Executive Summary

Parker-Hannifin delivered a record Q1 FY26 with revenue of $5.084B (+3.7% YoY), adjusted EPS of $7.22 (+16% YoY), and adjusted segment operating margin of 27.4% (+170 bps YoY) as aerospace strength and improving industrial demand drove margin expansion .
Results were above Wall Street consensus: revenue beat by ~$142M and adjusted EPS beat by ~$0.60; management raised FY26 guidance across sales, margins, EPS, and free cash flow, citing higher orders and inclusion of Curtis .
Orders increased +8% company-wide, with aerospace +15%; total company backlog reached a record $11.3B, reinforcing durability of demand into FY26 .
Key stock reaction catalysts: broad-based order acceleration, aerospace’s first-ever 30% adjusted margin, and an across-the-board guide raise—offset by acknowledged continued weakness in transportation and selective industrial CapEx .

What Went Well and What Went Wrong

What Went Well

Record Q1 adjusted EPS ($7.22) and adjusted segment operating margin (27.4%), with adjusted EBITDA margin of 27.3% driven by operations and cost controls; aerospace achieved a record 30.0% adjusted margin .
Orders and backlog accelerated: company orders +8% and aerospace orders +15%; total backlog hit $11.3B—a multi-year demand visibility tailwind .
Management tone was confident: “every number in the gold column…is a record,” highlighting margin expansion and EPS growth; CEO underscored The Win Strategy, decentralized structure, and interconnected technologies as drivers of outperformance .

What Went Wrong

Transportation remains the most challenged vertical; management does not expect a truck recovery this fiscal year, and EMEA industrial recovery remains slow .
DI North America reported sales declined YoY (-2.7%) despite turning organic growth positive (+2.1%); DI International organic growth remained modest (+1.0%) and EMEA organic sales were down (-2.6%) .
Q2 EPS guide is sequentially lower (seasonally softer top line), and aerospace margins are guided below the Q1 30% record due to unpredictable spares mix .

Financial Results

Metric	Q3 FY25 (Mar 31, 2025)	Q4 FY25 (Jun 30, 2025)	Q1 FY26 (Sep 30, 2025)
Revenue ($USD Billions)	$4.960	$5.243	$5.084
Reported YoY Growth (%)	(2.2)%	+1.1%	+3.7%
Diluted EPS (GAAP) ($)	$7.37	$7.15	$6.29
Adjusted EPS ($)	$6.94	$7.69	$7.22
Adjusted Segment Operating Margin (%)	26.3%	26.9%	27.4%
Adjusted EBITDA Margin (%)	27.0%	26.4%	27.3%
Cash from Operations ($USD Millions)	$2,308 YTD through Q3	$3,776 FY25	$782
Cash from Ops Margin (%)	15.8% YTD through Q3	19.0% FY25	15.4%

Segment breakdown (Q1 FY26 vs prior year):

Segment	Q1 FY26 Sales ($mm)	Q1 FY25 Sales ($mm)	Reported Growth (%)	Organic Growth (%)	Adjusted Segment Margin (%)
DI North America	$2,044	$2,100	(2.7)%	+2.1%	27.0%
DI International	$1,399	$1,356	+3.2%	+1.0%	25.0%
Aerospace Systems	$1,641	$1,448	+13.3%	+12.8%	30.0%

KPIs:

KPI	Q3 FY25	Q4 FY25	Q1 FY26
Company Order Rate YoY (%)	+9%	+5%	+8%
Aerospace Order Rate YoY (%)	+14%	+12%	+15%
Total Backlog ($USD Billions)	$7.3B (Aero)	$7.4B (Aero)	$11.3B (Company)
Free Cash Flow ($mm)	$2,005 YTD through Q3	$3,100–$3,200 FY25 guidance	$693
Share Repurchases ($mm)	$650 in Q3	$851 in Q4	$475 in Q1

Estimate comparison (Q1 FY26):

Metric	Consensus	Actual	Surprise
Revenue ($USD)	$4,942,674,870*	$5,084,000,000	+$141,325,130*
Adjusted EPS ($)	$6.62*	$7.22	+$0.60*

