PH: FY25 Deep Dive

FY25 (year ended June 30, 2025) revenue $19.85B (-0.4%) — Aerospace +13% organic with $7.389B backlog. Industrial in transformation. FCF $3.34B; net income $3.53B (+24%); diluted EPS $27.12 (+24%). Adjusted operating margin record 26.1%. Filtration Group acquisition announced November 2025. Q1+Q2 FY26 record Aerospace bookings +14% with $8.007B segment backlog.

Key Takeaways

Parker-Hannifin closed fiscal 2025 (year ended June 30, 2025) at $19.85 billion of revenue, essentially flat YoY (-0.4%) — but the structural read was hugely positive on margin and earnings. Net income reached $3.53 billion (+24% from $2.84B FY24); diluted EPS $27.12 (+24% YoY). Adjusted operating margin reached a record 26.1% with adjusted EBITDA margin 26.4% — both the highest in company history. Aerospace segment delivered record FY25 sales of $6.2 billion with +13% organic growth and 190bp adjusted segment operating margin expansion; aftermarket = 51% of Aerospace sales (high-margin recurring). The Industrial segment was in transformation with longer-cycle / secular trend exposure expanding (~2/3 of portfolio now). Q1+Q2 FY26 (the Sept + Dec 2025 calendar quarters) confirmed continued momentum: Q2 FY26 Aerospace sales record $1.7B (+14.5%), order rates +14%, backlog reached $8.007B. Cash flow from operations was $3.78 billion FY25 (record); FY25 capex $435M; FCF $3.34B. Capital allocation: $1.76B buybacks (the largest in years), $861M dividends. Total debt declined to $9.64B from $10.97B. Strategic moves: closed Curtis Instruments acquisition (electrification expansion) Q1 FY26; announced Filtration Group acquisition in November 2025 (closing 6-12 months out, expanding life sciences + HVAC). Sell-side coverage is 9 analysts: 7 Buy / 2 Hold / 0 Sell, consensus PT $1,070, range $980-$1,168. Recent: Citi $1,092→$1,137 (April 13); Stifel $965→$1,000 (April 10); Wells Fargo $1,050→$980 (April 1, lone PT cut); Evercore $949→$1,168 (Feb 23, +$219 the largest raise).

Main business structure

Parker-Hannifin reports three operating segments:

Aerospace Systems (~30% of revenue, the FY25 standout)

The Win Strategy execution showed unambiguous results:

• FY25 record sales $6.2 billion, +13% organic growth
• 190bp adjusted operating margin expansion in FY25
• 51% of FY25 sales from aftermarket (high-margin recurring revenue), 49% OEM
• Q2 FY26 (calendar Q4 2025) sales record $1.7B (+14.5%); order rates +14%; backlog $8.007 billion
• Q1 FY26 commercial OEM +24% — driven by 737 MAX deliveries + A320neo family ramp + GTF engine spares

Parker is a top-3 supplier on most major commercial aircraft programs (737, 787, A320, A350, F-35, etc.) — flow controls, hydraulics, fuel systems, oxygen generation systems.

Diversified Industrial (~70% of revenue)

The transformation story: 2/3 of Industrial portfolio now in longer-cycle / secular trend / aftermarket lines (vs short-cycle equipment historically). North America Q2 FY26 sales ~$2B with +2.5% organic growth and 27.0% adjusted operating margin (record). International Q2 FY26 sales record $1.5B (+12% reported / +4.6% organic).

Curtis Instruments acquisition (closed Q1 FY26): electrification offering expansion — DC motor controllers + chargers for material handling, off-highway, and electric mobility. Strategic fit: expands Parker's electrification portfolio for growing EV / battery / charging end markets.

Filtration Group acquisition (announced November 2025; closing 6-12 months out from announcement = late H2 FY26 / early FY27): adds complementary filtration technologies; expands presence in life sciences, HVAC. Expected to be accretive.

Win Strategy framework

Decentralized business system:

• Innovative products (85% IP-protected)
• Application engineers providing technical expertise on customer site
• Global distribution network serving ~$145B motion + control industry
• 6 market verticals account for >90% of revenue
• 2/3 of revenue from customers who buy 4+ technologies (cross-sell)

Geographic mix. NA ~50%, International ~50%. International growth has been the upside driver in FY25-FY26.

Customer concentration. Highly diversified — top 10 customers ~15% of revenue; no single 10%+. Aerospace Systems has higher concentration (Boeing, Airbus, Lockheed, RTX major customers).

Scale anchors. ~70,000 employees globally. ~470 manufacturing locations. Cleveland HQ.

