Parker Reports Fiscal 2025 Second Quarter Results

CLEVELAND, Jan. 30, 2025 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the quarter ended December 31, 2024, that included the following highlights (compared with the prior year quarter): Fiscal 2025 Second Quarter Highlights: Sales were $4.7 billion; organic sales growth was 1%Net income was $949 million, an increase of 39%, or $853 million adjusted, an increase of 6%EPS were $7.25, an increase of 39%, or $6.53 adjusted, an increase of 6%Segment operating margin was 22.1%, an increase of 100 bps, or 25.6% adjusted, an increase of 110 bpsYTD cash flow from operations increased 24% to $1.7 billion, or 17.4% of sales “Our performance this quarter reflects our focus on operational excellence and the strength of our balanced portfolio,” said Jenny Parmentier, Chairman and Chief Executive Officer. “We delivered record segment operating margin across all businesses, record earnings per share and year-to-date cash flow from operations. Strong cash flow from operations coupled with proceeds from previously announced divestitures allowed us to substantially reduce debt by $1.1 billion this quarter. We are encouraged to see industrial orders turn positive mainly in our longer-cycle businesses. Looking ahead, we have updated our outlook for fiscal year 2025 to reflect stronger Aerospace growth, currency headwinds and a continued delay in the expected industrial recovery. Our strong cash generation creates capital deployment optionality, and we remain committed to our strategy of actively deploying capital to drive shareholder value.” This news release contains non-GAAP financial measures. Reconciliations of adjusted numbers and certain non-GAAP financial measures are included in the financial tables of this press release. Outlook Guidance for the fiscal year ending June 30, 2025 has been updated. The company expects: Sales growth in fiscal 2025 of (2%) to 1%, with organic sales growth of approximately 2%; divestitures of (1.5%) and unfavorable currency of (1.0%)Total segment operating margin of approximately 22.7%, or approximately 25.8% on an adjusted basisEPS of $24.46 to $25.06, or $26.40 to $27.00 on an adjusted basis Segment Results Diversified Industrial Segment North America Businesses $ in mmFY25 Q2 FY24 Q2 Change Organic GrowthSales$1,928 $2,110 -8.6% -5.0%Segment Operating Income$427 $462 -7.6% Segment Operating Margin 22.1% 21.9% 20 bps Adjusted Segment Operating Income$473 $510 -7.2% Adjusted Segment Operating Margin 24.6% 24.2% 40 bps Achieved record adjusted segment operating marginContinued softness in transportation and off-highway marketsDelayed industrial recovery International Businesses $ in mmFY25 Q2 FY24 Q2 Change Organic GrowthSales$1,325 $1,404 -5.7% -3.0%Segment Operating Income$284 $290 -2.2% Segment Operating Margin 21.4% 20.7% 70 bps Adjusted Segment Operating Income$320 $323 -1.2% Adjusted Segment Operating Margin 24.1% 23.0% 110 bps Achieved record adjusted segment operating marginBroad-based softness continued in EuropeGradual recovery continued in Asia Aerospace Systems Segment $ in mmFY25 Q2 FY24 Q2 Change Organic GrowthSales$1,490 $1,306 14.0% 14.0%Segment Operating Income$338 $263 28.5% Segment Operating Margin 22.7% 20.1% 260 bps Adjusted Segment Operating Income$420 $347 21.2% Adjusted Segment Operating Margin 28.2% 26.5% 170 bps Achieved record sales and adjusted segment operating marginAchieved 14% organic sales growth20%+ aftermarket and mid-single digit OEM sales growth Order Rates FY25 Q2Parker+5%Diversified Industrial Segment - North America Businesses+3%Diversified Industrial Segment - International Businesses+4%Aerospace Systems Segment+9% Company order rates increased across all reported businessesNorth America orders turned positive on long-cycle strengthInternational order growth continued, led by AsiaAerospace orders accelerated against a tough prior year comparison About Parker HannifinParker Hannifin is a Fortune 250 global leader in motion and control technologies. For more than a century the company has been enabling engineering breakthroughs that lead to a better tomorrow. Learn more at www.parker.com or @parkerhannifin. Contacts: Media:Financial Analysts:Aidan GormleyJeff Miller216-896-3258216-896-2708aidan.gormley@parker.comjeffrey.miller@parker.com Notice