• Parker Reports Fiscal 2025 First Quarter Results

    Source: Nasdaq GlobeNewswire / 31 Oct 2024 07:30:54   America/New_York

    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 bps
    • Cash 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 basis
    • EPS 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 Growth
    Sales$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 margin
    • HVAC returns to growth, while delays impact in-plant and energy markets
    • Softness continues in transportation and off-highway markets
    International Businesses   
    $ in mm       
     FY25 Q1 FY24 Q1 Change Organic Growth
    Sales$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 margin
    • Positive sales growth in Asia, offset by continued softness in Europe
    Aerospace Systems Segment             
    $ in mm
     FY25 Q1 FY24 Q1 Change Organic Growth
    Sales$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 margin
    • Outstanding 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 positive
    • International orders turned positive on Asia improvement
    • Aerospace 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 Miller
    216-896-3258216-896-2708
    aidan.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, 2024
    Diversified 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  2023
    Net sales    
    Diversified Industrial $3,456,158 $3,618,528
    Aerospace Systems  1,447,826  1,228,960
    Total net sales $4,903,984 $4,847,488
    Segment operating income    
    Diversified Industrial $783,546 $806,754
    Aerospace Systems  322,986  226,260
    Total segment operating income 1,106,532  1,033,014
    Corporate general and administrative expenses 48,794  55,656
    Income before interest expense and other expense, net 1,057,738  977,358
    Interest expense  113,091  134,468
    Other expense, net  69,461  22,455
    Income 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  2024
    Assets    
    Current assets:    
    Cash and cash equivalents $371,068 $422,027
    Trade accounts receivable, net  2,712,656  2,865,546
    Non-trade and notes receivable  317,381  331,429
    Inventories  2,872,250  2,786,800
    Prepaid expenses  249,148  252,618
    Other current assets  511,198  140,204
    Total current assets  7,033,701  6,798,624
    Property, plant and equipment, net  2,839,542  2,875,668
    Deferred income taxes  91,882  92,704
    Investments and other assets  1,263,190  1,207,232
    Intangible assets, net  7,747,233  7,816,181
    Goodwill  10,625,287  10,507,433
    Total 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 $3,403,065
    Accounts payable, trade  1,953,477  1,991,639
    Accrued payrolls and other compensation  407,106  581,251
    Accrued domestic and foreign taxes  457,761  354,659
    Other accrued liabilities  1,004,073  982,695
    Total current liabilities  7,338,030  7,313,309
    Long-term debt  6,673,303  7,157,034
    Pensions and other postretirement benefits  427,702  437,490
    Deferred income taxes  1,544,503  1,583,923
    Other liabilities  715,948  725,193
    Shareholders' equity  12,891,900  12,071,972
    Noncontrolling interests  9,449  8,921
    Total 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 2025
    Forecasted 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 2025
    Forecasted 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 2025
    Forecasted earnings per diluted share$22.78 to $23.48
    Adjustments: 
    Business realignment charges0.39
    Costs to achieve 0.11
    Acquisition-related intangible asset amortization expense 4.21
    Gain 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 INFORMATION
    BUSINESS SEGMENT INFORMATION   
    (Unaudited) Three Months Ended September 30,
    (Dollars in thousands)  2024  2023
    Net sales    
    Diversified Industrial:    
    North America businesses $2,100,324 $2,229,906
    International businesses  1,355,834  1,388,622
         
    Segment operating income   
    Diversified Industrial:    
    North America businesses $484,563 $506,053
    International businesses  298,983  300,701


    RECONCILIATION OF ORGANIC GROWTH    
    (Unaudited)Three Months Ended
     As Reported     Adjusted
     September 30, 2024 Currency Divestitures September 30, 2024
    Diversified 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%

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