Parker-Hannifin Q1 Earnings Call Highlights

Key Points

• Parker-Hannifin posted record first-quarter revenue of $6 billion, up 18% year over year, with organic sales growth of 11.5% and adjusted EPS up 23% to $8.90.
• The company raised its fiscal 2027 outlook, forecasting adjusted EPS of $36.85 (±$0.40), organic sales growth of 7.5%–10.5%, and free cash flow of $3.5 billion–$4 billion. Strong aerospace and international industrial demand helped drive the improved forecast.
• Parker began integrating Filtration Group, which contributed $285 million in first-quarter sales; it expects $220 million in cumulative cost synergies. Acquisition-related borrowing raised expected annual interest expense to $690 million, and net debt reached 2.7 times adjusted EBITDA.

Parker-Hannifin NYSE: PH raised its fiscal 2027 earnings and sales outlook after reporting record first-quarter revenue, as demand strengthened across its industrial and aerospace markets and the company completed its acquisition of Filtration Group Corporation.

Sales rose 18% from a year earlier to $6 billion, while organic sales grew 11.5%, the company’s first quarter of double-digit organic growth in more than three years. Adjusted earnings per share increased 23% to $8.90.

Chairman and Chief Executive Officer Jenny Parmentier said demand was broad-based, with the company’s rolling 12-month order rate rising 13% and backlog reaching a record $13.7 billion. Aerospace, industrial businesses and Filtration Group all contributed to the backlog increase, she said.

Chief Financial Officer Todd Leombruno said organic growth exceeded the company’s prior forecast of 8% for the quarter. Acquisitions contributed 7% to sales growth, primarily from Filtration Group, with a remaining contribution from Curtis.

Full-Year Outlook Raised

Parker increased its fiscal 2027 adjusted earnings forecast to $36.85 per share, plus or minus $0.40, from a previous midpoint of $34.75. The company expects reported sales growth of 16% to 19% and organic growth of 7.5% to 10.5%, with the latter midpoint rising to 9% from 7%.

Leombruno said $1.70 of the $2.10 increase in the adjusted EPS midpoint came from higher expected segment operating income in Parker’s existing businesses. Filtration Group is expected to add $0.50 per share over roughly 10.5 months of ownership, including $40 million in anticipated cost synergies. Higher corporate interest and other costs offset part of those gains.

The company raised its full-year free cash flow forecast to $3.5 billion to $4 billion. For the second quarter, it expects sales of nearly $6.2 billion, organic growth of about 10% and adjusted earnings of $8.82 per share.

Parmentier said Parker raised its organic growth outlook for its three largest market verticals. It now expects approximately 10% growth in aerospace and defense and high-single-digit growth in both in-plant and industrial and transportation. The company forecasts mid-single-digit growth in off-highway, energy, and HVAC and refrigeration.

International and Aerospace Lead Growth

In Parker’s North American industrial businesses, first-quarter sales rose 20% to $2.4 billion, including 9.4% organic growth. Adjusted segment margin increased to 27.6%, while rolling 12-month orders rose 11%.

International industrial sales climbed 22% to $1.7 billion, with organic growth of 11.6%. Asia-Pacific organic sales grew 23.4%, helped by electronics and semiconductor demand, while Europe, the Middle East and Africa grew 4%. Latin America declined 1%.

Parker raised its full-year organic growth midpoint for the international industrial businesses to 9.5% from 5.5%. Parmentier said the company now expects mid-teens growth in Asia-Pacific, compared with its previous high-single-digit forecast.

Aerospace sales rose 14% to $1.9 billion, all of it organic, and the segment’s adjusted operating margin expanded to 30.7%. Parmentier said commercial aftermarket demand was stronger than expected, supported by an aging fleet and relatively few aircraft retirements. Parker raised its fiscal-year commercial aftermarket growth outlook to high single digits.

Asked about data center exposure, Parmentier said the business delivered double-digit growth in the quarter and accounted for approximately 1.5% of Parker’s sales in the prior fiscal year. She said orders and backlog remained strong, but the business was not yet large enough to be reported as a separate market vertical.

Filtration Group Integration Begins

Parker expects Filtration Group to contribute $1.85 billion in sales in fiscal 2027. Parmentier said the acquired business generated $285 million in first-quarter sales and performed as expected.

The acquisition creates an industrial filtration business with approximately $5 billion in annual revenue, according to Parmentier. She said Parker is targeting $220 million in cumulative cost synergies and an adjusted EBITDA margin above 30% for Filtration Group.

Leombruno said the acquired business’s starting margins are lower than those of Parker’s existing operations, creating some drag on reported margins until synergies build. He also said acquisition-related borrowing increased interest costs; Parker now expects $690 million in interest expense for the fiscal year, up from its previous forecast of $340 million.

First-quarter operating cash flow was $752 million, and free cash flow was $643 million. Net debt stood at 2.7 times adjusted EBITDA following the acquisition-related debt issuance, Leombruno said.

About Parker-Hannifin (NYSE:PH)

Parker-Hannifin is a global manufacturer of motion and control technologies. Its products include hydraulic and pneumatic systems, fluid connectors, filtration and sealing products, electromechanical components, and systems for aerospace and climate control applications.

The company serves customers across industries such as aerospace, manufacturing, transportation, energy, and life sciences. Its operations span markets around the world, with businesses organized around industrial and aerospace products and services.

Founded in 1917 by Arthur L.

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