 0.5%
  • Total segment operating margin to increase to approximately 22.6%, or approximately 25.7% on an adjusted basis
  • EPS to increase to $22.78 to $23.48, or $26.35 to $27.05 on an adjusted basis

Segment Results

Diversified Industrial Segment

North America Businesses              
$ in mm              
  FY25 Q1   FY24 Q1   Change   Organic Growth
Sales $ 2,100     $ 2,230     -5.8 %   -5.0 %
Segment Operating Income $ 485     $ 506     -4.2 %    
Segment Operating Margin   23.1 %     22.7 %   40 bps    
Adjusted Segment Operating Income $ 532     $ 554     -4.1 %    
Adjusted Segment Operating Margin   25.3 %     24.9 %   40 bps    
  • Achieved record adjusted segment operating margin
  • HVAC returns to growth, while delays impact in-plant and energy markets
  • Softness continues in transportation and off-highway markets
International Businesses      
$ in mm              
  FY25 Q1   FY24 Q1   Change   Organic Growth
Sales $ 1,356     $ 1,389     -2.4 %   -2.4 %
Segment Operating Income $ 299     $ 301     -0.6 %    
Segment Operating Margin   22.1 %     21.7 %   40 bps    
Adjusted Segment Operating Income $ 327     $ 334     -2.2 %    
Adjusted Segment Operating Margin   24.1 %     24.1 %   —         bps    
  • Achieved record adjusted segment operating margin
  • Positive sales growth in Asia, offset by continued softness in Europe
Aerospace Systems Segment                          
$ in mm
  FY25 Q1   FY24 Q1   Change   Organic Growth
Sales $ 1,448     $ 1,229     17.8 %   17.2 %
Segment Operating Income $ 323     $ 226     42.7 %    
Segment Operating Margin   22.3 %     18.4 %   390 bps    
Adjusted Segment Operating Income $ 403     $ 320     26.3 %    
Adjusted Segment Operating Margin   27.9 %     26.0 %   190 bps    
  • Achieved record sales and adjusted segment operating margin
  • Outstanding aftermarket sales growth in both commercial and defense markets

Order Rates

  FY25 Q1    
Parker +1 %  
Diversified Industrial Segment – North America Businesses -3 %  
Diversified Industrial Segment – International Businesses +1 %  
Aerospace Systems Segment +7 %  
  • Company order rates continue to be positive
  • International orders turned positive on Asia improvement
  • Aerospace orders remained strong against a tough prior year comparison

About Parker Hannifin
Parker Hannifin is a Fortune 250 global leader in motion and control technologies. For more than a century the company has been enabling engineering breakthroughs that lead to a better tomorrow. Learn more at www.parker.com or @parkerhannifin.

Contacts:  
Media: Financial Analysts:
Aidan Gormley Jeff Miller
216-896-3258 216-896-2708
aidan.gormley@parker.com jeffrey.miller@parker.com

Notice of Webcast
Parker Hannifin’s conference call and slide presentation to discuss its fiscal 2025 first quarter results are available to all interested parties via live webcast today at 11:00 a.m. ET, at investors.parker.com. A replay of the webcast will be available on the site approximately one hour after the completion of the call and will remain available for one year. To register for e-mail notification of future events please visit investors.parker.com.

Note on Orders The company reported orders for the quarter ending September 30, 2024, compared with the same quarter a year ago. All comparisons are at constant currency exchange rates, with the prior year quarter restated to the current-year rates. Diversified Industrial comparisons are on 3-month average computations and Aerospace Systems comparisons are on rolling 12-month average computations.

Note on Non-GAAP Financial Measures
This press release contains references to non-GAAP financial information including (a) adjusted net income; (b) adjusted earnings per share; (c) adjusted operating margin and segment operating margins; (d) adjusted operating income and segment operating income and (e) organic sales growth. The adjusted net income, adjusted earnings per share, adjusted operating margin, adjusted segment operating margin, adjusted operating income, adjusted segment operating income and organic sales measures are presented to allow investors and the company to meaningfully evaluate changes in net income, earnings per share and segment operating margins on a comparable basis from period to period. Although adjusted net income, adjusted earnings per share, adjusted operating margin and segment operating margins, adjusted operating income and segment operating income, and organic sales growth are not measures of performance calculated in accordance with GAAP, we believe that they are useful to an investor in evaluating the results of this quarter versus the prior period. Comparable descriptions of record adjusted results in this release refer only to the period from the first quarter of FY2011 to the periods presented in this release. This period coincides with recast historical financial results provided in association with our FY2014 change in segment reporting. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

Forward-Looking Statements
Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. Often but not always, these statements may be identified from the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and similar expressions, and may also include statements regarding future performance, orders, earnings projections, events or developments. Parker cautions readers not to place undue reliance on these statements. It is possible that the future performance may differ materially from expectations, including those based on past performance.

