Q4 2024 Parker-Hannifin Corp Earnings Call

Will follow the formal presentation.

Speaker Change: You may be placed in the question queued anytime by pressing star one on your telephone keypad. We ask you. Please limit yourselves to one question one follow up then return to the queue.

Speaker Change: As a reminder, this conference is being recorded its now my pleasure to turn the conference over to Charlie and Bruno Chief Financial Officer. Please go ahead Todd.

Speaker Change: Thank you, Kevin and good day, everyone and welcome to Parker as fiscal year 2020 for fourth quarter.

Bruno: And year end earnings release webcast as Kevin said this is traveling Bruno Chief Financial Officer speaking and with me today is our chairman and Chief Executive Officer, Jenny Parmentier.

Speaker Change: We appreciate your interest in Parker and we thank you all for joining us today.

I could draw your attention to slide two you will find our disclosure disclosures.

Our forward looking projections on non-GAAP financial measures.

Speaker Change: Actual results could vary from our forecast based on the items. We have listed here our press release the presentation, we're going to go through today and reconciliations for all non-GAAP financial measures were released this morning and are available under the investors section on our website at Parker Dot Com, we're going to start the call today with Chinese summarizing our record fiscal year two.

24.

Speaker Change: That was really driven by our portfolio transformation and really some exceptional strength in our aerospace businesses should also touch on a bright future and what really is driving the company today I'm going to follow the journey with us more details on specifically the strong fourth quarter. We just posted and then both of US are going to provide some color on the.

Speaker Change: Fiscal year 2025 guide that we released this morning.

Speaker Change: Lets us off on our journey to achieve our FY 'twenty nine targets.

Speaker Change: After those remarks, we'll open the call for Q&A session, we'll try to take as many questions as possible within the one hour time slot and with that Jenny I'll hand, it over to you and ask everyone to reference slide three thank you Todd and thank you to everyone for joining the call today.

Speaker Change: Parker delivered an outstanding year in fiscal 2024.

Jenny: The dedication of our people the strength and balance of our portfolio and the value of our business system. The win strategy, we met or exceeded many of our commitment for FY 'twenty four.

Jenny: We produced top quartile safety performance aligned with our goal to be the safest industrial company in the world.

Speaker Change: Strength of our portfolio with highlighted by a stellar year delivered by our aerospace systems segment.

Speaker Change: On low single digit sales growth the team delivered 200 basis points of margin expansion.

Speaker Change: Our earnings per share grew 18% on top of earnings growth up 15% in fiscal year 2023.

And we generated record free cash flow of $3 billion.

It's a very promising future ahead as you'll see from our strong fiscal year 'twenty five guide and the targets we have set for fiscal year 2029.

Speaker Change: Next slide please.

Speaker Change: And it was a record year for aerospace our first full year with maggot achieving over $5 billion in sales more than two times the sales of fiscal year 'twenty.

Speaker Change: All market segments delivered double digit sales growth and the strength continues as we look ahead.

We are positioned for growth with significant content on leading programs.

Speaker Change: And our extensive portfolio, we will continue to create value for our customers as well as our large installed base will drive continued aftermarket growth.

Speaker Change: Next slide please.

Yeah.

Speaker Change: As illustrated on this slide the transformation of our portfolio of further expanded longer cycle and secular revenue mix in fiscal year 'twenty four.

Speaker Change: Although aerospace is a big part of the transformation, it's not the whole story.

Speaker Change: The acquisitions of CLARCOR and lowered and are on purpose strategy to expand distribution in Europe, and Asia have greatly contributed to the longer cycle secular and industrial aftermarket mix.

Speaker Change: We see this transformation, continuing and expect 85% of our portfolio to be longer cycle secular and aftermarket by fiscal year 2009.

Speaker Change: Early last week, we announced that we have signed an agreement to divest the North American composites business that came with the Mega acquisition.

Speaker Change: As mentioned during our Investor day, we continue to optimize our portfolio.

Speaker Change: Our best on our playbook identifies businesses find greater value with a different owner.

Speaker Change: Through this process, we determined that this business is not aligned with our core products and we are not the best owner.

Speaker Change: It's a great team and we are confident that they will be successful in the future.

Speaker Change: Next slide please.

Speaker Change: These are the four key messages, we presented at our Investor day in May we are positioned for growth with our interconnected technologies and the secular trends. We have demonstrated the win strategy. Our business system is compounding our performance and driving us to top quartile.

Speaker Change: Operational excellence years of driving a continuous improvement culture through our lean tools creates growth and expense margin.

Speaker Change: And we have confidence in achieving the fiscal year 2009 targets launched at our Investor day in May.

Speaker Change: Next slide please.

Speaker Change: And as a reminder of what drives Parker.

Speaker Change: Safety engagement and ownership are the foundation of our culture, it's our people and living up to our purpose to drive top quartile performance, allowing us to be great generators and to players of cash.

Speaker Change: I'll turn it back to Todd to review, our outstanding fourth quarter results.

