PH Parker Hannifin 10-Q 2026-09-30 section summaries

Parker-Hannifin — Q1 FY2027 (three months ended September 30, 2026)

Consolidated results

Net sales increased 17.9%. Segment sales totaled $6,019 million, but a $27 million corporate adjustment for IEEPA tariff-related customer returns reduced reported sales; there was no comparable adjustment in Q1 FY2026. FGC acquisition-related costs were $78 million, including $23 million of acquired-inventory fair-value step-up amortization.

Segment performance and revenue mix

FGC contributed $281 million of Q1 sales and is included in Diversified Industrial; its segment operating results were described as immaterial.

Balance sheet, cash flow and capital

Equity less goodwill and other intangible assets implies tangible equity of $(11,832) million. Goodwill was $13,278 million in Diversified Industrial and $2,938 million in Aerospace Systems. Intangible assets had $16,422 million gross carrying value and $4,736 million accumulated amortization at quarter-end, versus $11,827 million and $4,547 million, respectively, at June 30. Q1 amortization expense was $189 million versus $140 million. Estimated amortization is $676 million for the rest of FY2027, then $892 million in FY2028, $871 million in FY2029, $822 million in FY2030 and $778 million in FY2031.

Inventories rose $474 million from June 30 to $3,640 million; the quarter’s cash flow included a $232 million inventory use. Financing cash flows included $12,478 million of borrowing proceeds and $5,257 million of borrowing payments. Stock-based compensation expense was $82 million versus $80 million. Dividends were $252 million ($2.00 per share), versus $228 million ($1.80 per share). Parker repurchased 0.1 million shares for $75 million, compared with 0.6 million shares for $475 million; 18.8 million shares remained authorized for repurchase.

Acquisitions, financing and outlook

Parker acquired Filtration Group Corporation on August 13, 2026, for a $9,304 million total purchase price ($9,102 million net of cash acquired). Preliminary purchase accounting included $5,153 million of acquisition-related goodwill and $4,630 million of acquired intangible assets, principally customer relationships ($4,120 million), patents and technology ($314 million), and trademarks ($196 million). Goodwill is not tax deductible; the valuation uses Level 3 assumptions and the allocation remains preliminary. Pro forma Q1 sales were $6,226 million versus $5,587 million, and net income attributable to common shareholders was $899 million versus $651 million, including acquisition accounting and financing effects.

Long-term debt was $14,640 million, net of $81 million of deferred issuance costs, versus $7,472 million at June 30. Parker drew $7,750 million under delayed-draw facilities for FGC, then repaid the $5,250 million 364-day facility in September; the remaining $2,500 million loan matures three years after August 13, 2026. September debt issuance included $2,400 million of U.S. senior notes at 4.75%–5.30% and €2,025 million of Euro notes at 3.80%–4.375%. Commercial paper outstanding rose to $2,800 million from $1,000 million, at weighted-average rates of 4.0% and 3.9%, respectively. Revolving-credit and commercial-paper program limits increased to $5,000 million each; no revolver borrowings were outstanding. A separate undrawn term-loan facility of up to $2,000 million is available for the pending CIRCOR Aerospace acquisition or general corporate purposes. Scheduled principal maturities include $707 million for the rest of FY2027, $1,208 million in FY2028, $1,533 million in FY2029 and $5,596 million in FY2030.

Backlog was $13.7 billion, with approximately 72% expected to convert to revenue within 12 months. Parker expects approximately $75 million of additional Diversified Industrial realignment charges during the rest of FY2027, mainly for simplification and plant actions; remaining realignment payments were approximately $33 million. It also has a pending approximately $2.55 billion cash acquisition of CIRCOR Aerospace, expected to close in calendar 2026 subject to customary conditions and regulatory approvals. Trade payables included $285 million payable through supplier-financing programs, up from $262 million.

Sales to and services performed for joint ventures were $29 million versus $27 million; cash dividends received from joint ventures were $47 million versus $59 million.

Parker-Hannifin — fiscal Q1 2027

Consolidated results

Sales grew 17.9%, comprising 11.5% organic growth, 6.9% from acquisitions and a 0.5% reduction from currency and other impacts. The “other” impact reflected tariff-related customer returns. FGC and Curtis contributed approximately $349 million of quarterly sales. Higher volume and favorable mix supported gross margin, partly offset by FGC inventory step-up amortization. SG&A growth reflected FGC costs, acquired-intangible amortization and acquisition transaction costs; higher average debt drove increased interest expense. The effective tax rate was 22.3% in both quarters; Parker expects approximately 22.5% for FY27.

Other, net expense included $82 million of stock-based compensation (versus $80 million), $55 million of acquisition-related expenses (versus $13 million) and $21 million of net tariff refunds (versus none). Parker recorded a $27 million sales reduction for tariff-related returns, partly offset by $6 million received from the U.S. government.

