PH - Earnings call 1 2024 | Parker-Hannifin Corporation

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Operator

Greetings, and welcome to the Parker Hannifin Fiscal 2024 First Quarter Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Todd Leombruno, Chief Financial Officer. Thank you.

You may begin.

Todd Leombruno

Diego. you, Thank Fiscal Parker's First Earnings Quarter Welcome Year Webcast. Release to XXXX

With Leombruno, this for Officer, morning. Banks, Jenny our said, and Diego and Executive Chief our joining today Chief Parmentier, is this Vice everyone As Lee to Todd Financial Officer; is you speaking. us President. Chairman me Thank

vary will disclosures forward of could projections today provide specific our in presentation Actual this to from details non-GAAP areas. financial comments on listed Our our based and be addressing to respect these X the measures. here. projections Slide results items

Our press remain and will all released at release, are this measures morning they for And available presentation there section and this Investors parker.com. non-GAAP reconciliations for available X the under were year.

some fiscal She along first increase the will on then our future. and details with financial as Today, trends, wrap I the up. we then highlights aerospace of fit hour. will will going promising some many reiterate Jenny, transformation, in portfolio Jenny Parker our quarter guidance. And Lee could quarter. is with take detail our strong position our I provide Jenny how secular outstanding is as to questions to to a also going for year and 'XX start

that, Jenny, would to I'll And you. move with And I ask hand X. to Slide to you it over

Jennifer Parmentier

thank driven Win joining our for The was quarter, everyone, call you teams standout strong by a Thank and you, portfolio to Good Todd. QX a and Strategy. morning executing today. our

adjusted basis over of margin. growth all Record EPS flow XX.X%, the over of with sales year margin will of growth reduction XX% quarter, along incidents. above in in and has a priority. operating recordable Safety Record with in our Starting X.X%. XX% XX.X% with cash point a and billion increase segment organic free increase XXX remain segments prior XX% a XX% with coming prior safety, year been $X.X top adjusted

quarter outstanding strong delivered year. Parker combination to the of Meggitt for start a aerospace The an and and

guidance, and in deck. we As of performance, result later go a will this slide Todd our 'XX over FY this are increasing the

slide, size materials. Next transformation before. the filtration of over of years of and doubled have slide this seen the please. aerospace, The last has engineered our Many X portfolio you

As from FY the can longer obvious FY a this, result guidance, mix. cycle of you to to secular 'XX 'XX shift revenue see and a

industrial by have fiscal have year we'll long XX% high in approximately company that and confidence of aftermarket. 'XX, We cycle end the markets

that our just Next slide, evident please. is mix of The spoke backlog. I shift in strong

Coverage this fiscal doubled For XX% year consistent today, in last for to several backlog has total from resilient. quarters. XX% remains 'XX and Parker, has been the

low is have to coverage with high secular backlog and extremely We robust. mid-teens into backlog in single-digit the continues the to the was exposure. changing longer-term growth past, longer-cycle future. support from be will from visibility Xx Aerospace Industrial it what This well now portfolio coverage XXs. acquisitions

Next slide, please.

the have transformed we have and We backlog. strong portfolio,

tool every Let financial and system me growth this Strategy is growth future drivers. and business Win expands the is our system margins. It a in proven sales you that The performance. remind of delivers strategy,

of in result addressing automation. This chain. higher levels increased CapEx equipment decade the and develop the of is reinvestment underinvestment and supply as Macro strengthen well to will last spend investments as

enabling percent made we And great and slide, support of trends. secular have Under margins. new product vitality innovation, our tools that products, increased principles index, new from by rates, acquisitions mentioned on faster our of product sales with the accretive and higher are growth have growth companies and the the aftermarket Simple blueprinting Design as is previous the

secular trends. related the growth from We continue to the benefit to

the from of electrification. years primary diesel no Parker energy commercial aerospace, matter to that what by defense. And and stated, expect growth is, the have with hybrid, Xx today driven we increases to in X.X multiple content previously source As solid to we both electric

With X/X high past technologies, tomorrow, confidence and differently better are than we to we and in cycle. Again, grow X% our we X% for us today, are have this even positioned well all achieve portfolio over clean the to giving the organic of supporting our is of growth truly energy-agnostic.

Next slide, please.

team aerospace XX% We Strategy combination. Meggitt The growth Now our expectations. a is this of And business, are our Win couldn't differentiator happier is for with powerful and Parker. a Parker exceeding and embraced acquisition. This be has

comprehensive areas, system electric tail, and of both offering and of technologies more broad sensors to a management, customers, and nose discussions brought product products new strategic applications. our From OEM with Parker and please. Meggitt is we a has a enabling both breadth and services. engine portfolio suppression, including and slide, Next thermal product for fire avionics have and and aftermarket. braking, detection power. This relationship airframe

point X the Next an top now and slide, with now Meggitt. of into basis a experiencing please. with the aerospace And we balanced trend favorable have at in will drivers mix the This look areas. increase of of XX% XXX each acquisition are sales future. these page, slide growth secular we aftermarket, are we portfolio at a the highlights the the Taking strong

of At page growth the the bottom the drivers. are macro

commercial the we expecting in aircraft double-digit deliveries are On and growth traffic. side, air

