Parker-Hannifin (PH) 8 Aug 242024 Q4 Earnings call transcript

Hello, and welcome to the Parker Hannifin Corporation Fiscal 2024 Fourth Quarter and Full Year Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the conference over to Todd Leombruno, Chief Financial Officer. Please go ahead, Todd.

Thank you, Kevin, and good day, everyone. year quarter fiscal release year-end Parker's webcast. to XXXX and fourth earnings Welcome

this Chief us Chief Todd And Kevin you interest is As said, we and Leombruno, Parmentier. appreciate today thank our in Parker, Jenny for with is Financial Chairman Officer, and joining Executive all on We your me measures. our our speaking. forward-looking based projections today. If I to items attention our on your the could Slide X, from non-GAAP listed disclosures financial Actual have could draw you results vary will here. find we on forecast Officer

to Our non-GAAP press release, go this under the through were our measures section and presentation morning all we're website for Investors are parker.com. available going the reconciliations released and today financial on at

company year X-hour time reference over that, session. We'll with start to record the what to touch ask try strong call to questions summarizing slot. And I'm fiscal really the really call the achieve for this that on and our Slide was fourth and the some our the both those Jenny open with everyone we'll our great just with aerospace to within take as quarter I'm fiscal also on specifically follow After on remarks, guide our of sets today. by in going journey we XXXX, FY future going businesses. Q&A color possible to hand posted. And really more on us to some our transformation our driven that are you we Jenny then today driving She'll exceptional going many Jenny, some X. released We're to XXXX details portfolio us and year going to is that it provide the as morning strength off 'XX targets.

in our and strength everyone our of thank the balance to of our business the XXXX an Parker today. delivered Win joining and portfolio Strategy. outstanding and Todd, of people, you, Thank the call system fiscal The the year on for you dedication value

'XX. We year met our goal top or Systems company stellar growth, exceeded the safety quartile expansion. many portfolio to FY team margin a of aligned by of in segment. our points safest On the strength of performance, commitments by highlighted the delivered was industrial be Aerospace low single-digit We produced for world. XXX The our our delivered with basis sales

Our top of per earnings of XX% earnings cash record And XXXX. generated of billion. flow grew on fiscal in XX% we growth $X share year free

fiscal the ahead Parker has promising targets strong 'XX guide see for year our fiscal very a we and future have from year set as you'll XXXX.

Next slide, achieving full segments the sales $X with growth, delivered look strength sales was it And Meggitt, we first of 'XX. ahead. for over a year All our more sales, than year in the double-digit continues please. and year billion as market Xx record fiscal aerospace,

are well We our programs, base value large leading aftermarket on positioned growth. as our for drive content continued as will customers, and create installed for continue will extensive our significant to growth with portfolio

please. slide, Next

this and secular and of transformation portfolio of in acquisitions to distribution illustrated story. portfolio secular strategy a be Europe XX% mix. our expect 'XX. continuing our cycle, and longer aftermarket although have and is secular by further industrial whole fiscal on-purpose fiscal And As transformation to expand and year not CLARCOR the longer contributed to of cycle, see it's of Lord aerospace slide, The Asia greatly cycle the part longer mix revenue this our the transformation, on in 'XX. and the aftermarket, expanded and year big We

composites divest have acquisition. North business we that last with American an came Early the to signed the that week, we agreement announced Meggitt

we during portfolio. Day, Investor continue optimize As our our to mentioned

process, this find It's a greater that owner. owner. be we are aligned Through future. owner this best is they with the businesses our successful confident will great business best playbook and we products, that Our not core with in the different and we team, identifies determined value not are a that

These slide, we presented in May. please. messages Investor are X our the at Day key Next

We are technologies growth secular positioned interconnected for and with the our trends.

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in Aberrational 'XX creates confidence have fiscal May. of lean expand targets driving Investor culture through tools, launched the and And excellence, years at a achieving year we our improvement continuous in our growth margins. Day

drives of allowing and Next that engagement Parker. our are foundation drives be to people cash. of Safety, quartile living our deployers the It's slide, up reminder, please. to And of performance, us what and as and culture. generators top a purpose ownership our great

I'll review outstanding our results. fourth turn back it quarter to Todd to

It On was quarter. I Jenny. to the fantastic Thank some talk to just fourth really year company. like would for X, the Slide a take time you, about

