Aerospace growth and industrial softness
Parker-Hannifin posted a 19.2% year-on-year increase in aerospace sales in its fiscal fourth quarter ended June 30, 2024. Its larger diversified industrial business recorded a 4.1% sales decline. The aerospace business serves commercial and military manufacturers, supplying original equipment and aftermarket services. Demand softened for transportation and off-highway products in North America, alongside weaker European demand and a slow recovery in China. The motion-and-control manufacturer is based in Cleveland, Ohio, in the United States.
Quarterly sales reached $5.19 billion against a $5.08 billion analyst estimate compiled by LSEG. Adjusted earnings were $6.77 per share against an estimate of $6.22. Full-year adjusted earnings reached $25.44 per share; Parker’s initial fiscal 2025 forecast was $26.30–$27.00 per share. Shares were up 9% in pre-market trading on August 8, 2024.
Two businesses and a manufacturing network
Parker’s fiscal 2024 business comprised Diversified Industrial and Aerospace Systems. The two segments accounted for 73% and 27% of annual sales respectively. The company maintained approximately 335 manufacturing plants at June 30, 2024, with facilities across 36 U.S. states and 42 other countries. It owned most manufacturing plants and also operated leased manufacturing properties, sales offices, administrative facilities and distribution centres. No individual manufacturing facility was material to its overall operations.
The industrial business sells standard components and products manufactured to original-equipment specifications, including replacement products. It reaches customers through field sales employees and independent distributors. Aerospace regional sales organisations sell airframe and engine systems directly to manufacturers and end users. Parker offers hundreds of thousands of part numbers; no single product contributed more than 1% of fiscal 2024 sales. Independent research and development costs were $253 million in fiscal 2024; pre-production expense associated with development contracts was $45 million. Its product families include:
- Industrial pumps, valves, actuators, seals and fluid-conveyance products.
- Aircraft fuel systems, flight controls, braking systems and thermal management.
- Filtration, sensors, diagnostics and electric-power equipment.
Leadership across industrial and aerospace groups
On October 30, 2023, Parker announced the retirement of Fluid Connectors Group President William R. “Skip” Bowman and Aerospace Group President Roger S. Sherrard, scheduled for December 31, 2023. They had served the company for 40 and 34 years respectively. The board elected Patrick M. Scott and Jay P. Reidy to succeed them, effective January 1, 2024.
Scott, elected to lead the Fluid Connectors Group, had led the Fluid System Connectors and Gas Turbine Fuel Systems divisions and served as Meggitt integration leader. Reidy, elected Aerospace Group president, had managed Precision Fluidics, Advanced Atomization Technologies and Gas Turbine Fuel Systems operations before becoming an aerospace operations vice president.
The first full quarter with Meggitt
Parker’s fiscal 2023 second quarter ended December 31, 2022. Sales reached $4.67 billion, up 22% from $3.82 billion a year earlier; organic sales grew 10%. Chief Executive Officer Jenny Parmentier identified it as the first full quarter including Meggitt. Reported net income was $395.2 million, compared with $387.6 million. Adjusted net income was $618.9 million, compared with $582.2 million. Acquisition and divestiture expenses were among the items included in the company’s reconciliation of adjusted results.
North American industrial sales increased 18% to $2.14 billion, with operating income of $419.9 million. International industrial sales were flat at $1.40 billion, with operating income of $285.5 million. Aerospace sales rose 84% to $1.14 billion. Aerospace operating income was $8.8 million on a reported basis and $234.6 million on an adjusted basis, equivalent to an adjusted margin of 20.6%. Year-to-date operating cash flow was $1.08 billion, or 12.1% of sales.
Sales and orders in fiscal 2023’s third quarter
For the quarter ended March 31, 2023, Parker recorded sales of $5.1 billion, up 24% from $4.1 billion. Organic sales grew 12%. Reported net income reached $590.9 million; adjusted net income was $771.9 million. North American industrial sales rose 16% to $2.3 billion, while international industrial sales increased 6% to $1.5 billion. Their reported operating incomes were $489.3 million and $329.5 million respectively. Aerospace sales increased 89% to $1.2 billion, with reported operating income of $133.9 million.
