Record sales, segment operating margin and earnings per share; EPS outlook increased
CLEVELAND, Oct. 31, 2024 (GLOBE NEWSWIRE) — Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the quarter ended September 30, 2024, that included the following highlights (compared with the prior year quarter):
Fiscal 2025 First Quarter Highlights:
Sales increased 1.2% to $4.9 billion; Organic sales growth was 1.4%Net income was $698 million, an increase of 7%, or $810 million adjusted, an increase of 4%EPS were $5.34, an increase of 7%, or $6.20 adjusted, an increase of 4%Segment operating margin was 22.6%, an increase of 130 bps, or a record 25.7% adjusted, an increase of 80 bpsCash flow from operations was 15.2% of sales, an increase of 14% to $744 million
“Through continued execution of The Win Strategy, our global team produced outstanding results in the first quarter,” said Chairman and Chief Executive Officer, Jenny Parmentier. “We delivered records for sales, adjusted segment operating margin, adjusted earnings per share and year-to-date cash flow from operations. Our performance also reflects the strength of our transformed portfolio with our Aerospace Systems segment achieving exceptional results. Looking ahead to the full year, we anticipate near-term pressure in select industrial markets and accelerating growth in aerospace. Reflecting these conditions and our strong first quarter performance, we have raised our outlook for segment operating margin and earnings per share. We remain committed to our fiscal 2029 targets and continue to see a very promising future for Parker.”
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. Guidance now reflects divestiture activity in the Diversified Industrial Segment, North America Businesses expected to be completed during the second quarter of fiscal 2025. The company now expects:
Total sales growth in fiscal 2025 of 0.5% to 3.5%, with organic sales growth of 1.5% to 4.5%; divestitures of (1.5%) and favorable currency of 0.5%Total segment operating margin to increase to approximately 22.6%, or approximately 25.7% on an adjusted basisEPS to increase to $22.78 to $23.48, or $26.35 to $27.05 on an adjusted basis
Segment Results
Diversified Industrial Segment
North America Businesses $ in mm FY25 Q1 FY24 Q1 Change Organic GrowthSales$2,100 $2,230 -5.8% -5.0%Segment Operating Income$485 $506 -4.2% Segment Operating Margin 23.1% 22.7% 40 bps Adjusted Segment Operating Income$532 $554 -4.1% Adjusted Segment Operating Margin 25.3% 24.9% 40 bps Achieved record adjusted segment operating marginHVAC returns to growth, while delays impact in-plant and energy marketsSoftness continues in transportation and off-highway markets International Businesses $ in mm FY25 Q1 FY24 Q1 Change Organic GrowthSales$1,356 $1,389 -2.4% -2.4%Segment Operating Income$299 $301 -0.6% Segment Operating Margin 22.1% 21.7% 40 bps Adjusted Segment Operating Income$327 $334 -2.2% Adjusted Segment Operating Margin 24.1% 24.1% — bps Achieved record adjusted segment operating marginPositive sales growth in Asia, offset by continued softness in Europe Aerospace Systems Segment $ in mm FY25 Q1 FY24 Q1 Change Organic GrowthSales$1,448 $1,229 17.8% 17.2%Segment Operating Income$323 $226 42.7% Segment Operating Margin 22.3% 18.4% 390 bps Adjusted Segment Operating Income$403 $320 26.3% Adjusted Segment Operating Margin 27.9% 26.0% 190 bps Achieved record sales and adjusted segment operating marginOutstanding aftermarket sales growth in both commercial and defense markets
Order Rates
FY25 Q1 Parker+1% Diversified Industrial Segment – North America Businesses-3% Diversified Industrial Segment – International Businesses+1% Aerospace Systems Segment+7% Company order rates continue to be positiveInternational orders turned positive on Asia improvementAerospace orders remained strong against a tough prior year comparison
About Parker Hannifin
Parker 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 first 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 September 30, 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. 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 Measures
This 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 Statements
Forward-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 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 (Unaudited) Three Months Ended September 30,(Dollars in thousands, except per share amounts) 2024 2023 Net sales $4,903,984 $4,847,488 Cost of sales 3,097,719 3,097,349 Selling, general and administrative expenses 848,789 873,691 Interest expense 113,091 134,468 Other income, net (30,801) (78,455)Income before income taxes 875,186 820,435 Income taxes 176,658 169,363 Net income 698,528 651,072 Less: Noncontrolling interests 108 245 Net income attributable to common shareholders$698,420 $650,827 Earnings per share attributable to common shareholders: Basic earnings per share $5.43 $5.07 Diluted earnings per share $5.34 $4.99 Average shares outstanding during period – Basic 128,663,088 128,472,550 Average shares outstanding during period – Diluted 130,680,242 130,363,441 CASH DIVIDENDS PER COMMON SHARE (Unaudited) Three Months Ended September 30,(Amounts in dollars) 2024 2023 Cash dividends per common share$1.63 $1.48
