Financial Data and Key Metrics Changes - Record adjusted segment operating margin of 26.3%, surpassing 26% for the first time [8][16] - Record adjusted EBITDA margin of 27% [9][16] - Year-to-date cash flow from operations reached $2.3 billion, an increase of 8% year-over-year [27] - Adjusted earnings per share (EPS) increased by 7% to $6.94, despite a 2% decline in sales [17][18] Business Line Data and Key Metrics Changes - Aerospace segment achieved record sales of $1.6 billion, up 12% year-over-year, driven by aftermarket strength [25][26] - Industrial North American sales were $2 billion, with organic growth down 3% [22] - International businesses saw order rates improve to 11%, with Asia Pacific up 2% and Latin America robust at 8% [24][25] Market Data and Key Metrics Changes - North American order rates remained positive at 3%, marking the second consecutive quarter of positive order entry [23] - EMEA region faced challenges with a 7% decline, while Latin America showed strong growth [24] - Aerospace orders increased by 14%, contributing to a backlog of $7.3 billion [26][46] Company Strategy and Development Direction - The company emphasizes a decentralized structure and the use of the Win Strategy to drive performance and margin expansion [10][12] - Focus on acquisitions to enhance interconnected technologies and maintain a competitive edge in the motion and control industry [11][75] - Commitment to mitigating tariff impacts through pricing, supply chain actions, and cost reduction strategies [14][47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive industrial growth in FY 2026, supported by long-cycle orders [44][106] - The company anticipates continued strength in aerospace and defense markets, with a focus on aftermarket growth [29][55] - Management acknowledged ongoing macroeconomic uncertainties but remains optimistic about future performance [106][107] Other Important Information - The board approved a 10% increase in the quarterly dividend, extending the record of increasing annual dividends for 69 years [27] - Share repurchases totaled $650 million for the quarter, with year-to-date repurchases at $750 million [28] Q&A Session Summary Question: Can you elaborate on the longer cycle orders and their conversion to revenues? - Management indicated that longer cycle orders are expected to contribute positively to revenues in FY 2026, with strong order rates in aerospace and HVAC [44][46] Question: What are the risks associated with tariffs and cost management? - Management is confident in fully mitigating tariff impacts through pricing actions, supply chain strategies, and ongoing cost reductions [47][48] Question: How sustainable is the growth in Latin America? - Latin America continues to show robust growth, driven by filtration and motion systems activities [133] Question: What is the outlook for European defense budgets? - Management noted potential positive sentiment regarding future defense spending in Europe, despite current market softness [92][93] Question: How is the company managing operational improvements? - The company is leveraging enhanced demand and capacity tools to improve operational efficiency, even in a challenging volume environment [71][72]

Financial Data and Key Metrics Changes - Record adjusted segment operating margin of 26.3%, surpassing 26% for the first time [6][15] - Record adjusted EBITDA margin of 27%, an increase of 150 basis points [15] - Net income at 9.4% with an 18.2% return on sales, both records [16] - Adjusted earnings per share (EPS) increased by 7% to $6.94 despite a 2% decline in sales [16][25] - Year-to-date cash flow from operations reached $2.3 billion, up 8% year-over-year [25] Business Line Data and Key Metrics Changes - Aerospace segment sales reached a record $1.6 billion, up 12% year-over-year, driven by aftermarket strength [23] - Industrial North American sales were $2 billion, with organic growth down 3% [20] - International businesses saw order rates improve to 11%, with Asia Pacific up 2% and Latin America robust at +8% [22] - Adjusted segment operating margins for international businesses expanded by 160 basis points to 25.1% [23] Market Data and Key Metrics Changes - Orders increased by 9% overall, with North America showing positive order entry results for two consecutive quarters [19][20] - EMEA region faced challenges with a 7% decline, while Latin America remained strong [22] - Tariffs accounted for approximately 3% of cost of goods sold, equating to $375 million annually, fully offset by mitigation actions [13][35] Company Strategy and Development Direction - The company emphasizes a decentralized structure and the use of the Win