Todd: Thank you Jimmy It really was a fantastic year for the company.

Todd: On slide nine I, just would like to take some time to talk about the fourth quarter Q4 was an exceptionally strong quarter for the company.

Speaker Change: Once again every number in this gold box on this page is a Q4 record.

Speaker Change: I'll also happen to be the highest levels of performance that we experienced this fiscal year.

Speaker Change: Total sales growth was up nearly 2% from prior year, we reached almost $5 $2 billion in sales in the quarter organic sales were positive at roughly 3% that was a little bit better than what we were expecting with our guidance. The divestitures were just really slight.

Jenny: Favorable impact in currency really turned into another headwind almost 1% unfavorable currency. If you look at adjusted segment operating margins Jenny mentioned this but we did improve them a 130 basis points from prior year and for the first time in the history of the company. We generated 25, 3% segment operating margins for a quarter.

Jenny: <unk>.

Jenny: Same story with the EBITA margins, the increase was a little bit greater 190 basis points.

Todd: For the quarter, we did 26, 3% adjusted EBITDA margins you look at adjusted net income of $884 million of adjusted net income that is up 12% from prior year and that is a 17.0 return on sales.

Judy: Earnings per share Judy mentioned this as well as 677 that was up 69 or 11 from prior year and it was just really an exceptionally strong quarter is a great way to finish the fiscal year really driven universally across the globe by our.

Judy: Engage team members and it was really just a nice way to finish the year.

Judy: Other data point on Parker being able to deliver on our commitments.

Judy: If we jump to slide 10. This is just the bridge on that 11% improvement in adjusted earnings per share again. The story is very similar to what we saw all year of strong operating execution continues to drive earnings per share growth. If you look at segment operating income dollars, we increased by $90 million or 7%.

Speaker Change: That's basically 54 cents or 80% of the EPS growth quarter over quarter.

Speaker Change: And we've talked a lot about this already but the aerospace systems segment. Once again is.

Speaker Change: Really responsible for over 90% of the earnings per share growth. When it comes to seven operating income the diversified industrial North American businesses made up the rest if you look at some of the blow.

Speaker Change: Segment operating income line corporate G&A was 16 favorable in the quarter that really again was a result of some favorable items from the prior year just not repeating.

Speaker Change: Interest expense favorable again 17 versus prior year that really is the result of our successful deleveraging efforts that we've been working hard on all year tax was unfavorable 12.

Speaker Change: Against the prior year and that was really just from slightly higher operating tax rate and of course, the higher <unk>.

Speaker Change: EBIT.

Speaker Change: And then other expense and share count, we're just both a bit higher than last year, but really the story here has been consistent throughout the whole year strong operating execution driving margin expansion really keeping an eye on cost controls and being disciplined with our debt pay down just a nice way to finish the year.

Speaker Change: If we jump to slide 11, let's look at the segment performance you can see again, our margin expansion across every business here really proud to see that incrementals for the company and really every.

Speaker Change: Part of the business, we're incredibly strong order rates inflected positive it's 1% that's positive we're really happy to see that in our backlog.

Speaker Change: Remained at near record levels, we have $10 9 billion.

Speaker Change: And shippable backlog, so that was a nice way to finish the year.

Speaker Change: Let's look at the diversified industrial segment, specifically in North America sales volume really remains strong $2 $2 billion in sales organic growth was negative three.

Speaker Change: But that was a full point better than our expectations softness in North America continues to be driven by off highway markets and transportation markets, but despite those lower volumes, we were able to increase adjusted segment operating margins by 150 basis points in the North American businesses achieved.

Speaker Change: <unk> 25.0 that is a record.

Speaker Change: It is all driven by operational execution executing the win strategy and really working hard to deliver for our customers order rates in North America also did improve to flat.

Speaker Change: That ends our negative string of year over year order declines and we were really happy to see that if.

Speaker Change: If you look at the international businesses sales were slightly over $1 4 billion organic growth was down two 5% to prior year, but again that was also better than our forecast off highway markets continue to be soft and if you look really across the regions.

Speaker Change: Europe, we were negative five in Asia Pac negative, one which did slightly improve.

Speaker Change: From Q3 in Latin America, just continues to be robust at 19% organic growth.

Speaker Change: Same story on the margins margins increased 60 basis points in the quarter, our international businesses generated 23, 9% segment operating margins and really just continue to be focused on simplification productivity improvements.

Speaker Change: And I'm really happy to see this in the continued margin expansion from those international businesses order rates in international finished at minus one with positive order rates in Asia driving the majority of the improvement.

Speaker Change: So nice to see that improve from Q3 as well.

Speaker Change: But if we look at aerospace systems right that business continues to shine sales reached a record $1 5 billion in aerospace first time, we've had $1 5 billion of sales in our aerospace business organic growth, 19% with double digit growth across all the platforms within aerospace operating margins.

Speaker Change: Brand new record, increasing 130 basis points to 27, one and it really is driven by great volumes in <unk>.

Speaker Change: Unbelievable strength in the aftermarket businesses.