military Defense for drive Department very a aerospace. our will the and side, increases. military growth, partnerships mid- the of aftermarket budget long-term future promising On And

over to QX it our the through to go of turn now summary I'll results. Todd

Todd Leombruno

Thank off global of our you, on going Jenny start, Jenny. Slide this, across really results. just here speaks mentioned I'm a the very is the touch some 'XX financial XX strong to to FY to our on and team. begin alignment

sales set We operating earnings per quarter. EBITDA and adjusted segment income this net and share. on records several records margin, margin, an basis, for broke We

impacted growth, up obviously, the prior divestitures. it's XX% versus year, If the by look of you and strongly net acquisitions at sales

look was our little growth. You positive at that to that a over impact, XX%

is points at prior year. adjusted was Organic margin, if increase at was X% quarter. prior margin, of slight an That year. XX.X%, at you growth an remained points XXX operating currency in that look and XX.X%. the basis look EBITDA positive When a segment And favorable basis impact actually was X.X%, of increase you adjusted it XXX versus versus

we income, income. net $XXX million a generated record adjusted net at adjusted in look $X.XX. you was EPS If at And

at items, prior If both you year. of improvement those XX% versus it's look a

we across can't really just say to enough, these are the it's global really portfolio this all results a across consistent pleased I'm our our say work transformation of quarter team, and And execution delivering great And businesses. standout here. that consistent

the to can driver the What XX% continues this you of I main move share, in really this If performance. just be standout $X.XX increase of chart, Slide that's kind to per earnings like about details XX, improvement. operating

quarter. our million. segments all $X.XX really major aerospace by And of in dollars to while That our was business EPS $XXX growth. margin operating segment driver increased We contributed growth, a strength nearly was this the

income both and to those do items with We headwinds also in simply you the interest funding timing that other last If expense line the did favorable repeat this solely some the was related tax, tell line year. of Meggitt expense year's a of of forward. that $X.XX. at $X.XX $X.XX have is expect not settled those going Really, will We based quarter. off look on But to that discrete are you, I items few of of the transaction.

share each, really is and with guided count and And we in line -- is finally, that G&A that were to. what slightly at corporate [indiscernible] just $X.XX

So nothing of concern there.

off record the and in a it broad-based EPS, driven $X.XX is So just offering improvements. that's the really to walk

in just in synergies see, there. And record all results businesses, team. of Meggitt The the Obviously, are as are job by there. margins strong the can across you the great

that, margins segment operating Every XX%. over again, driven On bit first little segment has that the it delivered Slide just adjusted the the about performance, And XX, good company we'll was performance. by just time strong happened. in talk volumes. of a That's really, history

is aligned. quite the global a really team Obviously, synergies very and Meggitt helped just bit,

And look mentioned, you year, prior elevated. again, remains backlog orders the X that did versus versus activity positive order on plus especially we of prior at incrementals, If coverage, are Jenny as remains And robust proud at line. really really number. aerospace incrementals And XX% year.

work great just there. So

we're It's I great continue the been with we very And as to pleased a just X-year that addition celebrate say then anniversary that businesses would outperform. to lastly, those Meggitt, company. really

billion And impacted just you slightly we've that look sales America mentioned at generated the up was volume and of was North by sales. some rebalancing destocking there. growth positive, kind X.X%. quarter. $X.X of We throughout channel If X.X% that specifically, is Organic

XXX If controls. you look points to we just margins And did basis XX.X%. cost at great that was really adjusted operating increase operating obviously margins, and execution

there. work great So

did And if at minus strong versus obviously you X. as look And minus did North North from last they improve They America America, improve backlog in quarter. They coverage X. remains well. orders are in

great America to team. So our work North

growth was versus in That the international is an about increase X. negative businesses, year. $X.X were of prior billion. segment the Organic sales about X.X% In

that down. So was

Asia a And X. positive was America, So documented was result very about had plus. and also the impact X tough the in prior The EMEA that mostly is segment that's also of negative organic X, at positive in Organic growth really that just was well year. driven a growth. China and comps that Pacific, was plus softness that by Latin right? we think I of some a really

growth, at XX.X%. XXX margins, However, operating that segment margins if basis we finished operating you negative expanded X at And even by organic look points. with the

margins productivity, team members on tough So very, expanded a our The team there very in controls. really focused are cost environment.

segment the resilient great, there, across work. performance just So nice very

is conditions choppy. They minus driven to out and of did do that rates China. Order be really to Really, decline X. continue Europe

growth, for Sales was in an year. market double-digit the XX% really Organic billion. XX%. quarter standout right? aerospace. And our Just versus That platforms. business, a quarter that were all of increase aerospace The the at of stellar $X.X from is about was prior robust very aerospace broad-based, growth

very strong there. business is So

Operating by strong Really, record, was basis great a things growth, the airlines, XXX really aftermarket margin that all driven points rate performance. margins, margins, to those new XX%. increasing healthy contributing increases at to unbelievable,

the few did onetime year. a the we note, will do expect rest benefit from we not contractual to those quarter. throughout in our fiscal I settlements And favorable repeat of small

robust. aerospace for business. XX Aerospace orders, already Great the I very but this, future plus mentioned are

cash a If XX, move to Slide you just flow. look quick at

flow operations prior That's Cash year. Our $XXX of XX.X% increased cash flow from was sales. versus million. operations from XX%