Strategy to drive performance and margin expansion [8][10] - Focus on maintaining a strong position in the motion and control industry through acquisitions and a resilient portfolio [9] - Commitment to being a strong generator and deployer of cash, with a focus on shareholder value [37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in mitigating tariff impacts and maintaining margin expansion despite macroeconomic uncertainties [13][35] - The outlook for FY 2025 includes a forecast of approximately -1% reported sales growth, with organic growth expected at +1% [31] - Management remains optimistic about positive industrial growth in FY 2026, driven by longer cycle orders [42][100] Other Important Information - The company approved a 10% increase in quarterly dividends, extending a record of increasing annual dividends for 69 years [25] - Share repurchases totaled $650 million in the quarter, with year-to-date repurchases at $750 million [25] Q&A Session Summary Question: Orders and their conversion to revenues - Management indicated that positive industrial growth is expected in FY 2026, with long cycle orders contributing to this outlook [42] Question: Risks related to costs and tariffs - Management is confident in fully mitigating tariff impacts through pricing, supply chain actions, and ongoing cost reductions [45] Question: Strength in aerospace margins - Management noted strong aftermarket performance and confidence in continued margin expansion despite potential headwinds from OEM recovery [50][54] Question: Disconnect between industrial orders and sales - Management explained that the connection between orders and shipments has extended due to the transformation of the portfolio, with longer cycle businesses affecting this dynamic [61] Question: European market outlook - Management acknowledged broad-based softness in European end markets but noted positive sentiment regarding proposed stimulus and future defense spending [88] Question: Corporate G&A cost containment - Management indicated that cost containment measures are expected to remain in place, with no significant rollback anticipated [127]

Core Insights - Parker-Hannifin reported revenue of $4.96 billion for the quarter ended March 2025, a decrease of 2.3% year-over-year, with an EPS of $6.94, up from $6.51 in the previous year [1] - The revenue fell short of the Zacks Consensus Estimate of $5 billion by 0.80%, while the EPS exceeded the consensus estimate of $6.73 by 3.12% [1] Financial Performance Metrics - Total revenue change for Parker-Hannifin was reported at -2.2%, slightly better than the estimated -2.6% [4] - North America’s Diversified Industrial segment saw a revenue decline of 9%, compared to an estimated decline of 8.7% [4] - International Diversified Industrial segment reported a revenue decrease of 5.3%, aligning with the estimated decline of 5.7% [4] - Aerospace Systems segment experienced a revenue increase of 11.6%, surpassing the estimated growth of 10.2% [4] - Aerospace Systems net sales were $1.57 billion, slightly above the average estimate of $1.56 billion, reflecting a year-over-year increase of 11.6% [4] - Diversified Industrial - International net sales were $1.36 billion, matching the average estimate, but showing a year-over-year decline of 5.3% [4] - North America’s Diversified Industrial net sales were $2.03 billion, below the estimated $2.05 billion, representing a 9% decline year-over-year [4] Segment Operating Income - Adjusted segment operating income for North America’s Diversified Industrial was $512.53 million, slightly below the average estimate of $517.40 million [4] - Aerospace Systems adjusted segment operating income was reported at $450.68 million, exceeding the average estimate of $434.73 million [4] - Adjusted segment operating income for International Diversified Industrial was $340.50 million, above the average estimate of $326.30 million [4] Stock Performance - Parker-Hannifin shares returned -3.8% over the past month, compared to a -0.7% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Parker-Hannifin reported quarterly earnings of $6.94 per share, exceeding the Zacks Consensus Estimate of $6.73 per share, and showing an increase from $6.51 per share a year ago, representing an earnings surprise of 3.12% [1] - The company posted revenues of $4.96 billion for the quarter ended March 2025, which was below the Zacks Consensus Estimate by 0.80% and a decrease from $5.07 billion year-over-year [2] - The stock has lost approximately 4.9% since the beginning of the year, slightly outperforming the S&P 500's decline of 5.3% [3] Earnings Outlook - The future performance of Parker-Hannifin's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $7.33 on revenues of $5.24 billion, and for the current fiscal year, it is $26.74 on revenues of $19.88 billion [7] Industry Context - The Manufacturing - General Industrial industry, to which Parker-Hannifin belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, indicating potential challenges ahead [8] - The correlation between near-term stock movements and earnings estimate revisions suggests that tracking these revisions can provide insights into stock performance [5]

