Parker Hannifin (1PH) Q1 2027 Earnings Report

The call was strongly positive. Parker reported record sales, organic growth, margins, earnings, orders and backlog, raised full-year sales, organic growth, margin, EPS and free cash flow guidance, and described broad-based demand across its markets. The main challenges were higher acquisition-related interest expense, temporary Filtration Group margin dilution, slightly lower year-over-year free cash flow, currency pressure and weakness in Latin America and oil and gas, but management expressed confidence in the outlook and integration plans.

For fiscal year 2027, Parker raised reported sales growth guidance to 16% to 19%, or roughly 17.5% at the midpoint, including $1.85 billion of Filtration Group sales, roughly 10.5-months of ownership, approximately 9% of the sales change, and a currency drag of 0.5; organic growth guidance is 7.5% to 10.5%, or 9% at the midpoint, with Aerospace and Defense at approximately 10% organic growth, in plant and industrial at high single digit growth, transportation at high single digit growth, Off Highway at mid single digit growth, energy at mid single digit growth with oil and gas flat this year, and HVAC and refrigeration at mid single digit growth. Aerospace organic growth is 10% at the midpoint, industrial North American businesses organic growth is 8% at the midpoint, and industrial international businesses organic growth is 9.5% at the midpoint; adjusted segment margins are expected to be 27.9%, a 20 basis points increase versus the prior guide and a 60 basis points increase versus prior year. Guidance includes $210 million of Corporate G and A, $90 million of other expense, $690 million of interest expense, a 22.5% tax rate, adjusted EPS of 36.85 with a range of plus or minus $0.40 and a 48%, first half 52%. Second half split, and free cash flow of $3.5 billion to $4 billion, or $3.75 billion at the midpoint, with conversion approximately 100% for the year; Filtration Group is expected to contribute $0.50 of adjusted EPS accretion and $40 million of synergies this fiscal year, with $220 million of cost synergies targeted. For Q2, reported sales are forecasted to be nearly $6.2 billion, a 19.5% increase versus prior, organic growth about 10%, adjusted segment operating margins 27.6%, and adjusted EPS $8.82; commercial aftermarket growth is high single digit for fiscal year 2027, EMEA guidance is low single digit to mid single digit growth, Asia Pacific is mid teens organic growth, Latin America is low single digit organic growth, commercial OEM is mid teens growth, commercial MRO is positive high single digit growth, defense OEM is high single digit growth, and defense MRO is mid single digit growth.