Parker(PH) - 2025 Q4 - Annual Results

Fiscal 2025 Performance Highlights & Outlook The company reported record fiscal 2025 results driven by strong margin expansion and provided a positive outlook for fiscal 2026 Fiscal 2025 Fourth Quarter Highlights The company achieved record Q4 sales, net income, and EPS, with significant margin improvement and strategic capital deployment | Metric | FY25 Q4 (Reported) | Change YoY | FY25 Q4 (Adjusted) | Change YoY | | :------------------------- | :----------------- | :--------- | :----------------- | :--------- | | Sales | $5.2 billion | 2% organic | - | - | | Net Income | $923 million | 18% | $992 million | 12% | | EPS | $7.15 | 19% | $7.69 | 14% | | Segment Operating Margin | 23.9% | +170 bps | 26.9% | +160 bps | - Repurchased $851 million of shares[5] - Announced an agreement to acquire Curtis Instruments, Inc, expanding its electrification offering[5] Fiscal 2025 Full Year Highlights The company achieved record full-year performance in net income, EPS, and operating margins, generating substantial cash flow | Metric | FY25 (Reported) | Change YoY | FY25 (Adjusted) | Change YoY | | :------------------------- | :-------------- | :--------- | :-------------- | :--------- | | Sales | $19.9 billion | 1% organic | - | - | | Net Income | $3.5 billion | 24% | $3.6 billion | 7% | | EPS | $27.12 | 24% | $27.33 | 7% | | EBITDA Margin | 27.3% | +210 bps | 26.4% | +80 bps | | Segment Operating Margin | 23.0% | +150 bps | 26.1% | +120 bps | - Cash flow from operations increased 12% to $3.8 billion, representing 19.0% of sales[5] - Repurchased $1.6 billion of shares[5] CEO Commentary The CEO attributed record fiscal 2025 performance to 'The Win Strategy™' and anticipates continued growth in fiscal 2026 - Achieved a record year for safety, engagement, earnings per share, margins, and cash flow[3] - Generated full year cash flow of $3.8 billion and increased the quarterly cash dividend by 10 percent[3] - Forecasts Aerospace to remain the fastest-growing business and a return to positive organic growth in Industrial businesses for fiscal year 2026[4] Fiscal 2026 Outlook The company projects continued sales growth and strong margins for fiscal year 2026, with adjusted EPS expected to reach $28.40 to $29.40 | Metric | FY26 Guidance (Reported) | FY26 Guidance (Adjusted) | | :----------------------------------- | :----------------------- | :----------------------- | | Sales Growth | 2% to 5% | ~3% organic (midpoint) | | Total Segment Operating Margin | 23.3% to 23.7% | 26.3% to 26.7% | | EPS | $24.68 to $25.68 | $28.40 to $29.40 | - Forecasted sales growth includes previously completed divestitures of 1% and favorable currency of 1.5%[6] Segment Performance Analysis This section details the performance of the Diversified Industrial and Aerospace Systems segments, including sales, operating income, and order rates Diversified Industrial Segment The Diversified Industrial segment saw mixed results, with declining sales in North America but growth and record margins in International businesses North America Businesses North American operations experienced a sales decline but achieved a significant improvement in operating margin | Metric | FY25 Q4 | FY24 Q4 | Change | Organic Growth | | :----------------------- | :----------- | :----------- | :--------- | :------------- | | Sales | $2,075 million | $2,229 million | -6.9% | -1.4% | | Segment Operating Income | $513 million | $505 million | +1.6% | - | | Segment Operating Margin | 24.7% | 22.7% | +200 bps | - | | Adjusted Segment Operating Margin | 26.7% | 25.0% | +170 bps | - | International Businesses International businesses delivered sales growth and a record adjusted operating margin, driven by strength in APAC and Latin America | Metric | FY25 Q4 | FY24 Q4 | Change | Organic Growth | | :----------------------- | :----------- | :----------- | :--------- | :------------- | | Sales | $1,492 million | $1,430 million | +4.3% | +0.6% | | Segment Operating Income | $334 million | $312 million | +7.1% | - | | Segment Operating Margin | 22.4% | 21.8% | +60 bps | - | | Adjusted Segment Operating Margin | 24.7% | 23.9% | +80 bps | - | - Achieved record adjusted segment operating margin[8] - Organic growth turned positive in the quarter with 6% in APAC and 4% in Latin America, while EMEA was (3%)[8] Aerospace Systems Segment The Aerospace Systems segment delivered strong performance with record sales, margins, and a backlog of $7.4 billion | Metric | FY25 Q4 | FY24 Q4 | Change | Organic Growth | | :----------------------- | :----------- | :----------- | :--------- | :------------- | | Sales | $1,676 million | $1,528 million | +9.7% | +8.6% | | Segment Operating Income | $407 million | $332 million | +22.6% | - | | Segment Operating Margin | 24.3% | 21.7% | +260 bps | - | | Adjusted Segment Operating Margin | 29.0% | 27.1% | +190 bps | - | - Achieved