Our more, was sales, versus year, XX.X% XX%. XX% finished flow and prior cash cash million quarter. free That's increased free of flow increase even $XXX for the at

committed year, the profile. full flow For to generation our we strong are cash

we course, flow from cash We of will mid-teens of extend And operations. flow are [indiscernible]. conversion free record cash over our XXX% forecasting

to great the flow. cash year So start on

real on our to reduction. to XX. I Slide want Moving quick just touch leverage

reduction knows I are leverage our think focused we everybody on commitment.

by are those scheduled. reduced ahead million. turns. since of billion of $XXX Both X.X that We Meggitt the in and by quarter we've reduced $X.X leverage over originally numbers improved we debt our the close, by what And just

still are X.X to to gross to billion XX at of we debt debt $X look debt it's forecast EBITDA And over you is in EBITDA, over If X.X. adjusted of FY now committed -- and now paydown course, net 'XX.

So great there that [indiscernible]. work

full we on XX, Looking our on the we our midpoint. guidance. incorporate some year. forward did expectations just are Basically, year increasing September XX We EPS growth currency organic rates. Slide are and details for margin And reaffirming

year in the to forecasted now at Reported half. the to second That in roughly sales as or the in always is for will be XX% X% just of X.X% be range XX% X.X% first split half, the growth the it is, midpoint.

X% are We guide, XXX basis from growth now aerospace in XX%. our guidance our raising prior organic points

see business that well. performing So to that's so great

just a growth be is a small a our remain X.X%. prior tweaked offset, headwind just little which to Full Currency company year at is bit. slight is expected now The will to guide. organic

a if Margins, we're of a It what you XX basis increasing points expectation look prior range our look was basis we're the points margin versus margins, expansion to at in of basis we're XX.X. on that our there's At And points midpoint, year-over-year margin XX side to prior guide. XX that. raising year. on if either expectation of change, forecasting at you

off based full interest you guided expect unchanged what to QX of around relatively last look items, we G&A, other quarter. we XX% performance, just strong and And be really year. the at for the margins other to to are if corporate Incremental those the

expect we to rate XX.X. for Tax be QX through QX

at the plus line. EPS $XX. of tax minus. full $XX.XX now about will at if on an $X.XX EPS on range midpoint, on is the to is the the items XX% And So is both year, and look those or you equate that as-reported And adjusted basis

if same, XX% the half, is the needed, QX, in and to be second And usual, at And guidance the for appendix, had. EPS that's adjusted XX% have midpoint. Split more expected are all $X.XX that specifics I now specifically as included half. remains we first

turn to I'll Slide Jenny, back it XX. you,

Jennifer Parmentier

joined last our the Banks, been and has Vice He an effective XXXX. XX, colleague like December during And Todd. in earnings XXXX quarter recognize XXXX, officer to his I and and as you, Thank since be a XXXX. friend, retiring now call. Lee will Parker since company would Chairman director President Lee of

to in of fiscal XXXX, at tenure, total EPS share $X.XX Lee's XX%. grew XXX billion. versus in sales was to $XX.XX During per from 'XX a per share year grew fiscal nearly X% sector year return CAGR shareholder 'XX. industrial Since XXX% adjusted $XX S&P

As around all team I'd like overstate impact had on isn't members our to not week's a company, when of if has our we comments world. possible our It's few of and repeat announced Lee's Lee retirement. this last enough, from positive to obviously shareholder my the tremendous the meeting businesses

recruiting, of for set and proud for key co-creating network to Parker's to importantly of the good From most and versions of short and what and leader leading beyond, His businesses and is many the like probably of to growing operational bar distribution leading Win looks and portfolio. the our talented The to recent driving performance largest transformation our legacy track our excellence global Strategy developing championing what most and and is of leaders extraordinary. was record nothing in he's us Lee's a

Lee, of can't of we us, thank enough. all on behalf you

you. miss nothing And and happiness in your retirement. you We but will health we and wish your family great

Lee Banks

Jenny. Thank you, Todd. you, Thank

Todd Leombruno

you're you going like know we crush Lee, retirement crushed to just [indiscernible].

Lee Banks

I've a plan. got

Jennifer Parmentier

All right.

A 'XX. out QX key a close Next Q&A. before great few to slide, please. messages to this fiscal start year was

engagement in business. will positive results to our Our drive focus on and safety continue

be cycle record, resilient track deployers continue and and revenue Win with our a to been successful proven X.X. The first accelerate going generators goals And the We a Meggitt. of portfolio is mix, year to we're longer It's have us to with allowing and performance FY of 'XX cash. and our a transformation Strategy continue more to the delivering great achieve

future of promising us. very a ahead have We

Back you, to Todd.

Todd Leombruno

going to Diego, for Q&A. call we're the open

So you. Thank we'll take whoever's queue. first in the

Operator

have Andrew Bank our of And America. Instructions] we first [Operator question, Obin with

Andrew Obin

congratulations. But We'll now. definitely started right these when where EPS miss you Lee, are you. are numbers you staggering

a history question would would of the what bit the half gave second subtract sort then just and EPS I than of split, midpoint quite us first you sequential the EPS terms what and first there be be Yes, your guidance printed of in decline a a more take seems half, quarter, just guidance. that you've to in If in the suggest.