Values retrieved from S&P Global.*

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Reported Sales Growth (%)	FY26	2.0%–5.0%	4.0%–7.0%	Raised
Organic Sales Growth (%)	FY26 (midpoint)	~3%	~4%	Raised
Segment Operating Margin (%)	FY26	23.3%–23.7%	23.6%–24.0%	Raised
Adjusted Segment Operating Margin (%)	FY26	26.3%–26.7%	26.8%–27.2%	Raised
EPS ($)	FY26	$24.68–$25.68	$25.53–$26.33	Raised
Adjusted EPS ($)	FY26	$28.40–$29.40	$29.60–$30.40	Raised
Free Cash Flow ($B)	FY26	N/A	$3.1–$3.5	Raised/Introduced
Q2 Reported Sales Growth (%)	Q2 FY26	N/A	~6.5%	New
Q2 Organic Sales Growth (%)	Q2 FY26	N/A	~4%	New
Q2 Adjusted Segment Margin (%)	Q2 FY26	N/A	26.6%	New
Q2 Adjusted EPS ($)	Q2 FY26	N/A	$7.10	New

Context: Guidance incorporates currency (+1.5 pts), acquisitions (Curtis ~1%), and divestitures (~1% unfavorable) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 FY25)	Previous Mentions (Q4 FY25)	Current Period (Q1 FY26)	Trend
Industrial organic growth	DI NA: (3.5)%, Intl: (2.8)%	DI NA: (1.4)%, Intl: +0.6%	Company: +5% organic; DI NA +2.1%, Intl +1.0%	Improving
Aerospace margins & mix	Adj margin 28.7%; aftermarket strength; backlog $7.3B	Adj margin 29.0%; aftermarket strength; backlog $7.4B	First-ever 30.0% adj margin; mix 51% OEM/49% aftermarket; spares strong	Strengthening
Orders/backlog	Company +9% orders	Company +5% orders	Company +8% orders; backlog $11.3B	Broad-based acceleration
Tariffs/pricing	FY25 EPS guide included tariffs fully offset	N/A	Pricing “muscle”; adjust quickly; tariffs not a margin lever	Managed risk
Regional trends	APAC +2%, EMEA (7%), LA +8%	APAC +5.6% organic; EMEA (3.2%); LA +3.8%	APAC +6% organic; EMEA (2.6%); LA ~0%	APAC leading; EMEA lagging
Data center/liquid cooling	N/A	N/A	Exposure <1% of sales; rapid growth; capability to scale	Emerging tailwind
M&A/portfolio	Announced Curtis acquisition	Ongoing deployment balance; repurchases	Curtis closed; ~$235M added to FY26 sales; margin slightly dilutive; EPS accretive	Active, disciplined

Management Commentary

“Every number in the gold column…is a record…mid‑single‑digit sales growth combined with strong margin expansion resulting in mid‑teens EPS growth.” — CFO Todd Leombruno .
“Our global team produced record sales, segment operating margin, earnings per share and year‑to‑date cash flow…powered by our business system The Win Strategy.” — CEO Jenny Parmentier .
“This was the first time in two years we’ve had positive organic growth across all of our businesses.” — CFO on DI organic turning positive .
“Aerospace…reached 30% for the first time ever. Record top‑line productivity, continued aftermarket strength, all drove the margin expansion.” — CFO .
“We have the analytics and the processes to navigate [tariffs] and act quickly up or down…we can’t use tariffs as a margin expansion device.” — CEO .

Q&A Highlights

DI North America cadence and conservatism: Q1 organic +2% beat internal expectations; distribution/HVAC/electronics and construction outperformed; full-year DI NA organic guide set at +2% with cautious tone; Q2 margins +150 bps YoY .
Sequential EPS seasonality: Q2 EPS guide lower sequentially due to softer top line; deemed normal seasonality by CFO .
International orders/geography: APAC strength (+6% organic) drove Intl; EMEA flat to slightly positive expected; longer-cycle orders variability highlighted .
Aerospace mix/margins: 51% OEM/49% aftermarket; Q1 spares buoyed margins to 30%; FY26 aerospace adj margin guide raised to ~29.5%; Q2 guide 29.1% .
M&A and Curtis: Pipeline active; Curtis added ~$235M sales to FY26, margin high‑teens/low‑20s, slightly dilutive but EPS accretive; integration underway .

Estimates Context

Q1 FY26 beat vs S&P consensus: revenue $5.084B vs $4.943B*, adjusted EPS $7.22 vs $6.62*; beats reflect aerospace OE/aftermarket strength and DI margin execution .
Estimate implications: Raise models for FY26 adjusted EPS (midpoint now $30), adjusted segment margin (27.0%), and FCF ($3.1–$3.5B). Monitor transportation drag and EMEA recovery pacing .