The aerospace business’s adjusted operating income reached $281.3 million, representing 23.5% of sales. From this quarter, order comparisons included acquisitions in both periods and excluded divestitures. At constant currency, company orders increased 2%; North American and international industrial orders each declined 4% on three-month averages. Aerospace orders increased 25% on a rolling twelve-month average basis. Parmentier described Meggitt integration and synergies as ahead of schedule.
The fiscal 2023 annual results
Parker ended fiscal 2023 with annual sales of $19.1 billion, compared with $15.9 billion in fiscal 2022, a 20% increase. Organic sales growth was 11%. Reported net income reached $2.1 billion against $1.3 billion; adjusted net income was $2.8 billion against $2.4 billion. Operating cash flow increased 22% to $3.0 billion, or 15.6% of sales. Full-year reported earnings were $16.04 per share, while adjusted earnings were $21.55 per share.
In the fourth quarter ended June 30, 2023, North American industrial sales rose 10% to $2.3 billion and international industrial sales increased 6% to $1.5 billion. Aerospace sales rose 90% to $1.3 billion; its reported operating income reached $327.6 million and adjusted operating income $331.4 million. Parker reduced debt by $846 million during the quarter. Its initial fiscal 2024 outlook called for total sales growth of 3%–6%, with adjusted earnings of $21.90–$22.90 per share.
Fiscal 2024 began with different growth rates
In the quarter ended September 30, 2023, Parker’s sales increased 15% to $4.8 billion. Organic sales growth was 2%. Reported net income reached $650.8 million; adjusted net income was $776.4 million. Operating cash flow was $650.0 million, compared with $457.4 million a year earlier. North American industrial sales grew 5% to $2.2 billion, and international industrial sales increased 2.5% to $1.4 billion.
Aerospace sales rose 65% to $1.2 billion. Aerospace operating income was $226.3 million on a reported basis and $319.5 million on an adjusted basis. The adjusted aerospace margin reached 26.0%. Industrial adjusted margins were 24.9% in North America and 24.1% internationally. Parmentier linked aerospace’s performance to the Parker-Meggitt combination, which had reached its first anniversary. At constant currency, total orders increased 2%; aerospace orders increased 24% on a rolling twelve-month average basis.
The second quarter’s industrial and aerospace figures
The quarter ended December 31, 2023 brought sales of $4.8 billion, up 3% year on year, with organic growth also at 3%. Reported net income was $681.9 million against $395.2 million a year earlier. Adjusted net income reached $802.4 million against $618.9 million. North American industrial sales declined 1% to $2.1 billion, while international industrial sales were flat at $1.4 billion.
Reported operating income in those industrial businesses was $461.9 million and $290.5 million respectively. Aerospace sales grew 15% to $1.3 billion. Its reported operating income rose to $263.1 million, with adjusted operating income of $346.9 million and an adjusted margin of 26.5%. Year-to-date operating cash flow increased 26% to $1.4 billion. At constant currency, company orders increased 2%; aerospace orders increased 21% on a rolling twelve-month average basis.
Industrial sales declined in the third quarter
For the quarter ended March 31, 2024, Parker’s sales were $5.07 billion, compared with $5.06 billion a year earlier. Organic sales grew 1%. North American industrial sales fell 5% to $2.2 billion; international industrial sales declined 6% to $1.4 billion. Reported operating income was $490.5 million in North America and $309.8 million internationally. Their adjusted operating margins were 24.1% and 23.5% respectively.
Aerospace sales increased 18% to $1.4 billion. Its reported operating income reached $289.3 million; adjusted operating income was $376.1 million, equivalent to a 26.7% adjusted margin. Reported company net income was $726.6 million, compared with $590.9 million. Year-to-date operating cash flow increased 20% to $2.1 billion. At constant currency, company orders were flat; North American industrial orders fell 4% and international industrial orders fell 8% on three-month averages, and aerospace orders rose 15% on a rolling twelve-month average basis. Adjusted net income increased 10% to $850.7 million, compared with $771.9 million a year earlier.
Clean technologies and manufacturing-site measures
Parker’s November 2023 sustainability statement placed more than 40% of fiscal 2023 research and development within its clean-technology portfolio. The identified areas included electrification, hydrogen and sustainable aviation fuels. The company described approximately two-thirds of its global technology portfolio as supporting electrification, lighter equipment, cleaner energy sources or other environmental applications. These were Parker’s classifications of its products and development work. Batteries and fuel cells were among the energy sources addressed by the portfolio.