RECONCILIATION OF ORGANIC GROWTH (Unaudited)Three Months Ended As Reported Adjusted September 30, 2024 Currency Divestitures September 30, 2024Diversified Industrial Segment(4.5)% (0.3)% (0.2)% (4.0)%Aerospace Systems Segment17.8% 0.6% —% 17.2%Total1.2% —% (0.2)% 1.4%
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS(Unaudited) Three Months Ended September 30,(Dollars in thousands) 2024 2023 Net income attributable to common shareholders$698,420 $650,827 Adjustments: Acquired intangible asset amortization expense 140,121 155,520 Business realignment charges 9,506 13,092 Integration costs to achieve 6,411 6,406 Gain on sale of building (10,461) — Gain on divestiture — (13,260)Tax effect of adjustments1 (34,211) (36,148)Adjusted net income attributable to common shareholders$809,786 $776,437
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE(Unaudited) Three Months Ended September 30,(Amounts in dollars) 2024 2023 Earnings per diluted share$5.34 $4.99 Adjustments: Acquired intangible asset amortization expense 1.07 1.19 Business realignment charges 0.07 0.10 Integration costs to achieve 0.05 0.05 Gain on sale of building (0.08) — Gain on divestiture — (0.10)Tax effect of adjustments1 (0.25) (0.27)Adjusted earnings per diluted share$6.20 $5.96 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 (Unaudited) Three Months Ended September 30,(Dollars in thousands) 2024 2023Net sales Diversified Industrial $3,456,158 $3,618,528Aerospace Systems 1,447,826 1,228,960Total net sales $4,903,984 $4,847,488Segment operating income Diversified Industrial $783,546 $806,754Aerospace Systems 322,986 226,260Total segment operating income 1,106,532 1,033,014Corporate general and administrative expenses 48,794 55,656Income before interest expense and other expense, net 1,057,738 977,358Interest expense 113,091 134,468Other expense, net 69,461 22,455Income before income taxes $875,186 $820,435
RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS(Unaudited) Three Months Ended September 30,(Dollars in thousands) 2024 2023 Diversified Industrial Segment sales $3,456,158 $3,618,528 Diversified Industrial Segment operating income $783,546 $806,754 Adjustments: Acquired intangible asset amortization 65,264 67,951 Business realignment charges 8,900 12,639 Integration costs to achieve 778 1,139 Adjusted Diversified Industrial Segment operating income $858,488 $888,483 Diversified Industrial Segment operating margin 22.7% 22.3%Adjusted Diversified Industrial Segment operating margin 24.8% 24.6% (Unaudited) Three Months Ended September 30,(Dollars in thousands) 2024 2023 Aerospace Systems Segment sales $1,447,826 $1,228,960 Aerospace Systems Segment operating income $322,986 $226,260 Adjustments: Acquired intangible asset amortization 74,857 87,569 Business realignment charges 8 453 Integration costs to achieve 5,633 5,267 Adjusted Aerospace Systems Segment operating income $403,484 $319,549 Aerospace Systems Segment operating margin 22.3% 18.4%Adjusted Aerospace Systems Segment operating margin 27.9% 26.0% RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS(Unaudited) Three Months Ended September 30,(Dollars in thousands) 2024 2023 Total net sales $4,903,984 $4,847,488 Total segment operating income $1,106,532 $1,033,014 Adjustments: Acquired intangible asset amortization 140,121 155,520 Business realignment charges 8,908 13,092 Integration costs to achieve 6,411 6,406 Adjusted total segment operating income $1,261,972 $1,208,032 Total segment operating margin 22.6% 21.3%Adjusted total segment operating margin 25.7% 24.9%
CONSOLIDATED BALANCE SHEET (Unaudited) September 30, June 30,(Dollars in thousands) 2024 2024Assets Current assets: Cash and cash equivalents $371,068 $422,027Trade accounts receivable, net 2,712,656 2,865,546Non-trade and notes receivable 317,381 331,429Inventories 2,872,250 2,786,800Prepaid expenses 249,148 252,618Other current assets 511,198 140,204Total current assets 7,033,701 6,798,624Property, plant and equipment, net 2,839,542 2,875,668Deferred income taxes 91,882 92,704Investments and other assets 1,263,190 1,207,232Intangible assets, net 7,747,233 7,816,181Goodwill 10,625,287 10,507,433Total assets $29,600,835 $29,297,842 Liabilities and equity Current liabilities: Notes payable and long-term debt payable within one year $3,515,613 $3,403,065Accounts payable, trade 1,953,477 1,991,639Accrued payrolls and other compensation 407,106 581,251Accrued domestic and foreign taxes 457,761 354,659Other accrued liabilities 1,004,073 982,695Total current liabilities 7,338,030 7,313,309Long-term debt 6,673,303 7,157,034Pensions and other postretirement benefits 427,702 437,490Deferred income taxes 1,544,503 1,583,923Other liabilities 715,948 725,193Shareholders’ equity 12,891,900 12,071,972Noncontrolling interests 9,449 8,921Total liabilities and equity $29,600,835 $29,297,842