record sales on continued aftermarket strength[9] - Aerospace backlog increased to a record $7.4 billion[9] Order Rates Overall company order rates increased by 5%, led by a 12% surge in the Aerospace Systems segment | Segment | FY25 Q4 Order Rate | | :---------------------------------------- | :----------------- | | Parker (Total) | +5% | | Diversified Industrial Segment - North America Businesses | +2% | | Diversified Industrial Segment - International Businesses | 0% | | Aerospace Systems Segment | +12% | - Parker order rates remain strong at 5%, reflecting a transformed portfolio[10] - Aerospace order rates were up 12%, driven by continued strength in both commercial and defense[11] Consolidated Financial Statements This section presents the company's consolidated statements of income, balance sheet, and cash flows for fiscal year 2025 Consolidated Statement of Income Net income and diluted EPS increased for both the fourth quarter and full fiscal year 2025, reflecting improved profitability | Metric | Q4 FY25 ($M) | Q4 FY24 ($M) | FY25 ($M) | FY24 ($M) | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net sales | 5,243 | 5,187 | 19,850 | 19,930 | | Income before income taxes | 1,071 | 986 | 4,107 | 3,595 | | Net income | 923 | 785 | 3,532 | 2,845 | | Diluted EPS | $7.15 | $6.01 | $27.12 | $21.84 | | Cash dividends per common share | $1.80 | $1.63 | $6.69 | $6.07 | Business Segment Sales and Operating Income The Aerospace Systems segment drove growth in Q4 and FY25, offsetting a slight decline in the Diversified Industrial segment | Segment | Q4 FY25 Sales ($M) | Q4 FY24 Sales ($M) | FY25 Sales ($M) | FY24 Sales ($M) | | :------------------------ | :----------------- | :----------------- | :-------------- | :-------------- | | Diversified Industrial | 3,567 | 3,659 | 13,665 | 14,458 | | Aerospace Systems | 1,676 | 1,528 | 6,185 | 5,472 | | Total Net Sales | 5,243 | 5,187 | 19,850 | 19,930 | | | | | | | | Segment | Q4 FY25 Op. Income ($M) | Q4 FY24 Op. Income ($M) | FY25 Op. Income ($M) | FY24 Op. Income ($M) | | :------------------------ | :-------------------- | :-------------------- | :------------------- | :------------------- | | Diversified Industrial | 847 | 817 | 3,120 | 3,176 | | Aerospace Systems | 407 | 332 | 1,441 | 1,111 | | Total Segment Op. Income | 1,254 | 1,149 | 4,561 | 4,287 | Consolidated Balance Sheet Total assets increased slightly as of June 30, 2025, while a reduction in debt contributed to a significant increase in shareholders' equity | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | | :-------------------------------------- | :----------------- | :----------------- | | Total assets | 29,494 | 29,298 | | Cash and cash equivalents | 467 | 422 | | Total current assets | 6,950 | 6,799 | | Goodwill | 10,694 | 10,507 | | Notes payable and long-term debt payable within one year | 1,791 | 3,403 | | Total current liabilities | 5,819 | 7,313 | | Long-term debt | 7,494 | 7,157 | | Shareholders' equity | 13,682 | 12,072 | Consolidated Statement of Cash Flows The company generated significantly higher cash from operations in FY25, driven by strong earnings and effective working capital management | Cash Flow Activity | FY25 ($M) | FY24 ($M) | | :-------------------------------------- | :-------- | :-------- | | Net cash provided by operating activities | 3,776 | 3,384 | | Net cash provided by (used in) investing activities | 224 | (298) | | Net cash used in financing activities | (3,977) | (3,115) | | Net increase (decrease) in cash and cash equivalents | 45 | (53) | | Cash and cash equivalents at end of period | $467 | $422 | - Proceeds from the sale of businesses significantly contributed to positive investing cash flow in FY25 ($623 million vs $78 million in FY24)[26] - Net payments for common stock activity increased to $1,762 million in FY25 from $328 million in FY24[26] Non-GAAP Financial Reconciliations This section provides reconciliations of GAAP to non-GAAP measures to clarify underlying operational performance Adjusted Segment Operating Income and Organic Sales Growth Adjusted segment operating margins were higher than reported figures due to the exclusion of amortization and realignment charges | Metric | Q4 FY25 (Reported) | Q4 FY25 (Adjusted) | FY25 (Reported) | FY25 (Adjusted) | | :-------------------------------------- | :----------------- | :----------------- | :-------------- | :-------------- | | Total Segment Operating Income ($M) | 1,254 | 1,410 | 4,561 | 5,189 | | Total Segment Operating Margin | 23.9% | 26.9% | 23.0% | 26.1% | | Total Organic Sales Growth | 2.1% | - | 1.3% | - | | Diversified Industrial North America Organic Sales Growth | (1.4)% | - | (3.7)% | - | | Diversified Industrial International Organic Sales Growth | 0.6% | - | (1.9)% | - | | Aerospace Systems Organic Sales Growth | 8.6% | - | 12.6% | - | - Adjustments primarily include amortization of acquired