At operating sites, Parker completed solar-panel installations, lighting retrofits and heating, ventilation and air-conditioning upgrades during the fiscal year. It maintained goals to reduce carbon from its operational footprint by 50% by 2030 and achieve carbon neutrality by 2040. The company reported a 45% reduction in its recordable incident rate and a 33% reduction in its lost-time incident rate over the preceding five years. Parker and its foundation contributed more than $9 million to charities supporting science and engineering education, community needs and sustainability.
The separately dated fiscal 2024 sustainability update
Parker released its fiscal 2024 sustainability update on February 25, 2025. The company had initiated more than 300 energy-footprint projects since fiscal 2019, including process improvements, compressed-air measures, HVAC changes and lighting upgrades. It reported a 23% reduction in Scope 1 and Scope 2 emissions between fiscal 2019 and fiscal 2023. The technology examples included hydrogen applications, the Parker Ebrake electric braking system and mobile electrification.
For fiscal 2024, Parker reported that 73% of sites had no recordable incidents. Its recordable incident rate had fallen 45% over the preceding five years. The company’s supplier programme targeted a 15% reduction in absolute Scope 3 emissions by 2030 and 25% by 2040, covering materials sourcing, logistics and services. It also introduced demand and capacity tools for supply-chain visibility. Parker and its foundation contributed more than $11 million to charities, while employees performed approximately 15,000 hours of community service during fiscal 2024.
A later divestiture changed the portfolio
On November 4, 2024, Parker completed the sale of its North America Composites and Fuel Containment Division to SK Capital Partners. The division operated six manufacturing locations across the United States and Mexico, with annual sales of approximately $350 million. It manufactured engineered carbon-fibre composites and fuel-containment solutions. The business had entered Parker’s North American diversified industrial operations through the Meggitt acquisition in 2022.
Parmentier described the sale as part of Parker’s assessment of whether particular businesses could operate more successfully under another owner. She identified SK Capital Partners as having the relevant expertise for the division’s next stage. Those comments expressed management’s view of the transaction and its future potential. Lazard acted as Parker’s exclusive financial adviser, and Jones Day provided legal advice.
Fiscal 2025 results provide a later operating update
For the year ended June 30, 2025, Parker recorded annual sales of $19.9 billion and organic sales growth of 1%. Reported net income reached $3.5 billion, up 24%; adjusted net income was $3.6 billion, up 7%. Reported earnings were $27.12 per share, with adjusted earnings at $27.33. Operating cash flow increased 12% to $3.8 billion, equivalent to 19.0% of sales. Total segment operating margin reached 23.0%, or 26.1% on an adjusted basis.
Fourth-quarter sales were $5.2 billion, with 2% organic growth. Reported quarterly net income was $923 million and adjusted net income $992 million. Aerospace’s backlog reached $7.4 billion; its rolling order rate increased 12%, while the company order rate was 5%, at constant currency excluding divestitures. Parker repurchased $1.6 billion of shares during fiscal 2025 and agreed to acquire Curtis Instruments to expand electrification. Its initial fiscal 2026 guidance was for 2%–5% sales growth and adjusted earnings of $28.40–$29.40 per share. Fiscal 2026 organic-growth guidance had an approximately 3% midpoint. Reported fourth-quarter earnings were $7.15 per share; adjusted earnings were $7.69.
The manufacturing footprint and order book in 2025
At June 30, 2025, Parker maintained approximately 322 manufacturing plants. Its facilities were situated in 35 U.S. states and 42 other countries. Most manufacturing plants were owned; leased properties also included factories, distribution centres and offices. The fiscal 2025 sales mix was 69% Diversified Industrial and 31% Aerospace Systems. Industrial products continued to serve both original-equipment and replacement markets, while aerospace products covered commercial transport, regional transport, defence aircraft, helicopters, business jets and energy applications.
The company’s fiscal 2025 filing defined backlog as written firm orders, including only scheduled or released portions of blanket purchase orders. Backlog stood at $11.0 billion, with approximately 71% scheduled for delivery within the following twelve months. The corresponding fiscal 2024 backlog was $10.9 billion. Parker stated that its broad product range and global operations made the overall business generally non-seasonal. No single product contributed more than 1% of fiscal 2025 sales, across hundreds of thousands of part numbers. The backlog’s dollar value was the amount expected to be billed to customers and recognised as sales.
Leave a comment