They of levels again, also the the QX be a happen Once to this this exceptionally gold company. was on highest an number we performance experienced quarter fiscal every year. page is strong for in record. box QX that this

very currency. in headwind in growth from our a really $X.X was Organic turned The was bit than better expecting little X% nearly unfavorable positive sales we currency billion almost Total and X%. quarter. guidance. unfavorable of sales year. were X% sales into That another what the reached were We were slight with up divestitures almost prior at impact, just roughly

this, you we the time margins, of Jenny If generated first in for the improve the operating from XX.X% And but segment year. basis adjusted for mentioned company, we margins at operating history them a points quarter. look segment prior did XXX

greater, XXX Same story points. EBITDA The margins. with little increase a was bit basis

margins. XX.X% did we quarter, the EBITDA adjusted For

prior look that net return sales. is That million adjusted on from income. adjusted year, income, is XX% up and You XX.X% of a at $XXX net

well, able $X.XX. data to finish our on was share, nice And commitments. a year, year. the just great really quarter. driven That way another prior strong Jenny a was It or $X.XX, our across it team this to it fiscal being exceptionally to as per year. from an mentioned And deliver really way universally Earnings $X.XX up finish engaged the was And it's by the Parker on just globe members. really was point

improvement just share. very earnings is Again, operating year. to to per share bridge all in Strong drive If growth. Slide execution similar is XX% per saw that a on this to continues what story the we earnings we XX, adjusted jump

at look income segment increased million you dollars, of we basically If operating That's EPS XX% by quarter-over-quarter. $XX or $X.XX growth X%. or the

the American made lot really up when share a talked is already, operating Systems we've it per the XX% Aerospace North Diversified growth comes rest. earnings segment income. again to And businesses about for but the this responsible of Industrial over segment once The

expense, segment efforts G&A again, corporate prior on the of in look quarter. $X.XX items again, That versus working was hard been not all If the repeating. we've line, deleveraging our is year. from you really, operating the That at that some favorable just prior really a $X.XX below result year. was income the successful favorable favorable Interest result year, of some of

against paydown. controls the operating whole really the Tax was higher expense were operating EBIT. share prior consistent higher an unfavorable higher of And story on expansion, debt and has cost just disciplined driving being tax from than and, strong and our execution, then but been here year, that $X.XX other keeping with the last bit margin course, a year: throughout was rate just really slightly eye the and both count year, really

way Just finish the year. to a nice

look the jump at If performance. segment XX, Slide let's to we

across were see proud X%, here. every to see You the part margin business inflected We're of could business again, see, and happy Really It's company that. that. Order positive. strong. for really really that's expansion rates to every Incrementals the incredibly positive.

And our backlog remained at levels. near-record

have We billion $XX.X backlog. shippable in

finish So that was a year. way nice the to

Industrial Diversified the at segment. look Let's

in North volume was Specifically point remained really sales negative sales. strong, than full our better was but that Organic $X.X billion America, in growth expectations. X%, a

be America transportation markets off-highway driven by North in and markets. continues to Softness

It X.X. deliver all we But businesses to really to That operating hard despite basis increase margins record. for and North The XXX adjusted volumes, driven were operational our segment Win customers. points, is Strategy a executing American the those by by and working lower able execution, is achieved

That North were to really to of and rates also that. happy did year-over-year America see declines, we improve our negative Order in order string flat. ends

look our markets also that businesses, at $X.X were was slightly the Off-highway down Organic soft. X.X% sales continued you than to be If was over prior growth again, But the better forecast. International billion. year.

And Latin America and regions, Asia Europe, in in negative X%; were from at the be continues across improve look Pac, if negative to QX; we slightly just robust really X%, growth. you which organic did XX%

Margins Same increased margins. basis story on the quarter. the in XX points

on XX.X% margins, expansion International really simplification, productivity segment to Our businesses in International see happy I'm continued margin focused this be And to improvements. businesses. from really generated just those the continue and operating

improvement. the with Order rates positive order rates International of minus at in majority X%, the finished Asia driving in

see QX to as from nice that So well. improve to

business that continues billion But Aerospace reached look if record Aerospace. shine. right, a in $X.X at Systems, we to Sales

of our billion $X.X had business. platforms XX%, double-digit Aerospace Organic across in we've growth, time all within with the First Aerospace. sales of growth

brand-new a increasing strength margins, to great is And XX.X%. in basis aftermarket it Operating record, driven businesses. points the unbelievable and by volumes really XXX

continued of X%. Aerospace orders level at the still order dollar did year, get orders the grow for We highest to and remained strong. rates plus

are looking all So things in up Aerospace.