[Fiscal 2025 Third Quarter Performance Highlights](index=1&type=section&id=Fiscal%202025%20Third%20Quarter%20Performance%20Highlights) Parker Hannifin achieved record third-quarter performance with substantial margin expansion, record earnings per share, and strong cash flow, alongside strategic capital deployment [Executive Summary & CEO Commentary](index=1&type=section&id=Executive%20Summary%20%26%20CEO%20Commentary) Parker Hannifin reported record third-quarter performance, achieving substantial margin expansion across all businesses, surpassing 26% adjusted segment operating margin for the first time, delivering record earnings per share and cash flow from operations, alongside significant capital deployment actions - Achieved record adjusted segment operating margin, surpassing **26%** for the first time[2](index=2&type=chunk) - Produced record earnings per share and generated record cash flow from operations[2](index=2&type=chunk) - Repurchased **$650 million** of shares in the quarter and announced a **10%** increase in quarterly cash dividend[2](index=2&type=chunk)[3](index=3&type=chunk) - Committed to actively deploying capital to drive shareholder value, including acquisitions and increased share repurchase activity, and achieving fiscal year 2029 financial targets[2](index=2&type=chunk) [Key Financial & Operational Highlights (Q3 FY25 vs. Q3 FY24)](index=1&type=section&id=Key%20Financial%20%26%20Operational%20Highlights) The third quarter of fiscal 2025 saw a slight decline in sales but significant improvements in net income, EPS, and operating margins, both on a reported and adjusted basis, along with strong cash flow generation Key Financial & Operational Highlights (Q3 FY25 vs. Q3 FY24) | Metric | FY25 Q3 | FY24 Q3 | Change | Adjusted FY25 Q3 | Adjusted FY24 Q3 | Adjusted Change | | :-------------------------------- | :------ | :------ | :----- | :--------------- | :--------------- | :-------------- | | Sales | $5.0 billion | $5.1 billion | -2.2% | - | - | - | | Organic Sales Growth | 1% | - | - | - | - | - | | Net Income | $961 million | $727 million | +32% | $904 million | $851 million | +6% | | EPS | $7.37 | $5.56 | +33% | $6.94 | $6.51 | +7% | | Segment Operating Margin | 23.2% | 21.5% | +170 bps | 26.3% | 24.7% | +160 bps | | YTD Cash Flow from Operations | $2.3 billion | $2.1 billion | +8% | - | - | - | | YTD Cash Flow from Operations (% of sales) | 15.8% | - | - | - | - | - | | Shares Repurchased (Q3) | $650 million | - | - | - | - | - | [Fiscal Year 2025 Outlook](index=1&type=section&id=Fiscal%20Year%202025%20Outlook) Parker Hannifin updated its guidance for the fiscal year ending June 30, 2025, forecasting slight sales decline but strong adjusted operating margin and EPS, with mitigation actions fully offsetting tariff effects Fiscal Year 2025 Forecasted Financials | Metric | Forecasted FY25 | Adjusted Forecasted FY25 | | :-------------------------------- | :-------------- | :----------------------- | | Sales Growth | ~ (1%) | ~ 1% (organic) | | Total Segment Operating Margin | ~ 22.7% | ~ 25.9% | | EPS | $25.92 to $26.12 | $26.60 to $26.80 | - Forecasted EPS includes the effect of announced tariffs fully offset by mitigation actions[4](index=4&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) This section details the sales, operating income, and order rate performance across the Diversified Industrial and Aerospace Systems segments [Diversified Industrial Segment - North America](index=2&type=section&id=Diversified%20Industrial%20Segment%20-%20North%20America) The North America Diversified Industrial segment experienced a sales decline in Q3 FY25, primarily due to softness in transportation, off-highway, and energy markets, but achieved a record adjusted segment operating margin and positive orders for the second consecutive quarter Diversified Industrial Segment - North America Performance (Q3 FY25 vs. Q3 FY24) | Metric | FY25 Q3 | FY24 Q3 | Change | Organic Growth | | :-------------------------- | :------ | :------ | :----- | :------------- | | Sales | $2,031 million | $2,231 million | -9.0% | -3.5% | | Segment Operating Income | $467 million | $490 million | -4.8% | - | | Segment Operating Margin | 23.0% | 22.0% | +100 bps | - | | Adjusted Segment Operating Income | $513 million | $538 million | -4.8% | - | | Adjusted Segment Operating Margin | 25.2% | 24.1% | +110 bps | - | - Achieved record adjusted segment operating margin[5](index=5&type=chunk) - Orders were positive for the second consecutive quarter, despite softness in transportation, off-highway, and energy markets[5](index=5&type=chunk) [Diversified Industrial Segment - International](index=2&type=section&id=Diversified%20Industrial%20Segment%20-%20International) The International Diversified Industrial segment also saw a sales decrease but delivered a record adjusted segment operating margin, with orders accelerating on long-cycle strength and varied organic growth across regions Diversified Industrial Segment - International Performance (Q3 FY25 vs. Q3 FY24) | Metric | FY25 Q3 | FY24 Q3 | Change | Organic Growth | | :-------------------------- | :------ | :------ | :----- | :------------- | | Sales | $1,358 million | $1,434 million | -5.3% | -2.8% | | Segment Operating Income | $312 million | $310 million | +0.7% | - | | Segment Operating Margin | 23.0% | 21.6% | +140 bps | - | | Adjusted Segment Operating Income | $340 million | $337 million | +1.2% | - | | Adjusted Segment Operating Margin | 25.1% | 23.5% | +160 bps | - | - Achieved record adjusted segment operating margin[6](index=6&type=chunk) - Organic growth was **2%** in APAC, **(7%)** in EMEA, and **8%** in LA, with orders accelerating on long-cycle strength[6](index=6&type=chunk) [Aerospace Systems Segment](index=2&type=section&id=Aerospace%20Systems%20Segment) The Aerospace Systems segment demonstrated strong performance with record sales, driven by continued aftermarket strength, and achieved a record adjusted segment operating margin, with its backlog also reaching a new high Aerospace Systems Segment Performance (Q3 FY25 vs. Q3 FY24) | Metric | FY25 Q3 | FY24 Q3 | Change | Organic Growth | | :-------------------------- | :------ | :------ | :----- | :------------- | | Sales | $1,572 million | $1,409 million | +11.6% | +11.7% | | Segment Operating Income | $373 million | $289 million | +28.9% | - | | Segment Operating Margin | 23.7% | 20.5% | +320 bps | - | | Adjusted Segment Operating Income | $451 million | $376 million | +19.8% | - | | Adjusted Segment Operating Margin | 28.7% | 26.7% | +200 bps | - | - Achieved record sales on continued aftermarket strength and delivered record adjusted segment operating margin[7](index=7&type=chunk) - Aerospace backlog increased to a record **$7.3 billion**[7](index=7&type=chunk) [Order Rates by Segment](index=2&type=section&id=Order%20Rates%20by%20Segment) Parker's overall order rates increased significantly, reflecting a transformed portfolio and long-cycle strength, with all reported businesses showing positive order growth Order Rate Changes by Segment (Q3 FY25) | Segment | FY25 Q3 Order Rate Change | | :------------------------------------ | :------------------------ | | Parker (Total) | +9% | | Diversified Industrial - North America | +3% | | Diversified Industrial - International | +11% | | Aerospace Systems Segment | +14% | - Parker's overall order rates increased to **9%**, driven by a transformed portfolio and long-cycle strength[8](index=8&type=chunk) - Aerospace orders increased by **14%**, fueled by strength in both commercial and defense sectors[8](index=8&type=chunk) [Corporate Information & Disclosures](index=3&type=section&id=Corporate%20Information%20%26%20Disclosures) This section provides an overview of Parker Hannifin, investor relations information, and important disclosures regarding non-GAAP financial measures and forward-looking statements [About Parker Hannifin](index=3&type=section&id=About%20Parker%20Hannifin) Parker Hannifin is a Fortune 250 global leader in motion and control technologies, with over a century of engineering innovation - Parker Hannifin is a Fortune 250 global leader in motion and control technologies, with a history of over a century of engineering breakthroughs[9](index=9&type=chunk) [Investor Relations & Webcast](index=3&type=section&id=Investor%20Relations%20%26%20Webcast) Information regarding investor contacts and access to the fiscal 2025 third-quarter results conference call and webcast replay - Conference call and slide presentation for fiscal 2025 third quarter results are available via live webcast and replay at investors.parker.com[9](index=9&type=chunk) [Notes on Non-GAAP Financial Measures](index=3&type=section&id=Notes%20on%20Non-GAAP%20Financial%20Measures) This section clarifies the use and purpose of non-GAAP financial measures, such as adjusted net