Parker-Hannifin (NYSE:PH) reported what executives described as a record fiscal 2026 third quarter, citing broad-based demand, margin expansion, and strong cash generation as the company raised its full-year outlook for organic growth, adjusted earnings, and free cash flow.
Record quarter: sales, margins, earnings, and backlog
Chairman and CEO Jennifer Parmentier said the company delivered “a quarter of record performance enabled by the strength of our portfolio,” alongside a “12% reduction in our recordable incident rate,” which she called Parker’s safest quarter ever.
For the quarter, Parmentier said Parker posted record sales of $5.5 billion, organic growth of 6.5%, and 40 basis points of margin expansion to 26.7% adjusted segment operating margin. She added adjusted earnings per share rose 18% and year-to-date cash flow from operations reached $2.6 billion. Orders increased 9% and backlog rose to a record $12.5 billion.
CFO Todd Leombruno said the quarter set new records for sales, adjusted segment operating margin, EBITDA, net income, and adjusted EPS. Total sales increased nearly 11%, including 6.5% organic growth, 2.5% favorable currency, and 1.5% from acquisitions. Leombruno said adjusted segment operating margin was 26.7% and adjusted EBITDA margin was 27.2%.
Leombruno highlighted two milestones: adjusted net income exceeded $1 billion for the first time, representing a 19.1% return on sales, and adjusted EPS reached $8.17, also a first for a single quarter. He attributed the year-over-year EPS increase largely to higher segment operating income, with a favorable tax comparison influenced by “a couple discrete items,” and a benefit from lower share count due to repurchases.
Segment performance: aerospace strength and steady industrial improvement
Leombruno said order rates were positive across all businesses, and backlog climbed to $12.5 billion. In North America, sales were $2.1 billion with nearly 3% organic growth, which he said was slightly ahead of expectations. He cited strength in in-plant and industrial equipment, off-highway, and energy. North America adjusted operating margin rose 10 basis points to a record 25.3%, while orders increased 7%.
International sales were a record $1.5 billion, up 13% year over year with 3% organic growth. Leombruno said Asia Pacific posted 10% organic growth, EMEA was flat, and Latin America declined. International adjusted operating margin increased 20 basis points to a record 25.3%, while international orders grew 6% against what he described as difficult prior-year comparisons.
Aerospace again led performance. Leombruno said aerospace sales rose 15.5% to $1.8 billion, including 14.2% organic growth driven by commercial OEM and aftermarket strength. Aerospace adjusted operating margin expanded 80 basis points to 29.5%. Orders rose 14%, and aerospace backlog increased 15% year over year to a record $8.4 billion.
During the Q&A, Parmentier detailed Q3 aerospace growth by sub-market, saying commercial OEM rose 22% and commercial aftermarket grew 14%. Defense OEM increased 13% and defense aftermarket rose 8%. She said the quarter’s mix was 51% OEM and 49% aftermarket, and emphasized the company was expanding margins despite the higher OEM mix.
Cash flow, dividends, and buybacks
Leombruno said year-to-date cash flow from operations was a record $2.6 billion, equal to 16.7% of sales and up 14% versus the prior year. Year-to-date free cash flow increased 17% to a record $2.3 billion, or 14.9% of sales.
He also highlighted capital returns. Leombruno said Parker’s board approved an 11% increase to its quarterly dividend to $2 per share, extending the company’s streak of increasing annual dividends paid per share to 70 years. In addition, the company repurchased $275 million of shares in the quarter, bringing year-to-date repurchases to $825 million.
FY2026 outlook raised; transportation improved on heavy truck orders
On updated market vertical expectations, Parmentier said Parker raised its aerospace organic growth forecast to 12% from 11% on continued strength in commercial OEM and aftermarket demand. In-plant industrial remained at positive low single-digit organic growth, with “strong” quoting activity and distributor inventories described as stable and “continuing to order to demand.”
Parker also improved its view on transportation, raising its outlook from a mid-single-digit organic decline to a low single-digit organic decline. Parmentier said the change was driven by stronger heavy-duty truck orders, while “automotive demand challenges persist.” Off-highway remained at positive low single-digit growth, with construction supported by capital and infrastructure investment and agriculture “under pressure.” Energy guidance stayed at positive low single-digit growth, with strong power generation activity and midstream oil and gas growth offset by soft upstream demand. HVAC and refrigeration was maintained at positive mid-single-digit growth, with strength in commercial HVAC, refrigeration, filtration, and aftermarket.
Leombruno said the company raised full-year organic growth guidance to 5.5% at the midpoint and increased reported sales growth guidance to 7%, with currency expected to be a 1.5% tailwind based on March 31 spot rates. He said adjusted segment operating margin is forecast at 27.2% for the year, representing 110 basis points of expansion versus the prior year, with full-year incrementals forecast at 40%.
The company increased full-year adjusted EPS guidance by $0.50 to $31.20 at the midpoint, which Leombruno said would represent 14.2% growth year over year. Parker also raised its free cash flow outlook to $3.3 billion to $3.6 billion (midpoint $3.45 billion), which Leombruno said would be about 16.2% of sales with approximately 100% conversion.
For the fourth quarter, Leombruno forecast reported sales of nearly $5.5 billion (up 5.5% year over year), about 4% organic growth, and adjusted segment operating margin of 27.4%. He said the company expects a 22% effective tax rate and guided adjusted EPS of $8.16, which he said would mark only the second time adjusted EPS surpassed $8 in a quarter.
Tariffs, Middle East exposure, and Filtration Group acquisition progress
Asked about disruption from developments in the Middle East, Parmentier said Parker’s first concern was employee safety and added direct revenue in the region is “very small,” with no manufacturing footprint and primarily a sales organization. She said the company was not seeing a material impact to demand and that teams were managing logistics and supply chain issues to minimize disruption to customers.
On tariffs, Parmentier said the environment remained “very dynamic,” but characterized price-cost management as a long-standing capability under The Win Strategy. “We don’t expect this to have any impact,” she said, adding the company routinely analyzes changes and is not concerned about its ability to manage them. Leombruno added Parker would not recognize any income related to tariffs until received, treating potential refunds as a contingency gain.
The company also provided an update on its planned Filtration Group acquisition. Parmentier said integration planning is underway using Parker’s playbook and that the company still expects to close within 12 months of the announcement date, subject to customary closing conditions and regulatory clearances. She reiterated that Parker had announced $220 million in synergies by the end of year three, representing 11%, and said the majority would come from The Win Strategy tools, lean supply chain, and simplification, though the company is not providing phasing details at this time.
Leombruno said no pre-funding is required and the company does not expect interest expense tied to the deal before closing. He said a little over half of the transaction would be funded with “serviceable debt,” with the remainder in short- to medium-term notes. Leombruno added the company does not expect leverage to exceed three times at close and plans to de-lever back to around two times “faster than we ever have before.”
About Parker-Hannifin (NYSE:PH)
Parker-Hannifin Corporation (NYSE: PH) is a global manufacturer and provider of motion and control technologies and systems. The company designs, manufactures and services a broad range of engineered components and systems used to control the movement and flow of liquids, gases and hydraulic power. Its product portfolio is applied across demanding environments and includes solutions for industrial manufacturing, aerospace, mobile equipment and other engineered applications.
Parker-Hannifin’s product and service offerings span hydraulic and pneumatic components, fittings and fluid connectors, valves, pumps and motors, electromechanical actuators and motion-control systems, filtration and separation products, and seals and sealing systems.