And cash flow performance. We of XX, Moving also That of a achieve did for want we record the to finished billion. flow, record sales. flow nearly a $X.X cash Slide the increase to of to performance highlight of record. CFOA year. XX% slide, 'XX I XX% a was year. our That's Free XXX%. next FY sales. just $X billion. with also prior cash It's from a XX% increased conversion That's XX%

million, company. some by working excellence. being AR. inventory nice continue generators to has we've want nice cash. efforts of efforts note, supply to had a focus the effort the to on This Really great focus lot want just of really improvements and team. able our Across great I that we really really the on and this made AP were people over on deployers by been chain Really thank in $XXX lot reduce showcasing to But of I capital. and globe, across the year, a we

what you now If in billion. the reduced we X.Xx $XXX cash. adjusted by hit target. since adjusted we debt quarter at Slide quarter reduced debt EBITDA And that We see now $X.X with We $X in to closing EBITDA have fiscal by had alone. debt is Meggitt, gross we that the to debt you billion And million X.X. if to XX, is our We million net ratios, did by in and $XXX leverage year. the a target debt look now all to jump reduce -- can over over

great So it up and a it's a just exactly had QX and year. fiscal what we solid forecast, really wraps

that, going outlook our is what for back to I'm everyone I'm going with So know 'XX. to and hand FY and get I that on, to is Jenny, to it focused

that business you This Thank you, on Todd. to in each the introduced sales May, At forecast 'XX this organic our growth Investor key slide. see FY in our our of growth we resulting verticals Day represents X% market vertical, X slide for X%. market of

a guide of Industrial North providing midpoint are 'XX. America guide, At the Industrial International at we for at fiscal year X.X%. X.X%, We have realistic X%, and Aerospace at this

achieving and are track synergies, EPS, continuing expanding We Meggitt of margins. in our confident growing record

it guide a give Todd back to review the more in I'll to little detail.

Jenny. Thank Okay. you,

of and So Slide guide. XX, me some details 'XX the FY I'm on share let now of the

to in Reported will the sales forecasted support second in That the sales equate at and done by we've half our at historically with on splits. sales. XX% to supported Aerospace X% of half, to in businesses. line be the in company sales X.X% in right $XX.X the XX% outside approximately the for then are is first That X.X% so really range Total in is billion midpoint. and modeled or what

FY growth, growth to roughly forecasting specifically X%, a gradual X.X% and look the are organic we're organic at we single-digit X% in the you recovery of markets expecting from Industrial throughout Aerospace, If high the in range midpoint. or growth And X.X%, at 'XX.

businesses, North we full of at midpoint. growth are for X.X% midpoint X% the the of we organic year. forecasting And For are businesses, organic International forecasting American the growth for the the at

from guidance Jenny this organic growth, I that it's first mentioned. growth at include And on second recently sales X.X% you half. divestiture announced the will mix note If half, does look that X.X% the

has to that expecting company. are it time impact quarter, second the in that will on to give an We update and close some the once we closes the

FY couple Strategy. in do The And to about margin a expansion We are, going exactly to our that is and we've versus get plan. continuing margin 'XX, forecasting expansion, what on of year. prior basis mentioned or currency be rates, of that's over we're Jenny done currency X.X% headwind Win spot really the to June we're years implement million XX by advance $XXX of and points XX on that slight last based

either XX.X% Adjusted XX There income is points half. a basis operating on segment of XX% split half, is And operating second range first guidance segment of margin XX% that. the midpoint. side at is

we're incremental based you have the and, we XX% of course, do slightly little incrementals, continued what Aerospace at than a expecting If math higher the on on margins. had bit growth normally That's just Meggitt synergies. in

additional That approximately from on Interest the of other is is Corporate approximately about to be to million. million. $XXX A items expected few And be million G&A million. is $XXX $XX expense expense FY is reduction expected 'XX. a guide. $X

end both as-reported And XX% and range Tax are the ranges at Both EPS we EPS those a tax on year rate, -- of the $XX adjusted are figures of of And or those high end. $X.XX modeling $XX.XX. midpoint. is of rate. low full on the those the

EPS, the XX% it split at half. And is XX% if adjusted second half, look in first you

to range of will at giving the sales. than we billion XX.X% $X.X be respect conversion free $X.XX cash flow, we XXX%. approximately That full cash the to of flow is a to for course, are greater expect midpoint. be of $X billion. In year, billion That And

we the expected be at Adjusted growth see And on right is Organic these sales, And margins specifically this some at plus look be X%. to are specifics, column the midpoint. far are all you'll QX. XX.X%. segment is about $X.XX. to positive. X.X% you forecasting of adjusted EPS page, If Reported

usual, in other guidance provided details several for As appendix. the we've

'XX. very income great our operating just the We'll is $X.XX expense add XX, deleveraging as flow continue this is If $X.XX our and EPS FY we driver main will in efforts. a to did of similar of lower you of cash look what Segment at that growth, have generation That to EPS story Slide our growth. is a interest EPS. result to

tax rate, number. at will you look an the be unfavorable If that

we model a full Just rate. the FY rate a 'XX. reminder a of year XX% a is will had headwind to be favorable tax $X.XX, that compared that of that That really in

Corporate increase G&A headwind is the all $XX just at year-over-year. $X.XX expense or share is look XX walk in, that's of is you our Other midpoint count slightly unfavorable, if $X.XX. just X% and unfavorable, $X.XX. But that to another

back With I'm it ask to that, Jenny, going to and you to XX. Slide hand reference everyone

Todd. Thanks,

As mentioned and Investor a in results, different Parker. demonstrated at our our Day this is

an free by additional than 'XX. cash to EPS more $XX year add and will We generate flow XX% fiscal

from performance Our will The strategy. continue accelerated to Win be

longer a and more cycle have resilient portfolio. We

growth experience continue And secular will great trends. deployers We of to be from and will we generators cash.

