Parker(US:PH)2025-08-07 16:02Financial Data and Key Metrics Changes - Total sales for fiscal year 2025 reached $19.9 billion, with a record adjusted segment operating margin of 26.1%, an increase of 120 basis points from the prior year [6][31] - Adjusted EBITDA margin was 26.4%, up 80 basis points year-over-year, and adjusted EPS grew by 7% [6][31] - Record cash flow from operations was $3.8 billion, representing 19% of sales, with free cash flow also at a record $3.3 billion or 16.8% of sales [31][32] Business Line Data and Key Metrics Changes - Aerospace segment achieved record sales of $6.2 billion, reflecting 13% organic growth and a backlog of $7.4 billion [8][24] - Industrial segment recorded an adjusted operating margin of 25.1%, a 90 basis point increase from the previous year, with a forecast of 700 basis points margin expansion through fiscal year 2026 [10][11] - Aerospace Systems sales reached $1.7 billion, up 10% year-over-year, with adjusted segment operating margins increasing by 190 basis points to a record 29% [29][30] Market Data and Key Metrics Changes - North America sales were $2.1 billion, with organic growth down 1%, but adjusted operating margins increased by 170 basis points to a record 26.7% [25][26] - International sales were $1.5 billion, up 4%, with organic growth positive at 1%, and adjusted operating margins achieving a record of 24.7% [27][28] - Aerospace orders increased by 12%, indicating strong demand in both commercial and defense sectors [29][30] Company Strategy and Development Direction - The company is focused on its "Win Strategy," which emphasizes decentralized operations and a culture of high performance to drive growth across all economic climates [4][14] - Recent acquisition of Curtis Instruments aims to enhance electrification offerings and expand the portfolio into low voltage motor control solutions [12][13] - The company plans to maintain a disciplined capital deployment strategy while exploring both small and larger acquisition opportunities [80][82] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving another record year for fiscal year 2026, with guidance for organic sales growth of approximately 3% [36][39] - The aerospace market is expected to see high single-digit growth, while industrial markets are anticipated to recover gradually [32][33] - Management acknowledged challenges in the transportation sector but noted positive sentiment in distribution channels and ongoing improvements in other market verticals [56][58] Other Important Information - The company finished fiscal year 2025 with a record backlog of $11 billion, indicating strong future demand [7] - The guidance for fiscal year 2026 includes an adjusted EPS of $28.9, reflecting a 6% increase from the prior year [39][40] Q&A Session Summary Question: Can you discuss the Q1 guide and the sequential step down in EPS? - Management noted that Q1 EPS guidance reflects a $0.05 increase year-over-year, with expected margin expansion [49][50] Question: What are the green shoots seen across industrial short cycle businesses? - Management highlighted positive distributor sentiment and gradual recovery in industrial equipment, with expectations for increased MRO activity [55][56] Question: Can you elaborate on the Curtis acquisition and its margin profile? - Management indicated that while Curtis's initial margins may be dilutive, they expect to achieve full synergies within three years, similar to past acquisitions [65][66] Question: How are international orders performing? - Management explained that international orders were flat due to tough comparisons, but overall order dollars remained stable [72][73] Question: What is the outlook for aerospace orders and growth? - Management expects continued strong demand in aerospace, with a balanced growth forecast between defense and commercial sectors [102][103]