income, adjusted EPS, adjusted segment operating margin, and organic sales growth, emphasizing their utility for comparable period-to-period evaluation - Non-GAAP financial measures (adjusted net income, EPS, segment operating margin, organic sales growth) are presented to allow investors and the company to meaningfully evaluate changes on a comparable basis from period to period[11](index=11&type=chunk) - Reconciliations of non-GAAP measures are included in the financial tables of the press release[11](index=11&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This disclosure advises readers that forward-looking statements are subject to unforeseen uncertainties and risks, and actual future performance may differ materially from expectations due to various factors - Forward-looking statements are based on known events and circumstances at the time of release and are subject to unforeseen uncertainties and risks[12](index=12&type=chunk) - Future performance may differ materially from expectations due to factors including changes in business relationships, acquisition uncertainties, supply chain disruptions, economic conditions, and regulatory developments[12](index=12&type=chunk)[13](index=13&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's consolidated statements of income, balance sheet, and cash flows for the reported periods [Consolidated Statement of Income](index=4&type=section&id=Consolidated%20Statement%20of%20Income) The consolidated statement of income for the three and nine months ended March 31, 2025, shows a decrease in net sales but a significant increase in net income and EPS compared to the prior year, primarily due to lower income taxes and other income Consolidated Statement of Income (in thousands of dollars) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Nine Months Ended March 31, 2025 | Nine Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $4,960,349 | $5,074,356 | $14,606,926 | $14,742,791 | | Cost of sales | $3,129,951 | $3,279,650 | $9,249,899 | $9,478,961 | | Selling, general and administrative expenses | $784,355 | $816,337 | $2,415,565 | $2,496,830 | | Interest expense | $95,942 | $123,732 | $309,835 | $387,229 | | Other income, net | $(44,713) | $(65,406) | $(404,230) | $(228,872) | | Income before income taxes | $994,814 | $920,043 | $3,035,857 | $2,608,643 | | Income taxes | $33,628 | $193,309 | $427,494 | $548,780 | | Net income | $961,186 | $726,734 | $2,608,363 | $2,059,863 | | Diluted earnings per share | $7.37 | $5.56 | $19.97 | $15.82 | [Consolidated Balance Sheet](index=8&type=section&id=Consolidated%20Balance%20Sheet) As of March 31, 2025, Parker Hannifin's balance sheet shows a slight decrease in total assets compared to June 30, 2024, driven by reductions in current assets and intangible assets, while shareholders' equity increased Consolidated Balance Sheet (in thousands of dollars) | Metric | March 31, 2025 | June 30, 2024 | | :------------------------------------ | :------------- | :------------ | | Total current assets | $6,777,140 | $6,798,624 | | Property, plant and equipment, net | $2,821,566 | $2,875,668 | | Intangible assets, net | $7,370,524 | $7,816,181 | | Goodwill | $10,461,946 | $10,507,433 | | Total assets | $28,917,808 | $29,297,842 | | Total current liabilities | $5,614,466 | $7,313,309 | | Long-term debt | $7,421,370 | $7,157,034 | | Shareholders' equity | $13,390,974 | $12,071,972 | | Total liabilities and equity | $28,917,808 | $29,297,842 | [Consolidated Statement of Cash Flows](index=9&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) For the nine months ended March 31, 2025, net cash provided by operating activities increased significantly, while net cash used in financing activities also increased, primarily due to higher net payments for common stock activity and debt Consolidated Statement of Cash Flows (in thousands of dollars) | Metric | Nine Months Ended March 31, 2025 | Nine Months Ended March 31, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $2,308,761 | $2,147,077 | | Net cash provided by (used in) investing activities | $344,670 | $(194,301) | | Net cash used in financing activities | $(2,681,045) | $(2,005,528) | | Net decrease in cash and cash equivalents | $(13,292) | $(69,698) | | Cash and cash equivalents at end of period | $408,735 | $405,484 | - Proceeds from sale of businesses significantly increased cash from investing activities to **$622,697 thousand** in FY25 from **$75,561 thousand** in FY24[23](index=23&type=chunk) [Reconciliations and Supplemental Data](index=4&type=section&id=Reconciliations%20and%20Supplemental%20Data) This section provides detailed reconciliations for organic growth, adjusted