Next slide, please.

XX will bell We and are on very New years Exchange proud the Stock to closing the next be Wednesday, ring on celebrating week, XX. York August

I'll turn Q&A. with get us to Todd started back it to

Yes.

the open Okay. . we'll for are first we Kevin, one to the and queue. lines the Q&A, take ready in

first Our from from is Instructions] [Operator question Mitchell coming Barclays. Julian

question around Maybe first just quarter first outlook. a the

bit. maybe off, organic the first talk a guide think, I So to about little sales

the June think I with you're a a deceleration dialing of from even orders. better quarter in bit year-on-year,

big movement demand kind So trends, any any month-to-month? recent of around just very commentary maybe

firm-wide And sales and year-on-year, you're up. for saying growth basically dollars P&L but then sort QX, with of flat on EPS margins the

is there line around? below something moving So the

this is to some historically if take with is Julian, There look that. Yes, is can our from splits QX, seasonality our historical earnings What at and you I we've line what just split. sales done. we're historical modeling in here Todd. going

driven quarter. be year. expecting continues what are guide by in is be But from growth in for organic North and double-digit expecting, X% to organic low growth, the in the Aerospace, America both we plus that down is for is Industrial the total prior to Aerospace. That company international, still businesses, Our which we're

it's single still it's low So but down. digits,

rollup. throughout and our just the best improve to is at that fiscal look that expect year, We

a offset strength of it's So but bit by really aerospace. a industrial right, environment, soft in you're little

If in you margins, just quarter. what look at for did record was the we QX an all-time

record We to that QX for company. are XX.X%, guiding a would the be

not the some proud So softness light easy a It of And it it in that. would on of an business, number pretty is -- about is to the that really side we're be do record. industrial there.

Yes, is a stuff first nothing phenomenon, just but there's below-the-line some quarter that abnormal.

QX, really share earnings what throughout income that We the net the experiencing we year. in supports are of and balance growth and growth per see

That's XX. my Slide would then follow-up be maybe just helpful. And around

outlook in you industrial give on context what year. quarter of you And verticals the particularly So end those end-market sort I please. helpful suppose fourth the and Maybe have color and around you're for that implant implant I'm some any of industrial, maybe that seems could CapEx bit getting focused very just there, like in just the environment rates wondered is on, little out worse piece, markets. a seeing

to Sure, Julian, be happy that. do

improved implant look QX. single you're and in digits it half, as first low in on in negative digit FY our half, see neutral neutral from digit full you single if that And a at the in to you second in the single is equipment, for can 'XX forecasting year. the industrial QX referencing, So guide low low slide the resulting

you automotive mid-single-digit in primarily QX. And light cars at If negative driven transportation, by and was that it look was trucks.

growth single-digit positive because forecasting the heavy-duty first are second automotive we expect We continues negative is low truck half, and in transportation truck growth Work strength growth then. mid-single-digit in to now. half return for the to

that single-digit at So full year growth. is low

second expect offset you year. Inside for are by we half, year, half, mid-single-digit in single-digit forecasting negative QX. same If for single-digit double-digit and low positive. it And construction, the to be high at negative the there, neutral off-highway, the was negative ag first for look we the full this

color that's there. some So

is improving. 'XX, fiscal second in was be mid-single the but for then single-digit half, it HVAC half. the is forecasted for to low digit low first in And energy single neutral QX, digit year negative

low This regulation by these the how on fast through growth and And forecasting up change refrigerant. are half at dependent their first of the mid-single-digit regulation. growth. We second manufacturers get But some a the growth forecast new production recent that's is on under ramp inventory single-digit driven half. is for

So single them digits. we for the at low have full year,

question coming David is from Next Evercore Raso ISI. from

My comfort X.X%. quarter. with are first We organic XQ, on your the into right? can It's have right? sales in We questions the X.X% guide, back

that, quarter, So get get XQ. from you seeing flat year-over-year positive just the get mix on positive in lack But that coming from down X% growth with in do slightly more and why X% the particularly Are XQ that positive. And the wanted slightly it color faster Is for say, easier that's maybe that I XQ, on comps just trying X.X%, going in from, to from of delta first America? color The industrial in XQ. going destocks growth some turning North the ago XQ I any a impression see a little Just getting we to orders. of with more the manufacturers? industrial then comfortable around to get distributors? for it year from essentially to

Yes.