Segment results

Diversified Industrial organic sales increased 10.3% (North America 9.4%; International 11.6%). Acquisitions added approximately $349 million of segment sales. North American demand improved across key markets, particularly in-plant and industrial equipment, aerospace and defense, transportation, and off-highway. Its margin was 23.0%, down from 24.8%, as acquired-intangible amortization, integration charges and FGC inventory step-up costs partly offset volume, mix and pricing benefits. International margin increased to 24.0% from 22.4%, supported by volume, mix and pricing; growth was led by Asia-Pacific electronics/semiconductors and in-plant/industrial equipment. Aerospace organic sales grew 13.9%, led by commercial OEM and aftermarket demand. Its margin rose to 26.6% from 25.0% as volume, productivity and cost containment outweighed unfavorable mix.

Backlog and cash flow

Backlog increased as orders exceeded shipments; the Diversified Industrial year-over-year increase also reflected FGC backlog.

Operating cash flow declined mainly due to higher receivables and inventory, taxes paid and $55 million of acquisition transaction costs, partly offset by higher adjusted net income. Investing outflow included $9.1 billion paid for FGC; the prior-year quarter included $1.0 billion for Curtis. Cash increased $210 million during the quarter to $711 million, including $585 million held by foreign subsidiaries. DSO was 51 days (50 at June 30, 2026; 52 a year earlier); inventory days supply was 92 (86; 93).

Acquisitions, financing and capital allocation

Parker completed its FGC acquisition on August 13, 2026, for approximately $9.1 billion net of cash acquired. To help fund it, Parker borrowed $7.75 billion under its 2026 Credit Facilities, repaid the $5.25 billion 364-day term loan in September using proceeds from U.S. and Euro notes and cash, and retained a $2.50 billion three-year term loan. The notes included $2.4 billion of U.S. Notes and €2.025 billion of Euro Notes, with stated rates of 4.75%–5.30% and 3.80%–4.375%, respectively, and maturities spanning FY29–FY36. Commercial paper outstanding was $2.8 billion; the $5.0 billion revolver had no borrowings and $2.2 billion of availability after commercial paper. A separate undrawn $2.0 billion delayed-draw facility may fund the pending CIRCOR Aerospace acquisition or other corporate purposes.

The CIRCOR deal, announced in May 2026, is valued at approximately $2.55 billion in cash and is expected to close during calendar 2026, subject to customary conditions and regulatory approvals. Parker expects to use the 2027 Credit Facility and cash. It intends to pursue strategically suitable acquisitions and consider divestitures where businesses are not a good long-term fit.

Parker repurchased $75 million of shares (0.1 million shares), versus $475 million (0.6 million shares) a year earlier. Of its 20.0 million-share authorization, 18.8 million remained available at quarter-end. Capital expenditures are targeted at 2.5% of FY27 sales, versus a 2.0% long-term target. Parker declared quarterly dividends of $2.00 per share in August and October; it has increased its dividend for 70 consecutive fiscal years and paid dividends for 305 consecutive quarters. Senior-debt ratings were Fitch A-, Moody’s A3 and S&P BBB+; Parker said it met all debt covenants and aims to maintain an investment-grade profile.

Risks and outlook

Parker cites acquisition and integration execution, pending CIRCOR approvals, changing customer and supplier orders, shipment delays, contract and development-program risks, input-cost increases that may not be recovered through pricing, labor and supply-chain disruption, tariffs and trade-policy effects, geopolitical tensions, cybersecurity, regulatory and environmental costs, inflation, interest rates, currency and tax changes, and natural disasters or pandemics. It uses local-for-local manufacturing, supplier diversification, pricing and cost actions, and lean initiatives to address uncertainty. It also extends supplier payment terms through supply-chain-financing programs, saying changes in financing availability are not expected to materially affect liquidity.

Market risk

PH manages foreign-currency transaction and translation exposure from its substantial non-U.S. operations with forward exchange contracts, cross-currency swaps, and foreign-currency debt designated as net-investment hedges. As of September 30, 2026, a 10% exchange-rate move would affect earnings by approximately $146 million through forward contracts, but remeasurement of the hedged items would offset most of that impact. PH said the contracts and associated hedged items do not create material market risk. Derivatives are not held for trading; counterparties are major investment-grade financial institutions, and PH does not anticipate material counterparty non-performance.

PH targets a debt mix of 60% fixed-rate and 40% variable-rate. Variable-rate debt at September 30, 2026 consisted of commercial paper and term-loan borrowings. A 100-basis-point increase in near-term interest rates would increase annual interest expense by approximately $53 million.

Disclosure Controls and Internal Control over Financial Reporting

As of September 30, 2026, the CEO and CFO concluded that the company’s disclosure controls and procedures were effective. Following the August 13, 2026 acquisition of FGC, management was integrating and evaluating the acquired business’s controls and implementing changes where needed. During the quarter, no other changes to internal control over financial reporting were identified as materially affecting, or reasonably likely to materially affect, those controls.

For the fiscal quarter ended September 30, 2026, none of Parker-Hannifin’s directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement. This section reported no financial, operating, or strategic developments.