Among other factors that may affect future performance are: changes in business relationships with and orders by or from major customers, suppliers or distributors, including delays or cancellations in shipments; disputes regarding contract terms, changes in contract costs and revenue estimates for new development programs; changes in product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions; ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination and ability to successfully undertake business realignment activities and the expected costs, including cost savings, thereof; ability to implement successfully business and operating initiatives, including the timing, price and execution of share repurchases and other capital initiatives; availability, cost increases of or other limitations on our access to raw materials, component products and/or commodities if associated costs cannot be recovered in product pricing; ability to manage costs related to insurance and employee retirement and health care benefits; legal and regulatory developments and other government actions, including related to environmental protection, and associated compliance costs; supply chain and labor disruptions, including as a result of labor shortages; threats associated with international conflicts and cybersecurity risks and risks associated with protecting our intellectual property; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; effects on market conditions, including sales and pricing, resulting from global reactions to U.S. trade policies; manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and economic conditions such as inflation, deflation, interest rates and credit availability; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; changes in the tax laws in the United States and foreign jurisdictions and judicial or regulatory interpretations thereof; and large scale disasters, such as floods, earthquakes, hurricanes, industrial accidents and pandemics. Readers should also consider forward-looking statements in light of risk factors discussed in Parker’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 and other periodic filings made with the SEC.

CONSOLIDATED STATEMENT OF INCOME      
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands, except per share amounts)   2024       2023  
Net sales   $ 4,903,984     $ 4,847,488  
Cost of sales     3,097,719       3,097,349  
Selling, general and administrative expenses   848,789       873,691  
Interest expense     113,091       134,468  
Other income, net     (30,801 )     (78,455 )
Income before income taxes     875,186       820,435  
Income taxes     176,658       169,363  
Net income     698,528       651,072  
Less: Noncontrolling interests     108       245  
Net income attributable to common shareholders $ 698,420     $ 650,827  
         
Earnings per share attributable to common shareholders:      
Basic earnings per share   $ 5.43     $ 5.07  
Diluted earnings per share   $ 5.34     $ 4.99  
         
Average shares outstanding during period – Basic   128,663,088       128,472,550  
Average shares outstanding during period – Diluted   130,680,242       130,363,441  
         
         
CASH DIVIDENDS PER COMMON SHARE      
(Unaudited)   Three Months Ended September 30,
(Amounts in dollars)     2024       2023  
Cash dividends per common share $ 1.63     $ 1.48  

RECONCILIATION OF ORGANIC GROWTH            
(Unaudited) Three Months Ended
  As Reported           Adjusted
  September 30, 2024   Currency   Divestitures   September 30, 2024
Diversified Industrial Segment (4.5)%   (0.3)%   (0.2)%   (4.0)%
Aerospace Systems Segment 17.8 %   0.6 %     —%   17.2 %
Total 1.2 %   %   (0.2)%   1.4 %

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands)     2024       2023  
Net income attributable to common shareholders $ 698,420     $ 650,827  
Adjustments:      
Acquired intangible asset amortization expense   140,121       155,520  
Business realignment charges   9,506       13,092  
Integration costs to achieve     6,411       6,406  
Gain on sale of building   (10,461 )      
Gain on divestiture         (13,260 )
Tax effect of adjustments1     (34,211 )     (36,148 )
Adjusted net income attributable to common shareholders $ 809,786     $ 776,437  

RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE
(Unaudited)   Three Months Ended September 30,
(Amounts in dollars)     2024       2023  
Earnings per diluted share $ 5.34     $ 4.99  
Adjustments:      
Acquired intangible asset amortization expense   1.07       1.19  
Business realignment charges   0.07       0.10  
Integration costs to achieve   0.05       0.05  
Gain on sale of building   (0.08 )      
Gain on divestiture         (0.10 )
Tax effect of adjustments1     (0.25 )     (0.27 )
Adjusted earnings per diluted share $ 6.20     $ 5.96  
         
1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment.