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Three Months Ended September 30,(Dollars in thousands) 2024 2023 Cash flows from operating activities: Net income $698,528 $651,072 Depreciation and amortization 229,046 240,387 Stock incentive plan compensation 75,842 77,894 Gain on sale of businesses (313) (13,260)(Gain) loss on property, plant and equipment and intangible assets (8,422) 1,333 Net change in receivables, inventories and trade payables (40,430) (69,280)Net change in other assets and liabilities (223,585) (185,691)Other, net 13,309 (52,496)Net cash provided by operating activities 743,975 649,959 Cash flows from investing activities: Capital expenditures (95,302) (97,746)Proceeds from sale of property, plant and equipment 13,271 710 Proceeds from sale of businesses 884 36,691 Other, net (5,461) 4,351 Net cash used in investing activities (86,608) (55,994)Cash flows from financing activities: Net payments for common stock activity (92,089) (78,148)Acquisition of noncontrolling interests — (2,883)Net payments for debt (408,929) (346,411)Dividends paid (209,937) (190,420)Net cash used in financing activities (710,955) (617,862)Effect of exchange rate changes on cash 2,629 (2,359)Net decrease in cash and cash equivalents (50,959) (26,256)Cash and cash equivalents at beginning of year 422,027 475,182 Cash and cash equivalents at end of period $371,068 $448,926
RECONCILIATION OF FORECASTED ORGANIC GROWTH (Unaudited) (Amounts in percentages) Fiscal Year 2025Forecasted net sales 0.5% to 3.5%Adjustments: Currency (0.5)%Divestitures 1.5%Adjusted forecasted net sales 1.5% to 4.5% RECONCILIATION OF FORECASTED SEGMENT OPERATING MARGIN TO ADJUSTED FORECASTED SEGMENT OPERATING MARGIN (Unaudited) (Amounts in percentages) Fiscal Year 2025Forecasted segment operating margin~22.6%Adjustments: Business realignment charges0.2%Costs to achieve 0.1%Acquisition-related intangible asset amortization expense 2.7%Adjusted forecasted segment operating margin~25.7%
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$22.78 to $23.48Adjustments: Business realignment charges0.39Costs to achieve 0.11Acquisition-related intangible asset amortization expense 4.21Gain on sale of building (0.08)Tax effect of adjustments1 (1.07)Adjusted forecasted earnings per diluted share$26.35 to $27.05 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 INFORMATIONBUSINESS SEGMENT INFORMATION (Unaudited) Three Months Ended September 30,(Dollars in thousands) 2024 2023Net sales Diversified Industrial: North America businesses $2,100,324 $2,229,906International businesses 1,355,834 1,388,622 Segment operating income Diversified Industrial: North America businesses $484,563 $506,053International businesses 298,983 300,701
RECONCILIATION OF ORGANIC GROWTH (Unaudited)Three Months Ended As Reported Adjusted September 30, 2024 Currency Divestitures September 30, 2024Diversified Industrial Segment: North America businesses(5.8)% (0.5)% (0.3)% (5.0)%International businesses(2.4)% —% —% (2.4)%
RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS(Unaudited) Three Months Ended September 30,(Dollars in thousands) 2024 2023 Diversified Industrial Segment: North America businesses sales $2,100,324 $2,229,906 North America businesses operating income $484,563 $506,053 Adjustments: Acquired intangible asset amortization 42,975 44,683 Business realignment charges 3,444 2,584 Integration costs to achieve 605 945 Adjusted North America businesses operating income $531,587 $554,265 North America businesses operating margin 23.1% 22.7%Adjusted North America businesses operating margin 25.3% 24.9% (Unaudited) Three Months Ended September 30,(Dollars in thousands) 2024 2023 Diversified Industrial Segment: International businesses sales $1,355,834 $1,388,622 International businesses operating income $298,983 $300,701 Adjustments: Acquired intangible asset amortization 22,289 23,268 Business realignment charges 5,456 10,055 Integration costs to achieve 173 194 Adjusted International businesses operating income $326,901 $334,218 International businesses operating margin 22.1% 21.7%Adjusted International businesses operating margin 24.1% 24.1%