of Webcast Parker Hannifin's conference call and slide presentation to discuss its fiscal 2025 second quarter results are available to all interested parties via live webcast today at 11:00 a.m. ET, at investors.parker.com. A replay of the webcast will be available on the site approximately one hour after the completion of the call and will remain available for one year. To register for e-mail notification of future events please visit investors.parker.com. Note on Orders The company reported orders for the quarter ending December 31, 2024, compared with the same quarter a year ago. All comparisons are at constant currency exchange rates, with the prior year quarter restated to the current-year rates, and exclude divestitures. Diversified Industrial comparisons are on 3-month average computations and Aerospace Systems comparisons are on rolling 12-month average computations. Note on Non-GAAP Financial MeasuresThis press release contains references to non-GAAP financial information including (a) adjusted net income; (b) adjusted earnings per share; (c) adjusted operating margin and segment operating margins; (d) adjusted operating income and segment operating income and (e) organic sales growth. The adjusted net income, adjusted earnings per share, adjusted operating margin, adjusted segment operating margin, adjusted operating income, adjusted segment operating income and organic sales measures are presented to allow investors and the company to meaningfully evaluate changes in net income, earnings per share and segment operating margins on a comparable basis from period to period. Although adjusted net income, adjusted earnings per share, adjusted operating margin and segment operating margins, adjusted operating income and segment operating income, and organic sales growth are not measures of performance calculated in accordance with GAAP, we believe that they are useful to an investor in evaluating the results of this quarter versus the prior period. Comparable descriptions of record adjusted results in this release refer only to the period from the first quarter of FY2011 to the periods presented in this release. This period coincides with recast historical financial results provided in association with our FY2014 change in segment reporting. A reconciliation of non-GAAP measures is included in the financial tables of this press release. Forward-Looking StatementsForward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. Often but not always, these statements may be identified from the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and similar expressions, and may also include statements regarding future performance, orders, earnings projections, events or developments. Parker cautions readers not to place undue reliance on these statements. It is possible that the future performance may differ materially from expectations, including those based on past performance. Among other factors that may affect future performance are: changes in business relationships with and orders by or from major customers, suppliers or distributors, including delays or cancellations in shipments; disputes regarding contract terms, changes in contract costs and revenue estimates for new development programs; changes in product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions; ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination and ability to successfully undertake business realignment activities and the expected costs, including cost savings, thereof; ability to implement successfully business and operating initiatives, including the timing, price and execution of share repurchases and other capital initiatives; availability, cost increases of or other limitations on our access to raw materials, component products and/or commodities if associated costs cannot be recovered in product pricing; ability to manage costs related to insurance and employee retirement and health care benefits; legal and regulatory developments and other government actions, including related to environmental protection, and associated compliance costs; supply chain and labor disruptions, including as a result of tariffs and labor shortages; threats associated with international conflicts and cybersecurity risks and risks associated with protecting our intellectual property; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; effects on market conditions, including sales and pricing, resulting from global reactions to U.S. trade policies; manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and economic conditions such as inflation, deflation, interest rates and credit availability; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; changes in the tax laws in the United States and foreign jurisdictions and judicial or regulatory interpretations thereof; and large scale disasters, such as floods, earthquakes, hurricanes, industrial accidents and pandemics. Readers should also consider forward-looking statements in light of risk factors discussed in Parker’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 and other periodic filings made with the SEC. CONSOLIDATED STATEMENT OF INCOME Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Dollars in thousands, except per share amounts) 2024 2023 2024 2023 Net sales$4,742,593 $4,820,947 $9,646,577 $9,668,435 Cost of sales 3,022,229 3,101,962 6,119,948 6,199,311 Selling, general and administrative expenses 782,421 806,802 1,631,210 1,680,493 Interest expense 100,802 129,029 213,893 263,497 Other income, net (328,716) (85,011) (359,517) (163,466)Income before income taxes 1,165,857 868,165 2,041,043 1,688,600 Income taxes 217,208 186,108 393,866 355,471 Net income 948,649 682,057 1,647,177 1,333,129 Less: Noncontrolling interests 107 206 215 451 Net income attributable to common shareholders$948,542 $681,851 $1,646,962 $1,332,678 Earnings per share attributable to common shareholders: Basic earnings per share$7.37 $5.31 $12.80 $10.38 Diluted earnings per share$7.25 $5.23 $12.60 $10.23 Average shares outstanding during period - Basic 128,752,836 128,426,247 128,707,962 128,449,398 Average shares outstanding during period - Diluted 130,758,808 130,367,351 130,716,482 130,314,326 CASH DIVIDENDS PER COMMON SHARE Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Amounts in dollars) 2024 2023 2024 2023 Cash dividends per common share$1.63 $1.48 $3.26 $2.96 RECONCILIATION OF ORGANIC GROWTH(Unaudited)Three Months Ended As Reported Adjusted December 31, 2024 Currency Divestitures December 31, 2024Diversified Industrial Segment (7.4)% (1.3)% (1.9)% (4.2)%Aerospace Systems Segment 14.0% —% —% 14.0%Total (1.6)% (0.9)% (1.4)% 0.7% (Unaudited)Six Months Ended As Reported Adjusted December 31, 2024 Currency Divestitures December 31, 2024Diversified Industrial Segment (5.9)% (0.8)% (1.0)% (4.1)%Aerospace Systems Segment 15.9% 0.3% —% 15.6%Total (0.2)% (0.5)% (0.8)% 1.1% RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Dollars in thousands) 2024 2023 2024 2023 Net income attributable to common shareholders$948,542 $681,851 $1,646,962 $1,332,678 Adjustments: Acquired intangible asset amortization expense 138,126 142,027 278,247 297,547 Business realignment charges 20,855 14,354 30,361 27,446 Integration costs to achieve 6,893 10,014 13,304 16,420 Gain on sale of building — — (10,461) — Gain on divestitures (249,748) (12,391) (249,748) (25,651)Tax effect of adjustments1 (11,437) (33,476) (45,648) (69,624)Adjusted net income attributable to common shareholders$853,231 $802,379 $1,663,017 $1,578,816 RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Amounts in dollars) 2024 2023 2024 2023 Earnings per diluted share$7.25 $5.23 $12.60 $10.23 Adjustments: Acquired intangible asset amortization expense 1.06 1.09 2.13 2.28 Business realignment charges 0.16 0.11 0.23 0.21 Integration costs to achieve 0.05 0.08 0.10 0.13 Gain on sale of building — — (0.08) — Gain on divestitures (1.91) (0.10) (1.91) (0.20)Tax effect of adjustments1 (0.08) (0.26) (0.33) (0.53)Adjusted earnings per diluted share$6.53 $6.15 $12.74 $12.12 1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment. BUSINESS SEGMENT INFORMATION Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Dollars in thousands) 2024 2023 2024 2023 Net sales Diversified Industrial$3,252,806 $3,514,473 $6,708,964 $7,133,001 Aerospace Systems 1,489,787 1,306,474 2,937,613 2,535,434 Total net sales$4,742,593 $4,820,947 $9,646,577 $9,668,435 Segment operating income Diversified Industrial$710,562 $752,334 $1,494,108 $1,559,088 Aerospace Systems 338,184 263,112 661,170 489,372 Total segment operating income 1,048,746 1,015,446 2,155,278 2,048,460 Corporate