financial metrics, and forecasted financials, along with supplemental business segment information [Organic Growth Reconciliations](index=4&type=section&id=Organic%20Growth%20Reconciliations) This section provides reconciliations of reported sales growth to organic sales growth for the total company and by segment, adjusting for currency fluctuations and divestitures for both the three and nine months ended March 31, 2025 Organic Growth Reconciliations by Segment (Q3 FY25) | Segment | Q3 FY25 As Reported | Q3 FY25 Currency Impact | Q3 FY25 Divestitures Impact | Q3 FY25 Organic Growth | | :------------------------------------ | :------------------ | :---------------------- | :-------------------------- | :--------------------- | | Diversified Industrial Segment | (7.6)% | (1.5)% | (2.9)% | (3.2)% | | Aerospace Systems Segment | 11.6% | (0.1)% | — % | 11.7% | | Total | (2.2)% | (1.0)% | (2.1)% | 0.9% | Diversified Industrial Segment Organic Growth Reconciliations by Region (Q3 FY25) | Diversified Industrial Segment: | Q3 FY25 As Reported | Q3 FY25 Currency Impact | Q3 FY25 Divestitures Impact | Q3 FY25 Organic Growth | | :------------------------------------ | :------------------ | :---------------------- | :-------------------------- | :--------------------- | | North America businesses | (9.0)% | (0.8)% | (4.7)% | (3.5)% | | International businesses | (5.3)% | (2.5)% | — % | (2.8)% | | - Europe | (8.6)% | (1.7)% | — % | (6.9)% | | - Asia Pacific | (0.8)% | (3.0)% | — % | 2.2% | | - Latin America | (0.2)% | (8.1)% | — % | 7.9% | [Adjusted Net Income & EPS Reconciliations](index=5&type=section&id=Adjusted%20Net%20Income%20%26%20EPS%20Reconciliations) This section details the adjustments made to reported net income and diluted earnings per share to arrive at adjusted figures, including items like acquired intangible asset amortization, business realignment charges, integration costs, and discrete tax benefits Adjusted Net Income Reconciliations (in thousands of dollars) | Metric | Q3 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Net income attributable to common shareholders | $960,866 | $726,574 | $2,607,828 | $2,059,252 | | Acquired intangible asset amortization expense | $135,964 | $141,216 | $414,211 | $438,763 | | Business realignment charges | $10,379 | $8,468 | $40,740 | $35,914 | | Integration costs to achieve | $5,447 | $13,256 | $18,751 | $29,676 | | Gain on divestitures | — | — | $(249,748) | $(25,651) | | Discrete tax benefit | $(179,849) | — | $(179,849) | — | | Adjusted net income attributable to common shareholders | $903,843 | $850,735 | $2,566,860 | $2,429,551 | Adjusted Earnings Per Diluted Share Reconciliations (in dollars) | Metric | Q3 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Earnings per diluted share | $7.37 | $5.56 | $19.97 | $15.82 | | Acquired intangible asset amortization expense | $1.04 | $1.08 | $3.17 | $3.36 | | Business realignment charges | $0.08 | $0.06 | $0.31 | $0.27 | | Integration costs to achieve | $0.04 | $0.10 | $0.14 | $0.23 | | Gain on divestitures | — | — | $(1.91) | $(0.20) | | Discrete tax benefit | $(1.37) | — | $(1.37) | — | | Adjusted earnings per diluted share | $6.94 | $6.51 | $19.68 | $18.66 | [Adjusted Segment Operating Margin Reconciliations](index=7&type=section&id=Adjusted%20Segment%20Operating%20Margin%20Reconciliations) This section provides detailed reconciliations of reported segment operating margins to adjusted segment operating margins for the Diversified Industrial and Aerospace Systems segments, including breakdowns for North America and International businesses, by adjusting for items like acquired intangible asset amortization and business realignment charges Adjusted Segment Operating Margin Reconciliations by Segment | Segment | Q3 FY25 Operating Margin | Q3 FY25 Adjusted Operating Margin | YTD FY25 Operating Margin | YTD FY25 Adjusted Operating Margin | | :------------------------------------ | :----------------------- | :------------------------------ | :------------------------ | :------------------------------- | | Diversified Industrial Segment | 23.0% | 25.2% | 22.5% | 24.8% | | Aerospace Systems Segment | 23.7% | 28.7% | 22.9% | 28.3% | | Total Segment | 23.2% | 26.3% | 22.6% | 25.9% | Adjusted Segment Operating Margin Reconciliations for Diversified Industrial Segment by Region | Diversified Industrial Segment: | Q3 FY25 Operating Margin | Q3 FY25 Adjusted Operating Margin | YTD FY25 Operating Margin | YTD FY25 Adjusted Operating Margin | | :------------------------------------ | :----------------------- | :------------------------------ | :------------------------ | :------------------------------- | | North America