take I'll David. So that,

things Todd Industrial that total sign. X was the for QX. X mentioned to -- mentioned, quarters so of did earlier, a in America end order as in after go And of that So QX rates negative being positive some X% positive Todd that North company order to entry. did improved negative

orders the not going we say a that see up, year that over the to driven I channel We and would that a step Asia by has believe change negative look from out. channel, distribution yet. at trend but X% destocking in International you When played ago, negative the was much X%, it and pretty it's improved Pacific. started

all these are inventory. But add aren't that the seeing placed actually things our We guide. into are them

flat Todd dollars the levels. strong. near-record also QX, remains QX at mentioned backlog with

reason half. we first growth guide the things have into are of with the that we all So good organic the feel numbers these the and baked in

David, agree Jenny with there. said everything I'd

on. As usual, your spot math is

the mentioned in against the prior. easier comps. X% Comps QX than You are

call little the I of to comps. stuff, a out it's that So just all but bit wanted

pricing doesn't new The reason there's I is it seem much for X. asked July like pricing --

may So I'm be. figure to the bump just trying out incremental what's

You're of -- some and, comp saying pickup... bit there's a maybe obviously little

pricing environment. We're back to normal a

easier. more about comps getting those it's So

the to America, on the And guide. be have look baked North flat easier the mentioned uptick, what that half, second into QX But comps. at QX. expect recovery really is Todd industrial is that in you growth If mainly we gradual to we

And We the follow-up, lowest it. the breaking don't indulge if question, that we margins out. other you kind verticals, of X at to mix they're But But with a one would you looking the just between answer this sense verticals we're know me it a of highlighted separately. sense so margins those now obviously, you the I'm could in in format? Aerospace, have of us rank give force X, get to the curious, highest

No, disclose going not to that, we're David.

the Those just the are from really are it's The at of Industrial and -- softness they're a -- International just the margins of would not far those And tell Europe those verticals, that you, all America Diversified across I margins a record segment. businesses off North levels. some look in David. mode. going businesses. kind of factor strong through Asia recovery But are

really performing expansion. margin are businesses well the in All

Next is question from coming Melius Research. from Scott Davis

perhaps Jenny know great the Analyst us you but it hasn't Todd, M&A a year. seeing. since hasn't you're give on and of probably update Day, bit much changed could answer I little an what on and -- congrats probably the another

you little I the to balance up bit clearly sheet space a probably step aggressive. and think more get have

a So I an helpful, of would update think. bit just be little

quite have pipeline. down. bit relationships that. to still Not always is Those That's those a we a different, important us. been we doing and we've of pay relationships, building obviously, but when the working some still And look our really Yes, lot maintaining to you're acquisitions, debt right. we're But focus. to

We're really it all the those in to we the clear growth, that looking it really flow looking is that boxes. of on secular margins, best But I'd are most some that cases, tick based And building cash the EPS, say with timing. trends. to for on deals has accretive resiliency, are where we're and and one those is for owner, thing technologies things the the interconnected

entire core portfolio. like technologies, the X build we we on of see So all and the opportunities to

at, have that different businesses We all of sizes. looking we're

you've built the that bigger is with with too deal something be not that And Meggitt? that's one I that not question going We're that So right next each we're mentioned. get is, criteria I on. a just on than of that's focused focused lot to the one, a all

Okay. lens of And there -- of here looking Or outside the that stuff at that's vertical? are the a growth more kind is -- it small metrics? kind is you -- the that optimization Jenny, Slide or function the potential key more margin that vertical the of divestiture, portfolio and lens guys XX and traditional is a of market

the It's latter.

it's technologies, the have was part see We the business, core we're to of margin our of our and that business profile very core fond it's Aerospace, product of. offering. market Obviously, a expansion that growth. in future this both that's and But

next from Baird. Mig Dobre coming from Our question is

things high industrial behave you. within that your morning. the technology pretty and low-end type. guess quarters single-digit them to been industrial out the whole me that we of of of engineered past would systems platforms Thank down process way couple I downturn stood kind of control filtration, over kind has your Good one the experiencing, materials sort to is of revenue we're remarkably of But the expect this stable. platform kind motion in

guess industrial this why margin is, on seen mix from downturns? bit the within sort of little a And back, there question an than there that from is looking business So Is you've in case? I in business your been prior hanging what this filtration different my has standpoint better? a impact

Yes.