Meggitt to that trying the a are in given the Or this And that's items you is different I'm -- of driving? is now, that quarter just have that versus seasonal are implied just that that second there understand, have? the do Parker is -- first pattern onetime quarter numbers going sort to

Todd Leombruno

QX. in obviously quarter performance then Andrew, I is I'll color, seasonality let out I'll really, But Jenny add. take or stellar them got just some got if for at stab the would some a in and that year. a has us QX volume lowest call it. Lee's our It of

about was keep talked your into record. lowest that going hard volume that to a of Every quarter. we number It's kind

do anniversary Meggitt. right, we You're

in a now from be for in standpoint, will that year-over-year base the So base or QX. the it's

we that abnormal So no volume But to it. seasonality really in that and expect other is items would there's around QX. are the onetime It's business. see just that

Jennifer Parmentier

[indiscernible]

Andrew Obin

than verticals? No, holding I American that's expected. little key bit Could by I'll answer. it. North think just better orders. you the more good I visibility other bit have question, in And a provide a a take just they're would

a What's orders little the talk of the what's and a than cadence focus quarter. bit weaker about of on coming throughout orders this Maybe quarter. better in expected, maybe lot just

Lee Banks

this. take I'll Lee. it's Andrew,

So maybe back. a just take I'll step

I've the think read, narrative all I the right. reports is that think I

America get second, into a demand North underlying at it in here still America globally, look you North in but and positive. is fairly I'll If

OEM the balancing There calendar to -- is out their definitely et but inventory I that's not XXXX. too, some distribution to dealers, the going this play And of I taking channel, at cetera. into continue would place, only through with half customers, argue through also dealership, second think levels,

spending North the mean, in lot flooded at look a there's just I all a good. still of in -- money say economy there's been of would lot I taking the it's But And you America. place, infrastructure

look at tough rebounded especially rest only thought it the quarters it's China, you key really, world, be China. on of comps, rebounded have now, got or bigger impact in like a I would the market. And not the X happening Germany but a hasn't Europe it ago. When is maybe just right story would it's -- got X probably in what's

So that's soft.

I If the soft, think, Southeast of Korea, tied Asia, pretty Japan and China. too, at still are strong. But look look India Asia, Asia, to they're you the rest if at of I rest

about there, for MRO, weakness. can't find I markets, American all and I think military, any strong. don't really that some commercial, OEM, going mean, What's on see North in I aerospace aerospace, the I'll When And lump stopping in time. you

X look those aircraft indicators, a kilometers, up you've they've time then seat all lined to hard-pressed in DoD talked that X where you well. coming find had spend available where about, at those that If you're history service indicators Jenny all into and

oil place gas busy. a really count, North MRO America keeping there's and taking rig is lot but There's in Land-based still people less that's of activity strong.

still our at yes, end real off again, they but distribution, the on are good. [indiscernible] if inventory, things And a all not markets, look falling cliff. you It's

just North bit short right the little So feel I of pretty a America place telling end a you, way now. positive We taking markets. got about balancing

Operator

Sachs. comes with question from next Goldman Our Ritchie Joe

Joseph Ritchie

And great fun. We'll Congrats [indiscernible] won't you. miss then, Cleveland to as year. retirement. be start on the to a Lee, trips

Lee Banks

Great.

Joseph Ritchie

of industrial your end So had on any then to do you markets look you question, color -- think today, decelerate? will think you up guys? commentary, to kind market end about Andrew's long had the if maybe portion what across continue those think certain to following end to think like you you And how you on as destock for continuing markets destocking of are if

Lee Banks

I'll and and North at Construction take Todd maybe somewhat trucks, let pile I'll North this, flat. of for think Jenny flat; automotive in heavy-duty flat; in most America, you've really got a part. flat is are stab But like things I is agriculture the America on. kind

inventory I still are demand good But Again, working people through. dealer some overall there. there's that think it's

that of production, some things from overhang COVID we that were there's tied think big still during time. to life the ramp-up I had sciences, period

little the strong. and a comps, tough handling bit. I'll material just still that's leave -- demand is really is down So it Yes,

Joseph Ritchie

Jenny. Go Got it. ahead,

Jennifer Parmentier

Lee's Andrew's of is, things. And to all yours, destocking normalizing, heals, think, to comments. see, as Lee's that as But this we'll as it see just a Just I comments a and helping continuing, with that's to and bit question echo we that think environment. backlog supply this better echo see chain strong of bit we I although a start

Lee Banks

CLARCOR. be bought core other everybody and the -- I to I One I meant out that to Joe, been of Parker way think legacy think knew focused thing what which about, huge cyclical But those And positives. that everybody as would numbers. kind true. is as to when is we we that I the have and in we talking, on panning business. LORD forget don't we be they bought And forgets say was aerospace bought not It's Meggitt, you're about seeing

Joseph Ritchie

That's Great. focus projects, And on orders. Okay. look, timing this of then quarter helpful. big mega

think a U.S. factory kind Do you well see in little the a orders of happening all of start positioned inside is to with equipment stuff in maybe investment the and Parker an the you see come talk more to things you out about bit going that's how lot Just, Jenny, see playing just when inflection through? that's