businesses | 23.0% | 25.2% | 22.7% | 25.0% | | International businesses | 23.0% | 25.1% | 22.2% | 24.4% | [Forecasted Financial Reconciliations](index=10&type=section&id=Forecasted%20Financial%20Reconciliations) This section provides reconciliations for forecasted organic growth, adjusted segment operating margin, and adjusted earnings per diluted share for fiscal year 2025, detailing the adjustments made to reported forecasts Fiscal Year 2025 Forecasted Financial Reconciliations | Metric | Fiscal Year 2025 Forecasted | Adjustments | Fiscal Year 2025 Adjusted Forecasted | | :------------------------------------ | :-------------------------- | :---------- | :----------------------------------- | | Net sales growth | ~ (1%) | Currency: 0.5%, Divestitures: 1.5% | ~ 1% (organic) | | Segment operating margin | ~ 22.7% | Business realignment: 0.3%, Costs to achieve: 0.1%, Intangible amortization: 2.8% | ~ 25.9% | | EPS | $25.92 to $26.12 | Business realignment: $0.47, Costs to achieve: $0.17, Intangible amortization: $4.22, Net gain on divestitures: $(1.91), Gain on sale of building: $(0.08), Saegertown incident: $0.06, Tax effect: $(0.88), Discrete tax benefit: $(1.37) | $26.60 to $26.80 | [Supplemental Business Segment Information](index=11&type=section&id=Supplemental%20Business%20Segment%20Information) This section provides a more granular breakdown of net sales and segment operating income for the Diversified Industrial segment, separating North America and International businesses for both the three and nine months ended March 31, 2025 Supplemental Business Segment Information (in thousands of dollars) | Metric | Q3 FY25 | Q3 FY24 | YTD FY25 | YTD FY24 | | :------------------------------------ | :------ | :------ | :------- | :------- | | **Diversified Industrial Net Sales:** | | | | | | North America businesses | $2,030,970 | $2,231,478 | $6,059,302 | $6,571,587 | | International businesses | $1,357,789 | $1,434,165 | $4,038,421 | $4,227,057 | | **Diversified Industrial Segment Operating Income:** | | | | | | North America businesses | $467,064 | $490,452 | $1,378,194 | $1,458,355 | | International businesses | $312,039 | $309,759 | $895,017 | $900,944 |

Financial Performance - Q3 FY25 - Sales reached $5 billion, a decrease of 2% compared to Q3 FY24[6, 17] - Adjusted Segment Operating Margin was 26.3%, an increase of 160 bps year-over-year[6, 17] - Adjusted EBITDA Margin was 27%, an increase of 150 bps year-over-year[6, 17] - Adjusted EPS grew by 7%[6, 17] - Cash Flow from Operations reached $2.3 billion YTD, an 8% increase[6, 24] Segment Performance - Q3 FY25 - North America Businesses sales reached $2.031 billion with an adjusted operating margin of 25.2%[21] - International Businesses sales reached $1.358 billion with an adjusted operating margin of 25.1%[21] - Aerospace Systems sales reached $1.572 billion with an adjusted operating margin of 28.7%[21] - Aerospace Systems organic growth was 12%[21] FY25 Guidance Update - Organic sales growth is forecasted at approximately 1%[30, 31] - Adjusted operating margin is expected to be around 25.9%[31] - Adjusted EPS midpoint is maintained at $26.70[31] - Free cash flow is projected to be approximately $3.1 billion[31]

Core Insights - Parker Hannifin Corporation reported record earnings per share (EPS) of $7.37, a 33% increase year-over-year, and a net income of $961 million, up 32% [4][16] - The company achieved a record adjusted segment operating margin of 26.3%, reflecting a 160 basis points increase compared to the previous year [4][24] - Year-to-date cash flow from operations increased by 8% to $2.3 billion, representing 15.8% of sales [4][28] Financial Performance - Total sales for the quarter were $5.0 billion, with organic sales growth of 1% [4][30] - The Diversified Industrial Segment reported sales of $3.39 billion, down 7.6% year-over-year, while the Aerospace Systems Segment saw sales increase by 11.6% to $1.57 billion [23][8] - The company repurchased $650 million of shares during the quarter and announced a 10% increase in its quarterly cash dividend [2][4] Segment Analysis - North America Businesses within the Diversified Industrial Segment experienced a 9% decline in sales, while the International Businesses saw a 5.3% decrease [3][7] - The Aerospace Systems Segment achieved a record sales figure driven by strength in aftermarket services, with a backlog increasing to $7.3 billion [8][10] - Orders across all segments remained positive, with a 9% increase in overall order rates, including a 14% increase in Aerospace orders [9][10] Outlook - The company updated its guidance for the fiscal year ending June 30, 2025, expecting total sales growth of approximately -1% with organic sales growth of about 1% [5][30] - Forecasted segment operating margin is expected to be around 22.7%, with an adjusted forecasted margin of approximately 25.9% [31][32] - EPS guidance for the fiscal year is projected between $25.92 and $26.12, with adjusted EPS expected to be between $26.60 and $26.80 [32][33]