So thanks question, for the Mig.

we engineered last We've the filtration, strategy Aerospace. acquisitions of size on-purpose to that double with acquisitions. X So and materials our that size back double to done think with had the the the if of you

you instance, into engineered the increased business. Lord, you resilient up filtration if the business our in has become that with cycle So when acquisition was take more past. a we than of filtration. of aftermarket picked that's materials, we it greatly CLARCOR, for at And in exposure And where look longer that lot

the bit you X behaving That definitely mentioned. see X a the those little other main reason. so differently you than that groups is And

And the margin impact?

the have accretive, that in The synergies those -- margin been to impact improve Win use the both that been deals where These do they future. successful we to hit. we the were Strategy have is criteria give very would like margins. And just to The acquisitions continue

give this. color you little on a Let me

acted all If you're businesses. we would equally I But top worried, the has been of by you has we line When record control, put those you agree for as motion platform, contributing that tell that exactly to these were that the process margin the margin expansion and you, expected generated we with equally it. [indiscernible]. up those systems that look XX.X, at quarter, flow

happened those Yes. Wouldn't have areas. without X

when And that we the generate, you generators look flow cash are at businesses stellar Yes. well. as cash those

all part helped and as portfolio all mix. the we why It's love of all-time it's sits, So the it's it numbers. generating record

Those technologies are that trends a we and secular participate in portfolio the very important part of about. our talk

Jamie today is from Truist Next question Cook Securities. coming from

good the incremental and organic guide. longer-term your relative quarter targeted range Congratulations your above my nice very I XX%-ish, Todd a a looking on growth guide. question, guess on implied to it's for margin incrementals year, just lower the first or Jenny, at the

there mix organic have is -- above-average you to targeted incrementals would So the versus low your anything range? your allow this in in year unusual a that on growth

the to should X% we're seeing X% incremental your why the I better to given get once be then margins guess organic like growth, today? than is, And just you already question what follow-up that

were on And as to then, The your orders like Jenny, Anything April? on it International. you're surprised -- want I'm and expectations to order talk cadence since there me do did outperformed ask both where can America saw the North anyway. you going well? And probably answer to Industrial not you the what going of to but to this,

We let me appreciate incrementals. the on is Todd. that. Jamie, This quarter. start Yes, the the Thank of you recognition for

is little growth strong higher Aerospace company little in operating works But bit bit cycle, that a incrementals funny, kind a for we profile the and little way than bit a XX% is historically the is That the are it incrementals we really do The forecast. so could right. than on challenge better, think over the margin sometimes driving be line. with Aerospace, normal. a the is higher the math what You're might we it right? top the Aerospace sometimes have the of at,

We promised million for also the Meggitt. we to that $XXX are have synergies in committed

in million of synergies 'XX. 'XX expect We versus FY $XX FY incremental

putting we've higher where that's So bit than Aerospace a been little at. historically

see And the Industrial at businesses, when in you even margin still low-growth expansion top we look line a environment.

numbers. put with when that you that's how came together, up So all the we

So we that. But focused deliver team the and good energized on that. really we making is that feel sure about

May orders. from with ourselves but that call, today talking made an QX. order quarter the we're do, were the normally And the at get continued saw condition encouraged I in what and the start that we obviously, that don't that the end something standpoint, of of about we we did And at Jamie, to the on seeing order comment were I

So what well have we've comments in for made at us. But the by today that orders. QX played is we guide that supported out those the

color So orders. no additional on

Next is Sachs. today from Goldman coming Ritchie from Joe question

the to tackle Todd, a quarter, was great just it the terrific going slightly question margin not year, I'm maybe differently. a year.

And businesses in so, and look, exit strong, the North were Industrial really the International. for rate right, both America

in XX% year of the International squarely and look either XX.X% the midpoint high segment. this take you If at your the guidance or International, North the at America end a the for for

you you we're growth, If going a guys to it isn't than in expand expect have some going that to environment. could and margins that? be shown even no-growth why guess typically, I better

at for an of Industrial expansion you business. line when going top there all-time ago 'XX targets. Aerospace, at businesses, those points unbelievably this with looking months I'm targets. the right FY smiling. we're at if growth And start. margin is expand you few look on just I'll record off showing and Joe, 'XX this, we're And really she's as well, you that low to FY We basis look XXX number. Well, Jenny, track the a gave an

really feel we good that. So about

If these us, for would number is a you look the throughout of a of quarters it bit be year, every seasonal outside numbers. margin cadence record X the aggressive at of QX, and they're increases, little volume, which

that's feel of have we into guide. we That's And that our went in. what all what that So kind today. was confidence

Strategy, -- teams. in a to believe margins, And up in realistic. back fantastic isn't but Yes. We we I exit believe is that guide But rate. for to easy. continue this was Win our a is isn't year, a this saying, this by ability would this our expand slam a fantastic it's just obviously, The dunk it

Okay. Got question you'll the... is But easy. the it. make I'm look it sure follow-up

We'll try.

