PH

Parker-Hannifin Corp. 10-K Summary (Fiscal Year Ended June 30, 2026)

Business Context and Reporting Period

This Annual Report on Form 10-K covers the fiscal year ended June 30, 2026. Parker-Hannifin Corporation is a global leader in motion and control technologies, operating through two reportable segments: Diversified Industrial (67% of net sales) and Aerospace Systems (33% of net sales). The company serves markets including aerospace & defense, industrial equipment, transportation, off-highway, energy, and HVAC & refrigeration. As of June 30, 2026, the company employed approximately 59,850 team members globally.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 8.3% year-over-year, driven by 6.6% organic growth. The Aerospace Systems segment saw a 14.2% sales increase, while Diversified Industrial grew 5.7%.
• Profitability: Gross profit margin expanded to 37.7% from 36.9%, aided by sales volume and favorable pricing, partially offset by material costs. Segment operating margins improved in both segments (Diversified Industrial +100 bps; Aerospace Systems +270 bps).
• Tax Rate: The effective tax rate increased to 20.0% in 2026 from 14.0% in 2025. The prior year benefited from a discrete tax benefit related to the release of a foreign valuation allowance.
• Acquisitions: The company completed the acquisition of Curtis Instruments, Inc. (Sept 2025) and Filtration Group Corporation (FGC) (Aug 2026). A pending acquisition of CIRCOR Aerospace was announced in May 2026.
• Divestitures: No significant divestitures were completed in 2026. Prior year divestitures (CFC and non-core filtration) reduced sales by approximately $146 million in 2026.

Guidance, Outlook, and Risks

• Capital Allocation: The company targets 2.5% of sales for capital expenditures in fiscal 2027. It maintains a dividend policy with 70 consecutive years of annual increases (current rate $8.00/share) and an active share repurchase program (18.8 million shares remaining).
• Debt and Liquidity: Subsequent to June 30, 2026, the company borrowed the full $7.75 billion under new term loan facilities to finance the FGC acquisition. Management expects to refinance a portion with long-term debt. The debt-to-debt-shareholders' equity ratio was 0.36 to 1.0 at year-end, well below the 0.65 covenant limit.
• Outlook: Management expects continued growth driven by aerospace demand and industrial recovery. However, they note risks related to global economic conditions, tariffs, and supply chain disruptions.
• Risks: Key risks include geopolitical instability, cybersecurity threats, raw material price volatility, and the integration of recent acquisitions (Curtis, FGC, and pending CIRCOR Aerospace).

Investor Verification Checklist

• Acquisition Integration: Verify the financial impact and integration progress of the FGC ($9.25B) and Curtis ($1.0B) acquisitions, and the regulatory status of the pending CIRCOR Aerospace deal.
• Debt Structure: Confirm the refinancing strategy for the $7.75 billion in term loans drawn post-fiscal year-end to fund the FGC acquisition.
• Tax Rate Normalization: Assess the sustainability of the 20.0% effective tax rate compared to the 14.0% rate in 2025, which included a one-time valuation allowance release.
• Backlog Conversion: Monitor the conversion of the $12.8 billion backlog (70% due within 12 months) into revenue, particularly in the Aerospace segment.
• Margin Pressure: Track the ability to pass on raw material cost increases to customers to maintain the expanded gross margins.