Jennifer Parmentier

happened great think But happen said about, couple will the a projects, speaking some in for are a participate when it's decade that's of going the and that. Absolutely. big a with as starting channel our there's mean, times, you and other they're mentioned earlier, in last of to We've I I position what factories I in decade, participate. we still semicon some partners, mean, to underinvestment in of some early days. these where in

equipment prepped, when goes when We've land and inside factory. go there the said up the the is walls when we're the

have already how And to distributors some been of to about business. us able our talk enjoying that they're

in that we're as well those good secular So mentioned trends a I really the as earlier. position with

Operator

comes Our Mig from Baird. question next with Dobre

Mircea Dobre

the more going customers really of Congratulations, best elevated to of Lee, Is the stock so backlog. supply in so with level on discussion, forward. the think and a of industrial way and what a and a years question, change built sort back as over you been of past going chains My we've to are backlog sort forth your and ordering? up? to this this you how of function couple is this about function all being I'm of the of through going safety Or curious

Jennifer Parmentier

Mig, Jenny. this is

just as with all we've you getting it's cycle here. made, business think longer acquisitions I But the Lee things that mentioned. we're stated, the

a in we longer a seen So see sense, past. the longer demand horizon demand than we've

So transformation the backlog. of the portfolio impacting is the definitely

their And last been course, kind they pencils sharpening couple years, think the order what people out through times how to I do sure there. see they of making some of on you're the and that lead right have of that going just we've

I that's part it. So think of

now I've backlog we've for quarters about more this portfolio. it But past is the many know seen of in our of the isn't order environment. several a said last the from But bulletproof. we that times, shift really declining

backlog orders to down resilient. have In but might been is this us going And we while going have of forward. has this portfolio go little negative quarters, to a drive America, remained believe that it backlog North kind for our bit,

Mircea Dobre

aero. you on more Right. little follow-up benefit quarter? the is My and in that Can the Understood. settlement contractual specific on a be

else the as of there is really aftermarket in this the something I raise, well, raise? of then terms as a organic talk that about function as driving in that guidance the there? little is market. guidance mean, bit a And well maybe Or

Todd Leombruno

Todd. this is Mig,

a a see growth, big a of those Aftermarket guidance all the That the margin can Activity and driver big raise, of quarter. it standout the in performance. of you was the obviously orders. the big was across was strong. platforms has driver On extremely been

another we little more we're with quarter that bit that. in raise feel just So able confident we to feel a that there

year, moved points we basis and to to about feel confident full XXX we pretty for So the that. XX from X

I I don't little minor, for that so small just to at were and onetime big things. guide rest our wanted year. to would make forward deal it more those I call a bit sense those of if out the make said you going a want about they items. it look the margin

So it's little of that.

Jennifer Parmentier

X of just little this areas, military. going at on aerospace. they're each in see look already, Todd they've but aftermarket, do very increases, and narrow-body we've and the if those said, just guidance, commercial strong -- And a Like commercial mid-teens. these times And more each said color couple of to we in that we to happened, of these look OEM so. forward a is continue to rate it And

is narrow-body at MRO mid-teens. the going pre-pandemic component Commercial a on. and are in almost engine repair restocking aircraft The lot levels. There's of

there. positive very So

Near we then as mid-single-digit And for programs mid- tailwind military Defense to of Department with term, single military our demand digit. repair of depots. legacy MRO, then have OEM, high continue. And some

partnerships. growing. there's and We [indiscernible] continue fleet enjoy public-private And really to service extension. They're

in all X across a great areas. these just just environment of all So all,

Operator

Evercore question David next Raso from ISI. our comes with And

David Raso

some second down just Obviously, given saw. the Best now comes American When it improvement X, X North ago, luck. Lee. quarters we right, orders, congratulations, derivative of to just

think you Given in to orders North you'd America? I'm ease, curious the just do we've starting the the bottom say, seen comps in to be year-over-year are if willing

cadence. the in Can get sales interested you just in organic have update Europe here how do guide. question we I'm us you what year to about then a for And also have full the particularly the organic X.X? And on from I

Jennifer Parmentier

that think crystal were to And I is don't negative X. good is of said, X, restate they Jenny. David, ball. this But a really you went have backlog any I will at strong. negative the and of that us as orders

good feel we about So that.

slightly some unchanged, out look half mostly if the at And positive. America, year, There's but full lower all you at North about there. uncertainty slightly first all, we it's X%, have in

you give can't we're an feel I that, answer good on So now. exact about we at but right where

David Raso

the take bit to though in the organic bit can again, that particular, us Can of I through the in maybe little detail? just sense a whole little Europe, you on was stronger X.X, little for the you help little thought with what's a a expected. a cadence first get company if And than the color guide. quarter maybe a

to trying just sense. get a So

Todd Leombruno

outperform agree David, Europe first did you. Yes, the quarter. in I with

called plus X. total I fantastic plus X. aerospace think The company we that derivative at Obviously, did was XX.

look you it's that second cadence, the really initially, much half-weighted. to guided what If not we at not is than different

comps kind little bit. of a expect We moderate to

did minus again on QX. at about little look you a second X if turns then about Europe But in I half. specifically, second X. in it they the comps expecting bit just would probably We're say X -- goes and QX, in negative based the for it's half,

Operator

Scott from comes question with Davis Research. Melius next Our

Scott Davis

but run. have tough I Great luck indeed, but picturing you time a pleasure been the It's Lee. good in Also, nothing a but... future. congrats, retired,