general and administrative expenses 56,264 49,902 105,058 105,558 Income before interest expense and other income, net 992,482 965,544 2,050,220 1,942,902 Interest expense 100,802 129,029 213,893 263,497 Other income, net (274,177) (31,650) (204,716) (9,195)Income before income taxes$1,165,857 $868,165 $2,041,043 $1,688,600 RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Dollars in thousands) 2024 2023 2024 2023 Diversified Industrial Segment sales$3,252,806 $3,514,473 $6,708,964 $7,133,001 Diversified Industrial Segment operating income$710,562 $752,334 $1,494,108 $1,559,088 Adjustments: Acquired intangible asset amortization 62,570 67,309 127,834 135,260 Business realignment charges 19,343 13,285 28,243 25,924 Integration costs to achieve 627 871 1,405 2,010 Adjusted Diversified Industrial Segment operating income$793,102 $833,799 $1,651,590 $1,722,282 Diversified Industrial Segment operating margin 21.8% 21.4% 22.3% 21.9%Adjusted Diversified Industrial Segment operating margin 24.4% 23.7% 24.6% 24.1% Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Dollars in thousands) 2024 2023 2024 2023 Aerospace Systems Segment sales$1,489,787 $1,306,474 $2,937,613 $2,535,434 Aerospace Systems Segment operating income$338,184 $263,112 $661,170 $489,372 Adjustments: Acquired intangible asset amortization 75,556 74,718 150,413 162,287 Business realignment charges 386 (123) 394 330 Integration costs to achieve 6,266 9,143 11,899 14,410 Adjusted Aerospace Systems Segment operating income$420,392 $346,850 $823,876 $666,399 Aerospace Systems Segment operating margin 22.7% 20.1% 22.5% 19.3%Adjusted Aerospace Systems Segment operating margin 28.2% 26.5% 28.0% 26.3% RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Dollars in thousands) 2024 2023 2024 2023 Total net sales$4,742,593 $4,820,947 $9,646,577 $9,668,435 Total segment operating income$1,048,746 $1,015,446 $2,155,278 $2,048,460 Adjustments: Acquired intangible asset amortization 138,126 142,027 278,247 297,547 Business realignment charges 19,729 13,162 28,637 26,254 Integration costs to achieve 6,893 10,014 13,304 16,420 Adjusted total segment operating income$1,213,494 $1,180,649 $2,475,466 $2,388,681 Total segment operating margin 22.1% 21.1% 22.3% 21.2%Adjusted total segment operating margin 25.6% 24.5% 25.7% 24.7% CONSOLIDATED BALANCE SHEET (Unaudited)December 31, June 30,(Dollars in thousands) 2024 2024 Assets Current assets: Cash and cash equivalents$395,507 $422,027 Trade accounts receivable, net 2,445,845 2,865,546 Non-trade and notes receivable 304,829 331,429 Inventories 2,806,983 2,786,800 Prepaid expenses 246,467 252,618 Other current assets 148,831 140,204 Total current assets 6,348,462 6,798,624 Property, plant and equipment, net 2,800,992 2,875,668 Deferred income taxes 87,400 92,704 Investments and other assets 1,232,636 1,207,232 Intangible assets, net 7,444,670 7,816,181 Goodwill 10,357,303 10,507,433 Total assets$28,271,463 $29,297,842 Liabilities and equity Current liabilities: Notes payable and long-term debt payable within one year$2,373,286 $3,403,065 Accounts payable, trade 1,794,884 1,991,639 Accrued payrolls and other compensation 420,477 581,251 Accrued domestic and foreign taxes 364,143 354,659 Other accrued liabilities 1,034,501 982,695 Total current liabilities 5,987,291 7,313,309 Long-term debt 6,667,955 7,157,034 Pensions and other postretirement benefits 409,873 437,490 Deferred income taxes 1,394,882 1,583,923 Other liabilities 684,401 725,193 Shareholders' equity 13,118,553 12,071,972 Noncontrolling interests 8,508 8,921 Total liabilities and equity$28,271,463 $29,297,842 CONSOLIDATED STATEMENT OF CASH FLOWS Six Months Ended(Unaudited)December 31,(Dollars in thousands) 2024 2023 Cash flows from operating activities: Net income$1,647,177 $1,333,129 Depreciation and amortization 454,869 468,165 Stock incentive plan compensation 106,472 108,061 Gain on sale of businesses (250,373) (25,964)(Gain) loss on property, plant and equipment and intangible assets (6,975) 5,097 Net change in receivables, inventories and trade payables 70,981 (42,804)Net change in other assets and liabilities (405,002) (407,366)Other, net 61,584 (86,331)Net cash provided by operating activities 1,678,733 1,351,987 Cash flows from investing activities: Capital expenditures (216,493) (204,117)Proceeds