BUSINESS SEGMENT INFORMATION      
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands)     2024     2023
Net sales        
Diversified Industrial   $ 3,456,158   $ 3,618,528
Aerospace Systems     1,447,826     1,228,960
Total net sales   $ 4,903,984   $ 4,847,488
Segment operating income        
Diversified Industrial   $ 783,546   $ 806,754
Aerospace Systems     322,986     226,260
Total segment operating income   1,106,532     1,033,014
Corporate general and administrative expenses   48,794     55,656
Income before interest expense and other expense, net   1,057,738     977,358
Interest expense     113,091     134,468
Other expense, net     69,461     22,455
Income before income taxes   $ 875,186   $ 820,435

RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands)     2024       2023  
Diversified Industrial Segment sales   $ 3,456,158     $ 3,618,528  
         
Diversified Industrial Segment operating income   $ 783,546     $ 806,754  
Adjustments:        
Acquired intangible asset amortization     65,264       67,951  
Business realignment charges     8,900       12,639  
Integration costs to achieve     778       1,139  
Adjusted Diversified Industrial Segment operating income   $ 858,488     $ 888,483  
         
Diversified Industrial Segment operating margin     22.7 %     22.3 %
Adjusted Diversified Industrial Segment operating margin     24.8 %     24.6 %
         
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands)     2024       2023  
Aerospace Systems Segment sales   $ 1,447,826     $ 1,228,960  
         
Aerospace Systems Segment operating income   $ 322,986     $ 226,260  
Adjustments:        
Acquired intangible asset amortization     74,857       87,569  
Business realignment charges     8       453  
Integration costs to achieve     5,633       5,267  
Adjusted Aerospace Systems Segment operating income   $ 403,484     $ 319,549  
         
Aerospace Systems Segment operating margin     22.3 %     18.4 %
Adjusted Aerospace Systems Segment operating margin     27.9 %     26.0 %
         
RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands)     2024       2023  
Total net sales   $ 4,903,984     $ 4,847,488  
         
Total segment operating income   $ 1,106,532     $ 1,033,014  
Adjustments:        
Acquired intangible asset amortization     140,121       155,520  
Business realignment charges     8,908       13,092  
Integration costs to achieve     6,411       6,406  
Adjusted total segment operating income   $ 1,261,972     $ 1,208,032  
         
Total segment operating margin     22.6 %     21.3 %
Adjusted total segment operating margin     25.7 %     24.9 %

CONSOLIDATED BALANCE SHEET      
(Unaudited)   September 30,   June 30,
(Dollars in thousands)     2024     2024
Assets        
Current assets:        
Cash and cash equivalents   $ 371,068   $ 422,027
Trade accounts receivable, net     2,712,656     2,865,546
Non-trade and notes receivable     317,381     331,429
Inventories     2,872,250     2,786,800
Prepaid expenses     249,148     252,618
Other current assets     511,198     140,204
Total current assets     7,033,701     6,798,624
Property, plant and equipment, net     2,839,542     2,875,668
Deferred income taxes     91,882     92,704
Investments and other assets     1,263,190     1,207,232
Intangible assets, net     7,747,233     7,816,181
Goodwill     10,625,287     10,507,433
Total assets   $ 29,600,835   $ 29,297,842
         
Liabilities and equity        
Current liabilities:        
Notes payable and long-term debt payable within one year   $ 3,515,613   $ 3,403,065
Accounts payable, trade     1,953,477     1,991,639
Accrued payrolls and other compensation     407,106     581,251
Accrued domestic and foreign taxes     457,761     354,659
Other accrued liabilities     1,004,073     982,695
Total current liabilities     7,338,030     7,313,309
Long-term debt     6,673,303     7,157,034
Pensions and other postretirement benefits     427,702     437,490
Deferred income taxes     1,544,503     1,583,923
Other liabilities     715,948     725,193
Shareholders’ equity     12,891,900     12,071,972
Noncontrolling interests     9,449     8,921
Total liabilities and equity   $ 29,600,835   $ 29,297,842