Todd Leombruno

[indiscernible] Scott.

plan. plan. a got a He's got You've

Scott Davis

of been Yes. more But inventories and have stuff I'm on so. even and Boards such guessing see we'll the you lot around questions asked. a about anyways,

with the and just rates, growth cycle a there some and the growth plan a picture one outsized big on X. to be to Slide businesses? to your back where kind -- you you tweaking the -- you in 'XX. you Jenny, Can Or the kind of get of there is do longer wanted further and with the just I around showed aero of go on want portfolio I So longer-cycle get mean, M&A? rates

Jennifer Parmentier

macro -- have from illustrations latter. investment these the the the the portfolio not tailwind are the today from but CapEx it's that aerospace with and Yes, trends. and secular we We just that we see

Scott Davis

down just the Parker new stores, there -- to are to I'm know comfortable and looking in narrow are was enough. you levels? whether have visibility. really and healed are way, more in the I this pre-COVID. has averages back trying down that chains little But a above then kind been everybody a more supply so asked COVID a inventory so they whether And holds Okay. distribution Fair levels the like they're bit new my here, -- is of up and guys or people different what long-term great through of normal this notes world,

cost of inventory risen, with has too, carrying rates. the higher obviously, And

haven't We had some that in time. quite

any too. So that would there plays comments be and into it how interesting,

Lee Banks

think is it's been. of what Lee. way the carrying inventory from latter. it's would Scott, it's cost The Yes, up I

I down. of has supply chains the quiet insanity to think started

were So I difference inventory before how versus to industrial of forward go are they core a huge be as don't expect what those some we there products about pre-COVID.

Operator

with next Our question comes Research. Jeffrey from Vertical Sprague

Jeffrey Sprague

over just the and all maybe here. help Could stood kind years. the thanks of congrats, really which to margins, come the out for back Lee, we

clear think from I we pretty quarter. probably other companies spreads just pretty that were favorable price/cost this follow it's

talk can know differ I in give you're in embedded you a but tracking where price/cost in how about it's year that want us your from some fiscal 'XX might don't how of and basis, to on sense you saw kind through progressing the isolation, guide? of what price you

Jennifer Parmentier

we now July more and a you we normal out January. what of going we pricing to if So out call where often recall, with we are a price. would And are early and went environment in back

management price/cost a The Win we the obviously, is but don't core Strategy. So disclose of element specifics,

we is to do did of we cost inflation. total just inflation material expanded what And from

we're back feel good about covered, have what and more of a environment. we So we normal to

Jeffrey Sprague

the but getting perspective just little maybe metals are not side so equation. or You've relief, much? you cost fair But some got inflation, Is on of some that other the a relief. cost

Jennifer Parmentier

index, have adjustments, adjustments. some where we few, agreements there's with those there's is very but And which customers, in. have commodities we that's built already Where of

Jeffrey Sprague

accelerated or the thought back margins up about the And them I comment Meggitt to going XXXX. into you've and be you're synergies no then Really talking aero. When okay, saw to just I morning, that. this

it go sure results Todd you're in but synergy of mix. and margins little but of And quarter? mostly synergies, aftermarket one-offs is bit scope the maybe for actually I'm are there here capturing up? like sounds pace, the embedded these to any that But that is on a the that So mentioned little color just in

Jennifer Parmentier

year to 'XX. synergies So million million. $XX recall, the 'XX, increased from then $XX $XX fiscal fiscal million in if we you committed we And in another to year

Todd to we're as mix, going there. mentioned, mentioned, the synergies a really aftermarket, the helped and confident right? very margin boost great -- is the get favorable $XXX Todd are doing as We're lot quarter. team in The That the strong A So just to job. a committed there. too, million, we're in just of is

Jeffrey Sprague

Yes. like it after getting Felt but you're faster, additional there. XX that Great. I'll leave

Todd Leombruno

helped chain Jeff, the No, it obviously, efficiency volumes is has supply -- really on has have combination a mentioned but of eased. side, Jenny the

back out more of year a not has think operations. years or a It's a totally you efficiencies is but businesses. noise look a seeing that that gone if lot it I taken yet, of ago, lot across to X.X our of lot we're all

Jennifer Parmentier

Yes.

Operator

comes Barclays. next Julian with question Our from Mitchell

Julian Mitchell

I Lee best. the all wish

sort my question picture. the to back international on circle first to wanted Just of demand

had So X at last the of I in quarters, X look guess, you've orders if you down X. those

any about the and When you when downturn, marks we most X it's of what on see that in that think just about orders. when if of you in of order pull to start X think you levels, markets, point quarter we of wondered you the and and extremely the slump. cycle orders perspectives international countries on think down you I this duration sort should [indiscernible] that inventory And down an kind of think down set out low of these disparate orders saw

Jennifer Parmentier

choppy line organic segment growth QX said, Well, for Julian, our international, with in orders, while. it's been a was level. In at forecast like prior you

impacting destocking region. is that Low remain continues, end in As there's softness Lee that territory. Eurozone in contraction recovery mentioned, some macroeconomic markets. China And in broad-based Europe, in indicators

say, look China at in semicon construction recovery and But I you in remains continued Asia to hard again, there. There's Pacific, slow. China, if automotive. tell two, So softness would

were is earlier, for a a mentioned because QX year bit of there last shutdown. we from comp they tough QX rebounding As the

