Parker-Hannifin Corp. 10-Q Summary: Q2 Fiscal 2026
Business Context and Reporting Period
This report covers the quarterly period ended December 31, 2025 (Q2 of Fiscal 2026) and the six months ended on that date. Parker-Hannifin is a global leader in motion and control technologies, operating through two primary segments: Diversified Industrial and Aerospace Systems. The company serves markets including aerospace, defense, industrial equipment, transportation, and energy.
Key Financial Metrics
| Metric (in millions) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 |
|---|---|---|---|---|
| Net Sales | $5,174 | $4,743 | $10,258 | $9,647 |
| Gross Profit Margin | 37.3% | 36.3% | 37.4% | 36.6% |
| Net Income | $845 | $949 | $1,653 | $1,647 |
| Diluted EPS | $6.60 | $7.25 | $12.89 | $12.60 |
| Operating Cash Flow (6mo) | $1,644 (vs. $1,679 prior year) | |||
| Total Debt (Current + Long-term) | $9,870 (Dec 31, 2025) | |||
| Cash & Equivalents | $427 (Dec 31, 2025) | |||
| Backlog | $11.7 billion (Dec 31, 2025) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 9.1% in Q2 and 6.3% for the six-month period. Growth was driven by higher volume in both segments, the acquisition of Curtis Instruments, and favorable currency impacts ($84M in Q2; $117M for six months).
- Profitability: While net income decreased 11% in Q2 compared to the prior year, it increased slightly (0.4%) for the six-month period. The Q2 decline was largely due to a significant one-time gain on divestitures in the prior year ($248M) that did not recur.
- Margins: Gross profit margins expanded to 37.3% in Q2 (from 36.3%) due to favorable product mix, cost containment, and benefits from prior-year realignment activities.
- Acquisitions: The company acquired Curtis Instruments for approximately $1.0 billion in September 2025, contributing $74M to Q2 sales. A pending $9.25 billion acquisition of Filtration Group was announced in November 2025.
- Working Capital: Operating cash flow decreased slightly year-over-year due to higher cash tax payments and increased working capital requirements (inventory days supply rose to 95 days).
Guidance, Outlook, and Risks
- Outlook: Management expects the fiscal 2026 effective tax rate to be approximately 22%. Capital expenditures are targeted at 2.5% of sales for the remainder of the fiscal year.
- Dividends & Buybacks: The company declared a quarterly dividend of $1.80 per share (69th consecutive year of increases). Share repurchases totaled $550M in the first six months, with 19.3 million shares remaining under authorization.
- Strategic Moves: The company is actively pursuing the Filtration Group acquisition, expected to close in 6-12 months, funded by new debt and cash. They have secured $7.75 billion in delayed draw term loan facilities for this purpose.
- Risks: Key risks include global economic uncertainty, geopolitical tensions, supply chain disruptions, and the successful integration of recent and pending acquisitions. The company notes that a 10% change in foreign exchange rates could impact earnings by approximately $125 million.
Investor Verification Checklist
- Divestiture Impact: Verify the comparability of Q2 2025 net income against Q2 2024, noting the $248M one-time gain on divestitures in the prior year.
- Acquisition Integration: Monitor the integration progress of Curtis Instruments and the regulatory approval status of the $9.25 billion Filtration Group acquisition.
- Working Capital Trends: Track inventory levels (currently 95 days supply) and accounts receivable (49 days sales outstanding) to ensure cash flow efficiency improves.
- Debt Covenants: Confirm continued compliance with the debt-to-debt-shareholders' equity covenant (currently 0.41 vs. 0.65 limit) as leverage increases with the Filtration Group deal.
- Realignment Costs: Watch for additional business realignment charges, with management anticipating approximately $40 million more in the remainder of fiscal 2026.