from sale of property, plant and equipment 13,259 1,360 Proceeds from sale of businesses 622,182 74,595 Other, net (6,941) (2,954)Net cash provided by (used in) investing activities 412,007 (131,116)Cash flows from financing activities: Net payments for common stock activity (189,681) (136,394)Acquisition of noncontrolling interests — (2,883)Net payments for debt (1,494,484) (784,847)Dividends paid (420,061) (381,115)Net cash used in financing activities (2,104,226) (1,305,239)Effect of exchange rate changes on cash (13,034) (7,999)Net decrease in cash and cash equivalents (26,520) (92,367)Cash and cash equivalents at beginning of year 422,027 475,182 Cash and cash equivalents at end of period$395,507 $382,815 RECONCILIATION OF FORECASTED ORGANIC GROWTH (Unaudited) (Amounts in percentages)Fiscal Year 2025Forecasted net sales(2%) to 1%Adjustments: Currency1.0%Divestitures1.5%Adjusted forecasted net sales0.5% to 3.5% RECONCILIATION OF FORECASTED SEGMENT OPERATING MARGIN TO ADJUSTED FORECASTED SEGMENT OPERATING MARGIN (Unaudited) (Amounts in percentages)Fiscal Year 2025Forecasted segment operating margin~ 22.7%Adjustments: Business realignment charges0.2%Costs to achieve0.1%Acquisition-related intangible asset amortization expense2.8%Adjusted forecasted segment operating margin~ 25.8% RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE (Unaudited) (Amounts in dollars)Fiscal Year 2025Forecasted earnings per diluted share$24.46 to $25.06Adjustments: Business realignment charges0.39Costs to achieve0.15Acquisition-related intangible asset amortization expense4.22Net gain on divestitures(1.91)Gain on sale of building(0.08)Tax effect of adjustments1(0.83)Adjusted forecasted earnings per diluted share$26.40 to $27.00 1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment. Note: Totals may not foot due to rounding SUPPLEMENTAL INFORMATION BUSINESS SEGMENT INFORMATION Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Dollars in thousands) 2024 2023 2024 2023 Net sales Diversified Industrial: North America businesses$1,928,008 $2,110,203 $4,028,332 $4,340,109 International businesses 1,324,798 1,404,270 2,680,632 2,792,892 Segment operating income Diversified Industrial: North America businesses$426,567 $461,850 $911,130 $967,903 International businesses 283,995 290,484 582,978 591,185 RECONCILIATION OF ORGANIC GROWTH (Unaudited)Three Months Ended As Reported Adjusted December 31, 2024 Currency Divestitures December 31, 2024Diversified Industrial Segment: North America businesses (8.6)% (0.4)% (3.2)% (5.0)%International businesses (5.7)% (2.7)% —% (3.0)% (Unaudited)Six Months Ended As Reported Adjusted December 31, 2024 Currency Divestitures December 31, 2024 Diversified Industrial Segment: North America businesses (7.2)% (0.5)% (1.7)% (5.0)%International businesses (4.0)% (1.3)% —% (2.7)% RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Dollars in thousands) 2024 2023 2024 2023 Diversified Industrial Segment: North America businesses sales$1,928,008 $2,110,203 $4,028,332 $4,340,109 North America businesses operating income$426,567 $461,850 $911,130 $967,903 Adjustments: Acquired intangible asset amortization 40,985 44,699 83,960 89,382 Business realignment charges 5,444 3,250 8,888 5,834 Integration costs to achieve 445 562 1,050 1,507 Adjusted North America businesses operating income$473,441 $510,361 $1,005,028 $1,064,626 North America businesses operating margin 22.1% 21.9% 22.6% 22.3%Adjusted North America businesses operating margin 24.6% 24.2% 24.9% 24.5% Three Months Ended Six Months Ended(Unaudited)December 31, December 31,(Dollars in thousands) 2024 2023 2024 2023 Diversified Industrial Segment: International businesses sales$1,324,798 $1,404,270 $2,680,632 $2,792,892 International businesses operating income$283,995 $290,484 $582,978 $591,185 Adjustments: Acquired intangible asset amortization 21,585 22,610 43,874 45,878 Business realignment charges 13,899 10,035 19,355 20,090 Integration costs to achieve 182 309 355 503 Adjusted International businesses operating income$319,661 $323,438 $646,562 $657,656 International businesses operating margin 21.4% 20.7% 21.7% 21.2%Adjusted International businesses operating margin 24.1% 23.0% 24.1% 23.5%

Parker Reports Fiscal 2025 Second Quarter Results

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