X%. So is in have largely at in the guide, the about the no full the we change best first guidance, for year today. so with is line half, This previous big and negative view

Julian Mitchell

they And that of customers of see sort and inventories their of then for on those big a mean the some concerned North talk think what and down, such when lot America get backlog others. does for as investors about mobile suppliers OEM business, I yourselves still

do within or that your what's machine just of kind gauge how those the of of or at scale big assessment inventory that mobile mobile America. maybe you North us And So level of remind customers? some piece

Jennifer Parmentier

starting as some line on there Lee there's dealers analysis kind there well are pushouts, do make of the no as mentioned, it going on So we in a constant goes get sure cancellations. no rebalancing But certain to as of to are inventory. amount backlog with the there that are

backlog mobile are And the orders, customers, discussion are some that big they with in real. the OE adamant our of

if even slot customer a have away. some to commented happen take have one they cancellation customer, another will who they right get from And that that

feel is us. pretty it's still again, But -- chain supply about that. the as if we So positive improving, helping

So good there. we're I in think position a pretty

Todd Leombruno

North think would North business, of offsetting aftermarket portfolio, benefit up I a these think just earlier, does in LORD. you OEM add. brought the significant include Yes, this include that the America CLARCOR Julian, I of Lee and that's does amount businesses. That helped some callouts. about There's the that from America we but larger

Jennifer Parmentier

Longer cycle.

Operator

comes Our Wells Fargo. from next with O'Dea question Joe

Joseph O'Dea

to field First question related inventory. just is

I the several quarters think some for have now. of going on corrections been

both so a Are abate and along actually But your OEM and are, it far process take a an you views headwinds maybe region. that those And by level level just starting is? if bit? what to at even distributor how

Jennifer Parmentier

a North gone backlog here probably of in about and through We anticipated, Yes. regions, we Well, talked is I again, had continuing. think that as in what strong. first, that remains than Destocking the is saw more QX it's little continuing. we've America we've coverage

the out, channel is Lee pointed sentiment positive. But overall as very

But choppy. is As I before, been the strong, mean, have there. too, international, I was the just orders too, backlog mentioning

going better or where to and a have next to up we'll you quarter update So say wind for in try X, in February. that's the

remaining is Europe. Lee international story mentioned, and recovery about impact has China as But slow on and on really this a is -- and that it the --

there and So continuing. is markets, destocking softness in continued industrial

Joseph O'Dea

as But ask business. that in particular, most see of X over spend? to now X you're to the And the just then, technologies, to side that right I returns of strategic where because direct years across and the opportunities you across biggest on Jenny, some of for really, the the focus opportunities trying about regions, emphasis and investment on you next think spend wanted on the industrial

Jennifer Parmentier

increase inspection, above really and Well, from our help at XX-year AI-driven us our were tools It's is our average. forecasting X% goal that And some AI increase safety, so productivity. X%. CapEx a efficiency robotics, 'XX. focus increased things going to And for automation, year to on has our our in a fiscal on are X.X% fiscal We bit we're little pretty year from 'XX. X%, big

We're in the investing chain. we investing need we have divisions growth. supply to secular in where And we're then support specific --

So, customers. for instance, electrification projects with our

we make chain investing into at So when that is the and this, us the we we strategies. think that the not sourcing intact, strategy is only local-for-local those well supply in look help will sure something future but have dual

that investment, And the expect pay so future. we dividends into that to well

Operator

next Linzey Our from question with comes Brett Mizuho.

Brett Linzey

down, actions just standpoint? Lee. simplification that the discretionary? to all you some you? Parker structural years. over quarter, to back simply how margins Is what I international guess Appreciate a the more come the volumes the cost-containment back taking Wanted and Congrats market on is positions doing the and Are In insight to destock. of choppiness from throttling this up.

Jennifer Parmentier

Yes.

Strategy evident works, for because that Win and performance So The I've our Every divisions Strategy a environment expand in Parker that So to So with the right? Strategy say is tool we're we say that groups. in this tool, used to The margins. Win always next slower-growth QX I every what right? helps recession, executing Parker planning Win run is and

can be for the discretionary how it production. to your changing from the anywhere staff spending, operation adjusting way material your you order So you

they look levers So and that see corners changes flexible. managers demand general our And and very a And to have become of around pull. there's agile can lot coming. they learned how

proud as the do of we're get downside that to upside as well what the return. the best sure on very make So they we

Brett Linzey

Yes. then great. on orders. That's just one And more

could sequential played that here? [indiscernible] quarter pattern you through how out discernible into the curious bottom the to Just October. give evolution we that the of might some confidence orders Any be

Jennifer Parmentier

an give in update on February. We'll you that

Todd Leombruno

no not the we This time. I the to restructuring fiscal touch just We There's restructuring Brett, is to on that our for something been change for. year. comment. that all this wanted do wait plans

think guide have the the the that's the I we all of for of decentralization in of the $XX markets. And restructuring million costs year. beauty

the depending doing all to businesses in they need around are Our world. what's on what their businesses happening do

Win of restructuring. day. it's to it's Jenny's and part we're waiting sign constantly do Strategy, we for We So any not do every that. kind do To The high of of what point, part

Operator

Jones comes with Nathan question next from Our Stifel.