Core Viewpoint - Parker-Hannifin Corporation is expected to report third-quarter fiscal 2025 results on May 1, with revenue estimates at $5 billion, reflecting a 1.5% decline year-over-year, while earnings per share are projected at $6.73, indicating a 3.4% increase from the previous year [1][3]. Financial Performance Expectations - The Zacks Consensus Estimate for the Aerospace Systems segment's quarterly revenues is $1.56 billion, representing a 10.7% growth from the year-ago figure, driven by strong demand in commercial and military markets [4]. - The Diversified Industrial North America segment's revenues are estimated at $2.05 billion, indicating an 8.2% decline year-over-year, while the International segment's revenues are pegged at $1.36 billion, reflecting a 5.2% decrease [7]. Strategic Developments - The acquisition of Meggitt has enhanced Parker-Hannifin's presence in the UK, allowing for a broader range of solutions in aircraft and aero-engine components, which is expected to positively impact the Aerospace Systems segment [4]. - The company's Win Strategy, focusing on innovation and strategic positioning, is anticipated to support margins in the fiscal third quarter [5]. Market Conditions - The Aerospace Systems segment is expected to benefit from healthy demand in the general aviation market and increased defense spending, while the Diversified Industrial segment faces challenges due to softness in the construction and agricultural sectors, as well as lower demand in the transportation market [3][6]. Earnings Prediction - Parker-Hannifin has an Earnings ESP of +1.01%, with the Most Accurate Estimate at $6.80 per share, suggesting a favorable outlook for an earnings beat [9].

Core Insights - Analysts project Parker-Hannifin (PH) to announce quarterly earnings of $6.73 per share, reflecting a year-over-year increase of 3.4% [1] - Revenue is expected to reach $5 billion, indicating a decline of 1.5% from the same quarter last year [1] Earnings Estimates - The consensus EPS estimate has been revised upward by 0.4% in the past 30 days, indicating a reassessment by covering analysts [2] - Revisions to earnings projections are critical for predicting investor behavior and stock price performance [3] Key Metrics Forecast - Analysts forecast 'Net sales- Aerospace Systems' to reach $1.56 billion, a year-over-year increase of 10.7% [5] - 'Net sales- Diversified Industrial- International' is estimated at $1.36 billion, reflecting a decline of 5.2% from the prior-year quarter [5] - 'Net sales- Diversified Industrial- North America' is projected at $2.05 billion, indicating an 8.3% decrease from the previous year [6] Operating Income Estimates - 'Adjusted Segment operating income- Diversified Industrial- North America' is expected to be $517.40 million, down from $538.30 million in the same quarter last year [7] - 'Adjusted Segment operating income- Aerospace Systems' is projected to reach $434.73 million, up from $376.10 million a year ago [7] - 'Adjusted Segment operating income- Diversified Industrial- International' is estimated at $326.30 million, compared to $336.57 million in the same quarter last year [8] Stock Performance - Over the past month, Parker-Hannifin shares have recorded a return of -0.6%, while the Zacks S&P 500 composite has changed by -4.3% [8] - Based on its Zacks Rank 3 (Hold), PH is expected to perform in line with the overall market in the upcoming period [8]

Core Points - Parker Hannifin Corporation announced a quarterly cash dividend of $1.80 per share, marking a 10% increase from the previous dividend of $1.63 per share [1][2] - This dividend will be the 300th consecutive quarterly dividend paid by the company, reflecting its strong financial position and cash flow generation capabilities [1][2] - The company has a record of increasing its annual dividend per share for 69 consecutive fiscal years, placing it among the top five longest-running dividend-increase records in the S&P 500 index [2] Financial Performance - The increase in the dividend is attributed to the company's strong balance sheet and performance, which provides the flexibility to strategically deploy capital for shareholder value [2] - The announcement indicates the Board's confidence in the company's ability to navigate through business cycles while maintaining robust cash flows [2]