Parker(US:PH)2026-01-30 13:03Financial Performance - Net sales for the three months ended December 31, 2025, were $5,174 million, an increase of 9.1% from $4,743 million in the same period of 2024[85] - Gross profit margin improved to 37.3% for the current-year quarter, up from 36.3% in the prior-year quarter[85] - Selling, general and administrative expenses (SG&A) increased to $837 million, representing 16.2% of sales, compared to $782 million and 16.5% in the prior-year quarter[85] - Net income for the three months ended December 31, 2025, was $845 million, a decrease of 11% from $949 million in the same period of 2024[85] Segment Performance - The Diversified Industrial Segment reported net sales of $3,468 million for the three months ended December 31, 2025, an increase of 6.6% compared to $3,253 million in the prior-year quarter[96] - Aerospace Systems Segment net sales reached $1.706 billion in the current-year quarter, up from $1.490 billion in the prior-year quarter, with an operating margin of 26.0%[105][107] Tax and Financial Ratios - The effective tax rate for the current-year quarter was 20.6%, compared to 18.6% in the prior-year quarter[85] - The company expects the effective tax rate for fiscal 2026 to be approximately 22%[94] - As of December 31, 2025, the company maintained a debt to debt-shareholders' equity ratio of 0.41 to 1.0, well below the covenant limit of 0.65 to 1.0[124] Cash Flow and Investments - Cash provided by operating activities decreased by $35 million to $1.644 billion for the first six months of fiscal 2026 compared to the same period in fiscal 2025[116] - Net cash used in investing activities decreased by $1.6 billion, primarily due to $1.0 billion spent on the Curtis acquisition[117] Acquisitions and Divestitures - The acquisition of Curtis contributed approximately $74 million to net sales in the current-year quarter[85] - The company completed the acquisition of Curtis for approximately $1.0 billion on September 18, 2025, and announced an agreement to acquire Filtration Group for approximately $9.25 billion, expected to close within 6 to 12 months[129] - The company continues to assess existing businesses for potential divestitures that do not align with long-term strategic goals[129] Backlog and Sales Performance - The backlog for the Diversified Industrial Segment was $3,738 million as of December 31, 2025, unchanged from the prior-year period[96] - North America businesses sales increased by $58 million year-over-year, with a $41 million contribution from the Curtis acquisition and a $38 million decrease due to divestitures in the current-year quarter[98] - International businesses sales rose by $157 million year-over-year, with $33 million from the Curtis acquisition and $62 million from favorable currency exchange rates in the current-year quarter[99] - The backlog for the Diversified Industrial Segment increased from $3.7 billion as of June 30, 2025, driven by orders exceeding shipments[103] Operational Efficiency - Operating margin for the Diversified Industrial Segment improved due to favorable product mix and price increases, despite rising material costs[100] - Days sales outstanding for trade accounts receivable was 49 days as of December 31, 2025, compared to 51 days at June 30, 2025[119] Shareholder Returns - The company declared a quarterly cash dividend of $1.80 per share on October 22, 2025, marking 302 consecutive quarters of dividend payments and 69 consecutive years of annual increases[127] - The Board of Directors approved a share repurchase authorization of 20.0 million shares, with 19.3 million shares remaining available for repurchase as of December 31, 2025[128] Future Outlook and Risks - The company anticipates incurring approximately $40 million in additional business realignment charges in the remainder of fiscal 2026[102] - Capital expenditures are targeted at 2.5% of sales for the remainder of fiscal 2026, with a long-term annual target of 2.0%[126] - A 10% change in foreign exchange rates related to forward exchange contracts as of December 31, 2025, would affect earnings by approximately $125 million[138] - A 100 basis point increase in near-term interest rates would increase annual interest expense on variable rate debt by approximately $24 million[139] - The company aims to maintain an investment-grade credit profile, with long-term credit ratings of A from Fitch, A3 from Moody's, and BBB+ from S&P as of December 31, 2025[125] - Supply chain financing programs are in place to improve liquidity and working capital efficiency, with no significant impact anticipated on liquidity[130]