CONSOLIDATED STATEMENT OF CASH FLOWS        
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands)     2024       2023  
Cash flows from operating activities:        
Net income   $ 698,528     $ 651,072  
Depreciation and amortization     229,046       240,387  
Stock incentive plan compensation     75,842       77,894  
Gain on sale of businesses     (313 )     (13,260 )
(Gain) loss on property, plant and equipment and intangible assets     (8,422 )     1,333  
Net change in receivables, inventories and trade payables     (40,430 )     (69,280 )
Net change in other assets and liabilities     (223,585 )     (185,691 )
Other, net     13,309       (52,496 )
Net cash provided by operating activities     743,975       649,959  
Cash flows from investing activities:        
Capital expenditures     (95,302 )     (97,746 )
Proceeds from sale of property, plant and equipment     13,271       710  
Proceeds from sale of businesses     884       36,691  
Other, net     (5,461 )     4,351  
Net cash used in investing activities     (86,608 )     (55,994 )
Cash flows from financing activities:        
Net payments for common stock activity     (92,089 )     (78,148 )
Acquisition of noncontrolling interests           (2,883 )
Net payments for debt     (408,929 )     (346,411 )
Dividends paid     (209,937 )     (190,420 )
Net cash used in financing activities     (710,955 )     (617,862 )
Effect of exchange rate changes on cash     2,629       (2,359 )
Net decrease in cash and cash equivalents     (50,959 )     (26,256 )
Cash and cash equivalents at beginning of year     422,027       475,182  
Cash and cash equivalents at end of period   $ 371,068     $ 448,926  

RECONCILIATION OF FORECASTED ORGANIC GROWTH  
(Unaudited)    
(Amounts in percentages)   Fiscal Year 2025
Forecasted net sales   0.5% to 3.5%
Adjustments:    
Currency   (0.5)%
Divestitures   1.5%
Adjusted forecasted net sales   1.5% to 4.5%
     
RECONCILIATION OF FORECASTED SEGMENT OPERATING MARGIN TO ADJUSTED FORECASTED SEGMENT OPERATING MARGIN
     
(Unaudited)    
(Amounts in percentages)   Fiscal Year 2025
Forecasted segment operating margin ~22.6%
Adjustments:  
Business realignment charges 0.2%
Costs to achieve   0.1%
Acquisition-related intangible asset amortization expense   2.7%
Adjusted forecasted segment operating margin ~25.7%

RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE
     
(Unaudited)    
(Amounts in dollars)   Fiscal Year 2025
Forecasted earnings per diluted share $22.78 to $23.48
Adjustments:  
Business realignment charges 0.39
Costs to achieve   0.11
Acquisition-related intangible asset amortization expense   4.21
Gain on sale of building   (0.08)
Tax effect of adjustments1   (1.07)
Adjusted forecasted earnings per diluted share $26.35 to $27.05
     
1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment.
     
Note: Totals may not foot due to rounding

SUPPLEMENTAL INFORMATION
BUSINESS SEGMENT INFORMATION      
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands)     2024     2023
Net sales        
Diversified Industrial:        
North America businesses   $ 2,100,324   $ 2,229,906
International businesses     1,355,834     1,388,622
         
Segment operating income      
Diversified Industrial:        
North America businesses   $ 484,563   $ 506,053
International businesses     298,983     300,701

RECONCILIATION OF ORGANIC GROWTH        
(Unaudited) Three Months Ended
  As Reported           Adjusted
  September 30, 2024   Currency   Divestitures   September 30, 2024
Diversified Industrial Segment:              
North America businesses (5.8)%   (0.5)%   (0.3)%   (5.0)%
International businesses (2.4)%     —%     —%   (2.4)%

RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands)     2024       2023  
Diversified Industrial Segment:        
North America businesses sales   $ 2,100,324     $ 2,229,906  
         
North America businesses operating income   $ 484,563     $ 506,053  
Adjustments:        
Acquired intangible asset amortization     42,975       44,683  
Business realignment charges     3,444       2,584  
Integration costs to achieve     605       945  
Adjusted North America businesses operating income   $ 531,587     $ 554,265  
         
North America businesses operating margin     23.1 %     22.7 %
Adjusted North America businesses operating margin     25.3 %     24.9 %
         
(Unaudited)   Three Months Ended September 30,
(Dollars in thousands)     2024       2023  
Diversified Industrial Segment:        
International businesses sales   $ 1,355,834     $ 1,388,622  
         
International businesses operating income   $ 298,983     $ 300,701  
Adjustments:        
Acquired intangible asset amortization     22,289       23,268  
Business realignment charges     5,456       10,055  
Integration costs to achieve     173       194  
Adjusted International businesses operating income   $ 326,901     $ 334,218  
         
International businesses operating margin     22.1 %     21.7 %
Adjusted International businesses operating margin     24.1 %     24.1 %

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