intangibles, business realignment charges, and integration costs[19] Diversified Industrial International Businesses - Organic Sales Growth Supplement (Q4 FY25): | Region | Reported Sales Growth | Currency | Organic Sales Growth | | :---------- | :-------------------- | :------- | :------------------- | | Europe | 3.0% | 6.2% | (3.2)% | | Asia Pacific| 6.9% | 1.3% | 5.6% | | Latin America | 0% | (3.8)% | 3.8% | Adjusted Net Income and Diluted EPS Adjusted net income and EPS were higher than reported figures after excluding non-recurring items and discrete tax benefits | Metric | Q4 FY25 (Reported) | Q4 FY25 (Adjusted) | FY25 (Reported) | FY25 (Adjusted) | | :---------------------- | :----------------- | :----------------- | :-------------- | :-------------- | | Net Income ($M) | 923 | 992 | 3,531 | 3,559 | | Diluted EPS | $7.15 | $7.69 | $27.12 | $27.33 | - Adjustments include amortization of acquired intangibles, business realignment charges, integration costs, gains on sale of buildings, gains on divestitures, and discrete tax benefits[21] Adjusted EBITDA Adjusted EBITDA and its corresponding margin were higher than reported figures after accounting for non-recurring charges and gains | Metric | Q4 FY25 (Reported) | Q4 FY25 (Adjusted) | FY25 (Reported) | FY25 (Adjusted) | | :---------------------- | :----------------- | :----------------- | :-------------- | :-------------- | | EBITDA ($M) | 1,400 | 1,403 | 5,423 | 5,233 | | EBITDA Margin | 26.7% | 26.8% | 27.3% | 26.4% | - Adjustments to EBITDA include business realignment charges, integration costs to achieve, gain on sale of buildings, gain on divestitures, and the Saegertown incident[24] Forecasted Non-GAAP Reconciliations Fiscal year 2026 forecasts are adjusted to exclude currency impacts, divestitures, and other charges for a clearer operational view Forecasted Sales Growth to Organic Sales Growth (FY26): | Metric | Fiscal Year 2026 | | :---------------------- | :--------------- | | Forecasted net sales | 2.0% to 5.0% | | Currency | ~(1.5)% | | Divestitures | ~1.0% | | Adjusted forecasted net sales | 1.5% to 4.5% | Forecasted Segment Operating Margin to Adjusted Forecasted Segment Operating Margin (FY26): | Metric | Fiscal Year 2026 | | :-------------------------------------- | :--------------- | | Forecasted segment operating margin | 23.3% to 23.7% | | Business realignment charges | ~0.3% | | Amortization of acquired intangibles | ~2.7% | | Adjusted forecasted segment operating margin | 26.3% to 26.7% | Forecasted Earnings Per Diluted Share to Adjusted Forecasted Earnings Per Diluted Share (FY26): | Metric | Fiscal Year 2026 | | :-------------------------------------- | :--------------- | | Forecasted earnings per diluted share | $24.68 to $25.68 | | Business realignment charges | 0.54 | | Amortization of acquired intangibles | 4.26 | | Tax effect of adjustments | (1.08) | | Adjusted forecasted earnings per diluted share | $28.40 to $29.40 | Company Information and Disclosures This section provides company background, notes on financial reporting methodologies, and forward-looking statement disclaimers About Parker Hannifin Parker Hannifin is a Fortune 250 global leader in motion and control technologies with over a century of engineering breakthroughs - Parker Hannifin is a Fortune 250 global leader in motion and control technologies[12] - The company has been enabling engineering breakthroughs for over a century[12] - A webcast of the fiscal 2025 fourth quarter and full year results is available at investors.parker.com[12] Note on Orders Order comparisons are reported at constant currency rates and exclude divestitures, using different averaging methods for each segment - Order comparisons are at constant currency exchange rates, excluding divestitures[13] - Diversified Industrial comparisons use 3-month average computations[13] - Aerospace Systems comparisons use rolling 12-month average computations[13] Note on Non-GAAP Financial Measures Non-GAAP measures are used to provide a comparable basis for evaluating performance, with reconciliations provided in financial tables - Non-GAAP measures include adjusted net income, adjusted EPS, adjusted segment operating margin, organic sales growth, and EBITDA margin[14] - These measures are used to meaningfully evaluate changes in performance on a comparable basis from period to period[14] - EBITDA is defined as earnings before interest, taxes, depreciation, and amortization[14] Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are based on known events and circumstances but are subject to unforeseen uncertainties and risks[15] - Future performance may differ materially from expectations due to factors such as changes in customer relationships, raw material costs, and economic conditions[16] - Readers should consider risk factors discussed in Parker's Annual Report on Form 10-K and other SEC filings[16]