Yes.

that to So to you you're continue down debt. mentioned planning pay still

congrats You so X that. question leverage I was earlier know net down there around leverage got M&A. your to turns, ratio, a your on

what's capital forward? to well? to just buy So get bit about before side. thinking And you us the are to priority about that front-footed opportunity Like a with shares then to to as you that how little there M&A leverage deployment bit more on you is right talk an back a want of the little going get kind continue ratio

get a very Yes, and got we great Joe, it's there, a EBITDA team very question. operate hard to to was proud It really we're easy, target It's about net We've that. adjusted to been the around here. leverage. to We talk was our but something get clear, constantly worked debt about X.X there. not

way out the debt service is way have goes all structured, that our into XXXX. The we debt a

to able in has that be top going it's to be the differently. going help line just would to to earlier. a be will been not down -- to capital to cash mentioned accretive work I It's we And our It's our to that we have not deals, to have cash that But grow right generate. to the you, going deal. as It's going deploy towards we than preference good EPS So our able Jenny available. to that's different It's to the to got tell be be putting got margins. it be we'll company one pay our continues accretive. generate feel as happens be be debt. to to to way to continue what good optionality It's

can't deploying that done, a minimum, assure we is about no those be elsewhere. we get year. record our And a bare $XXX going. going buyback going million to if to you at could our have And we that We're worries share that. We're dividend and I will active. do keep

said. deal up the the the back we'd Parker. like we and And we'll always don't if way believe . in shares, timing future, I in to like line the Todd mean, one buy

is question Jefferies. Stephen Next from coming from Volkmann

in Todd, just 'XX. said the synergies FY Great. Meggitt it missed you I when

those Yes. synergies. Meggitt We increased

committed quarter and We're FY $XX what accumulated the third synergies or million of the 'XX to is in that think $XXX I quarter, million FY $XXX the the in million 'XX. 'XX. an was at additional end would in were million That be second $XX FY the number.

out, if the back then I'm for margin And that it. Got Aerospace? just think, mentally, other trying add relative in I to to did mix how much sort drivers of

especially Aftermarket everything Aerospace is I in right is strong. mean booming now. Yes. really

the of been highest-margin robust. the business. You that we and is business it's That know really have, profile

what for I you quarter, was did at if XX% So think they look it margins. the

for we in forecasting And gets of look XXX us at 'XX, it's are another you points basis margin XX.X% expansion what ballpark. If FY that Aerospace.

Aerospace. margins So really strong in

kind aftermarket what of headwinds should normalizes worried think is, But scenario? guess assuming some potential maybe the about trying mix if point, I I'm big we assumption, of I Great. that does, to in a it don't that's OE know. kind at about margin be that

what of team improved tools -- best forecast have the that we've team, I And with you, store. speak really company, about really No. multiple to And our tell verticals. good remain the in 'XX we the When 'XX, team. about we of our our has you all We of but look at would we've tools feel outside the discussions don't had want across good that in that. Aerospace I FY feel

feel very Yes. We growth. positive air traffic about

not concerned about So we're that.

Jones question from coming next today is Nathan Stifel. Our from

revenue back guide. going go to the I'm to

XX%. XH to as long split, a I as of to for has Parker been For guiding remember, XH can revenue XX%

you've I much to historically. ask, wanted than got larger now So you've a had backlog

out that. So into potentially some visibility better

assumptions forward, talking can you're first, spending out But been us into first. coming going it have what CapEx there? macroeconomic is give that half guidance but you've lot in baked any of that on what downturn on about is. and A guys where color into So backlog just of based revenue just that kind went lower you you're you interested visibility competitors second peers of the there. it's got maybe And I'm the --

Aerospace, run to really you half first the the second when that's we about, get organic just Well, XX%, out because pretty at through half for it as into a get comps X.X% talked second we growth In half. and X%, little is bit. is tough have the there. at Obviously,

obviously, So about we good really Aerospace. feel

backlog based the see visibility first look there, our right? information in good at in half. have So the And from guiding as that over the we've minus have We there. When mentioned, we a we orders no North of typical what concerns to we're you QX -- Todd America, and X% customers. a high have that's as X% growth, of we, about, based and we today off off talked organic

Again, we all expect and continued the off-highway in softness transportation year in first half.

do the those going forecasts expect have here, we industrial and recovery, in. for kind that's So of baked verticals. We we've gradual back market as what mentioned a to

growth on are we're the in and is mainly again, inputs the at. looking comps. half, So that it the second uptick is somewhat Those easier

International, In in X.X% at again, first X% half. X.X%. growth, second organic negative the half

but As we rates still mentioned, they're order territory. in negative improved,

that guidance offset assumes Our in positive, by Asia Pacific weakness turns continued Europe.