Nathan Jones

David a has downturns a congratulations years. I every different I'm the the my of Julian's Lee and downturn retirement ask add going order while same. over been Parker on bit many question is different, tends to math to always [indiscernible]. way. to little and the be And through

of a see pause X X, declines of magnitude recession. negative mid-cycle maybe either You quarters X order are to rates. The those or a

talk you to just maybe And have order seen mid-cycle to feelings ourselves more the downturn downturns been comments about last this guys trying of previously. the point months? starting any pause quarters to X got we're rates. like relative around we've We've that negative to feel the XX to Is the a recession X where now into in for the this you've

Jennifer Parmentier

handle past to of again, as dips. the off by able going portfolio, start to cycle think I by these be I'll that with each them and So we weather backlog, time, we're see longer Well, think to just of performance, and less view evidenced to going to better right? we're just we're I the the continue a saying downturns, susceptible transformation the

and to a of positioned really at a we're in So keep and position when expanding I be margins the targets our to good growth organic in We're really side. able for achieve perform this think forward returns just well slower-growth higher be level. very environment industrial to a some going going on

Todd Leombruno

exposure but whole had aerospace couple never Nathan, the times, percentage portfolio. said a of of we've this across a high too, we've as

over the business it's right extremely now. XX% that strong of is So of and the part portfolio,

from that So benefiting as we're well.

Nathan Jones

there [indiscernible] just Yes. then that And about understand dynamic. businesses the I Meggitt. industrial was just talking one on that

You guys talked about have outperforming. that

some think I to here. margins likely clearly better growth, the growth seeing seeing it's market better [indiscernible] leading

with business in on the high this the ROI. X? ROI Is targeted year You now double-digit outperformance within year single-digit X reach had

Todd Leombruno

you We Nathan, Growth X-year with happy margin performing had that. is executing plan had has we our is anniversary. that business we just our than X-year if synergies of It's It been remember, is robust. way and expectations. focus more still be days. a performing. is And on couldn't the better kind the performance good. here early The

happy we're So with it.

Nathan Jones

Okay. We'll target. wait that till upgrade of the

Todd Leombruno

Yes. I time think Thanks, more question. we for got Nathan. Diego, one

Operator

Nigel from Wolfe with and question Coe Okay, comes Research. that

Nigel Coe

on a you've Lee, walking we will that's of and dream high, of like callouts, a off doing. lot had you're but what certainly

rest So you of the retire. the before congrats and enjoy. year Enjoy

maybe I backlog got through So in consume are elsewhere. industrial I'm hearing any on confirm, wondering, backlog consumption helpful. in based calculating I'm was you of Todd. you I've didn't lumpier we're could backlog, million sequential be what more $XXX coming that color backlog mean, kind to would seeing there Maybe the surprised more orders longer of range. here? I just cycle, you say like

Todd Leombruno

saying you're aerospace? Nigel, specifically on

Nigel Coe

industrial. Industrial,

Todd Leombruno

Excuse me, industrial.

and the Lee number the talking rebalancing, point this. talked again, on concerning think this about. at We overly I that in you're yet. cycle really about you're about kind think Jenny nothing it's right more And have of just

are more anything there, orders. to There project-based the nothing in it's I things in comparison industrial from the but significant some lumpiness can't say total. that we're seeing

Nigel Coe

uplift, I'm bridge the as [indiscernible] But the I gets the for taxes, current when Great. there's the previous right? about interest. Is Okay. $X.XX thereabouts, I'm that taxes That in that FX. nothing last I guess, cleanup the getting question, And guide for of right? is is margin FY And [indiscernible] -- the 'XX, Is me $X.XX $X.XX guide increase. or about questions $X.XX from to to here. getting which

Todd Leombruno

was for we XX. to FX rates September thing currency did only the The updated

a [indiscernible] P&L, the update, translates line. the an sales but just on it's That little of a major. really bit there's throughout So headwind

Nigel Coe

questions Great. sorry there. for low-level Okay. Well, the

Todd Leombruno

worries. worries. follow you Yes, No up No No. we with more. and can

Lee Banks

to to to I'm all it the It's callouts This you Lee. a long is Todd. It's just I I going run. back think for XX pass been nice everybody. we're at end. years. almost the say thank from want

race X years, faster. CEO to do of taken And Jenny thing. the in X same run directly. the doubt I've XX their the worked from going my that has that and team CEOs, for Every is this During baton mind I've them predecessor and got no

and you, we'll hopefully, around. you thank So see

Todd Leombruno

time. Lee, to Lee going and see you. you're going we I family. to to know miss and us enjoy Congratulations are going whole Elizabeth And more you your to they're around. definitely

So congratulations again.

you Thank us our conclude to 'XX does This today. QX webcast. for everyone joining FY

everyone, our As all available Director of usual, needs Yan Relations; you Investor Relations, and Huo, for Jeff kind Miller, our have will and Thank be Investor great of of VP anyone follow-ups. if joining, day. any a Thanks.

Operator

a and concludes Have All you, day. Thank disconnect. parties that today's good may call.

Parker-Hannifin (PH) 2 Nov 232024 Q1 Earnings call transcript