Key core metrics (3-year trend)

1. Revenue and the FY25 plateau

| | FY23 | FY24 | FY25 | |---|---|---| | Revenue ($B) | 19.07 | 19.93 | 19.85 | | YoY | — | +5% | -0.4% |

Revenue plateaued in FY25 — Industrial cycle moderation offset by Aerospace +13%. The flat top line masks margin expansion that drove the +24% EPS growth.

2. Earnings and operating leverage

| | FY23 | FY24 | FY25 | |---|---|---| | Operating income ($B) | 3.22 | 3.90 | 4.06 | | Net income ($B) | 2.08 | 2.84 | 3.53 | | Diluted EPS | $16.04 | $21.84 | $27.12 | | Adjusted operating margin | ~22% | ~25.0% | 26.1% |

The record 26.1% adjusted operating margin reflects continued Win Strategy execution + price-cost discipline + operating leverage on Aerospace momentum.

3. Free cash flow

| | FY23 | FY24 | FY25 | |---|---|---| | OCF ($B) | 2.98 | 3.38 | 3.78 | | Capex ($M) | 381 | 400 | 435 | | FCF ($B) | 2.60 | 2.98 | 3.34 |

FCF compounded from $2.60B → $3.34B over two years (+29%). Capital intensity remained low (~2% of revenue).

4. Capital allocation

| | FY23 | FY24 | FY25 | |---|---|---| | Buybacks ($M) | 297 | 332 | 1,762 | | Dividends ($M) | 704 | 782 | 861 | | Total return ($M) | 1,001 | 1,114 | 2,623 | | Total debt ($B) | 12.98 | 10.97 | 9.64 |

Buyback pace stepped up dramatically to $1.76B (5x prior years) — the largest in company history. Total debt declined ~$1.3B. Capital allocation framework signals confidence in continued FCF generation + room for the Curtis + Filtration Group acquisitions.

Market evaluation

Sell-side coverage (as of April 27, 2026). 9 analysts cover the stock.

| Rating | Count | |---| | Buy / Outperform / Overweight | 7 | | Hold / Equal-Weight | 2 | | Sell | 0 |

Price targets. Consensus $1,070, range $980 (low: Wells Fargo, OW) to $1,168 (high: Evercore ISI, OP).

Recent analyst activity (Feb-April 2026). 6 covered actions in window:

• Citigroup: $1,092 → $1,137 on April 13 — Buy maintained, +$45
• Stifel: $965 → $1,000 on April 10 — Hold maintained, +$35
• Wells Fargo: $1,050 → $980 on April 1 — the lone PT cut (-$70), OW maintained
• BMO Capital: initiated Outperform at $1,090 on March 27
• Morgan Stanley: $945 → $1,038 on Feb 24 — EW maintained, +$93
• Evercore ISI: $949 → $1,168 on Feb 23 — the largest raise (+$219), OP maintained, Street-high

The Wells Fargo cut was on tariff-on-aerospace concerns + Industrial cycle moderation. The Evercore +$219 raise reflects the bull case on Aerospace momentum + record margin profile + Filtration Group accretion.

Buy-side positioning. PH is a core diversified industrial holding paired with EMR, ETN, ITW. Trades at premium multiple to industrial peers on Aerospace + Win Strategy execution + recent M&A optionality. Short interest below 1% of float.

FY25 corporate structure: record margins + Aerospace momentum + post-acquisition transformation

FY25 was the year Parker-Hannifin's Win Strategy execution + Aerospace tailwind + Industrial portfolio mix shift collectively produced record-high adjusted margins (26.1%) on roughly flat revenue. Aerospace +13% organic with $7.389B backlog was the cleanest growth signal; Industrial transformation toward 2/3 longer-cycle / aftermarket continues; record buyback pace ($1.76B) reflects management confidence; the Filtration Group acquisition (announced Nov 2025) plus Curtis Instruments (closed Q1 FY26) extend the M&A consolidation narrative. The Q1+Q2 FY26 prints already confirmed continued momentum: Q2 record sales $5.2B, +6.6% organic growth, 27.1% adjusted operating margin, +17% adjusted EPS growth, $1.6B OCF. Two FY26 watch items: (1) does Aerospace sustain the +14% order growth pace into a tougher comparison base, especially as commercial OEM deliveries trend (737/A320 ramps); (2) does the Industrial cycle reaccelerate in CY2026 to support continued margin expansion. The Q3 FY26 earnings print this week (calendar Q1 2026 = Parker fiscal Q3) is the proximate event for measuring backlog conversion + Filtration Group close timeline + tariff impact commentary.