in the year. that's we're around right growth Again, end-markets neutral full now. guide at softness for looking Europe, the what So in

the into built guide. have we what that's So

what parts looking spur got the that Do the of various that industrial economy? you expectation? underlying the need that some half second assumptions Kind of recovery cuts inform things in that you've of like you're for rate are to interest that in

again, our this us certainly talk about it. AI we the no there's into Yes. helpful, have Nathan, numbers is heard is forecast. doubt What baked Todd. would be about you've Those really --

using. yourself. anything nothing variety macroeconomic a seeing of of that have that we you're outside So we're There's forecasts not

we've Aerospace mainly markets, We really the many, and move And the were to off great orders X%. the a turn we orders minus negative, really glad half to second North performance, seen many, recovery driven were see really the for see It Industrial do in of based years. that's in orders what Industrial many gradual fiscal not of American happy by is year. to

we've So using forecast. to all our what of been that build is

Next is Vertical Jeffrey coming question Partners. Research from from Sprague

lot A A from of of couple here. ground things covered me.

just First, Todd. or Jenny on the divestiture,

I be a parcel But view and you And of moved up, here pieces process kind just of for and shake and of recently this sounds kind kind other as right, of came out reviewing does there's part the of there think could methodically your like should obviously, one-off? kind largely threshold that normal to we and rises, assets. something it Or some that portfolio? margin cause coming structure of out good kind enough it's things additional with your as the acquired? of portfolio it to has what's your

but the anything to would around we At Investor continue Day, that trim we mentioned portfolio, not significant.

But go just Every best analysis significant, again, our be to would trimming we our businesses, some perform. Jeff. of of businesses the analysis. through owner around have year nothing All an a It portfolio.

on share versus in And big could Aero terms of us just buckets, your aftermarket view XXXX with aftermarket? military you also the OE commercial OE for versus

Absolutely.

and are talked very today. digits. forecasting single recovery, as off And digit, about based traffic been there, So wide-body we've really on low commercial ramp-up. OE, we strong aftermarket, double of rates Commercial air high broad-based narrow-body growth again,

And digit again, defense fighters. single proved ], to growth we high repairs, be for And again, aftermarket, defense really OE then great continued increasing have us. the with demand Defense and public-private upgrades. depots increase, [ retrofits, digit. budget mid-single legacy pointing partnerships And to that's for those

at So year high Aerospace, really strong it's going for single to be X.X%. a digit

DeBlase coming from Nicole Deutsche is question from next Bank. Your

color question that's ask the coming can in that press I will confirm number wanted have on North be of segment? all the the And another whether to And revenue just But we margins? just the that the I on divestiture you accretive release. any out divestiture. Industrial was America guess, all to

about It I'd be margin the Yes, no come color close until we expect Nicole, exact do Industrial actual Todd. get is on rather close to It you that North wait to America QX. in sometime of We will that. there's this out businesses. give it. doubt will date accretive, all the segment

core Jenny with talked about maybe perfectly business, It's products. aligned our just it. not a great

it's that business, at look of enterprise $XXX the that we for million you If got value. enterprise value

said, -- more there share once gain closes. like it And that looking So we'll will that. I of to on be finally that be a

then on Got for down you really the it. like And outlook it are be That's to Europe helpful. guys International, expecting sounds again.

China. in you're for seeing And any color what on confirm but you there. your I know If could of it's you, kind thoughts small

Yes.

by positive, in the Europe. Pacific guide that Asia assume does So weakness continued turns offset

So the full fiscal neutral is year for year 'XX. to Europe

in project say QX, increased growth QX due softness low So improved just some single digits continued there. What would in to orders. China, negative I orders and to

there. positive some there's So

think of have just time, I think last in light we Kevin, question. maybe I left, minutes X X

Securities. from from is Final Mizuho coming Brett question Linzey today

Congratulations.

a but specifically on Just the question margin gross margins. outlook,

So another the in seeing now but outlook a as embedding secular in you mix traction you're margin 'XX Are seeing here? lift some you're in year applications. 'XX, gross of strong these higher-than-normal a better

noticing for Thanks XX operating a income that. all will you points Todd. Yes. of here. in been at basis the come majority gross elements on for of We've When segment margin that the vast line. expansion, time that profitability Brett, is this long look of working hard

on some apologize Okay. Got it. if Great. of the outlook construction, the I And the the level distribution then visibility you if was is dimension on I could business your it, between OE, appreciate in color missed adverse on so I wondering but what's Off-Highway, I and OE inventories. off-highway, of

that share a that you perhaps of picture we but can callback. good a today, with have that don't could I up in pick I

any to closing Thank floor question-and-answer the I'd comments. further of session. over like turn back you. our end for the We reached

you. earnings for Thanks our today. us webcast. thank This joining concludes Kevin, to Okay, everyone

As do interest and your appreciate attention, of Parker. always, support we

if of Miller, our If or Jeff a throughout We day the be VP day. guide, it. more anyone's even and any and Relations, the follow-up whether available that's quarter, Relations; Investor questions, of Huo, if everyone on hope great our got 'XX the Director tomorrow, Yan the will needed. Investor year FY I appreciate has

That webcast. you. today's Thank teleconference does conclude and

We thank today. your have a You at this your disconnect time, day. participation for wonderful lines may you and