Speaker Change: Aerospace orders still remains strong.

Speaker Change: Did get the highest dollar level of orders for the year and order rates continue to grow at plus 7%. So all things are looking up in aerospace.

Speaker Change: Well go to next slide.

Speaker Change: 12, I just want to highlight our cash flow performance for the year. We finished FY 'twenty four with record cash flow performance CFO increased 14% to a record of $3 $4 billion at 17% of sales.

Speaker Change: Free cash flow nearly $3 billion Thats also a record that was 15% of sales. It's also a 15% increase from prior year and we did achieve a conversion of 105%.

Speaker Change: I really just want to thank our team. This has been a lot of effort by a lot of people across the company really made some nice improvements in working capital.

Speaker Change: Really nice.

Speaker Change: Efforts on AP, and AR, but I really want to note. This year, we were able to reduce inventory by over $120 million.

Speaker Change: Really showcasing the efforts and focus that we've had on supply chain excellence.

Speaker Change: Cross the globe, we continue to focus on being great generators and great deploys cash.

Speaker Change: If we turn to slide 13, you can see what we did with all that cash we reduced debt by over $800 million in the quarter $800 million in the quarter alone.

Speaker Change: And since closing Mega we have now reduced debt by over $3 4 billion.

Speaker Change: We had a target to reduce debt by $2 billion in the fiscal year, we hit that target and if you look at our leverage ratios gross debt to adjusted EBITDA is now $2 one.

Speaker Change: <unk> and net debt to adjusted EBITDA is now two point, though so it's exactly what we had forecast.

Speaker Change: And it really ramps up just a solid Q4 and a great <unk>.

Speaker Change: Fiscal year.

Speaker Change: So with that I'm going to hand, it back to Jenny and I am going to get to what I know everyone is focused on and that is our outlook for FY 'twenty five.

Jenny: Thank you Todd.

Jenny: Our Investor day in May we introduced six key market verticals of our business that you see on this slide.

Speaker Change: This slide represents our FY 'twenty five sales growth forecast for each market vertical resulting in organic growth of 2% to 5%.

Speaker Change: We are providing a realistic guide for fiscal year 'twenty five.

Speaker Change: At the midpoint of the guide we have aerospace at eight 5% Industrial North America, 2% and industrial international at one 5%.

Speaker Change: We are confident in growing EPS, achieving mega synergy and continuing our track record of expanding margin.

Speaker Change: I'll get it back to Todd to review the guidance a little more detail.

Todd: Okay. Thank you Jenny.

Todd: I'm now on slide 16, and let me share some of the details of the FY 'twenty guide.

Todd: Reported sales is forecasted to be in the range of one 5% to four and a half or 3% at the midpoint that will equate to approximately $225 billion in sales.

Speaker Change: That is really supported by outside outside support and our aerospace businesses.

Speaker Change: Total sales for the company our modeled at 48% in the first half and 52% in the second half so right in line with what we've historically done on sales splits. If you look specifically at organic growth, we are forecasting organic growth in the range of 2% to 5% or three 5% at the midpoint.

Speaker Change: And we're expecting high single digit growth from aerospace.

Speaker Change: Eight 5%.

Speaker Change: And a gradual recovery in the industrial markets throughout FY 'twenty five.

Speaker Change: For the North American businesses, we are forecasting organic growth of 2% at the midpoint and for the international.

Speaker Change: National businesses, we are forecasting growth of one 5% organic at the midpoint for the full year.

Speaker Change: If you look at the mix on organic growth.

Speaker Change: Two 5% first half for 5% growth second half.

Speaker Change: And.

Speaker Change: I will note that this guidance does include sales from the recently announced divestiture that Jenny mentioned, we are expecting that to close sometime in the second quarter and we will give an update once that closes to.

Speaker Change: The impact it has on the company.

Speaker Change: We are based on.

The range of $1 five to four and a half or 3% at the midpoint.

Speaker Change: June 30th currency spot rates, and we're forecasting that to be a slight headwind of about a half a percent or $100 million on currency versus prior year.

That will equate to approximately $225 billion in sales.

That is really supported by outside outside support and our aerospace businesses.

Speaker Change: Jenny mentioned margin expansion 50 basis points of margin expansion is our plan and in FY 'twenty five we're going to get that by continuing to do exactly what we've done over the last couple of years, it's really implement.

Total sales for the company our modeled at 48% in the first half and 52% in the second half so right in line with what we've historically done on sales splits. If you look specifically at organic growth, we are forecasting organic growth in the range of 2% to 5% or three 5% at the midpoint.

Speaker Change: And.

Jenny: Advance the win strategy adjusted.

Speaker Change: Adjusted segment operating margin guidance is $25 four at the midpoint. There is a range of 20 basis points on either side of that.

Speaker Change: And segment operating income is split 47% first half, 53% second half if you do the math on Incrementals were expecting slightly.

And we're expecting high single digit growth from aerospace.

Eight 5%.

And a gradual recovery in the industrial markets throughout FY 'twenty five.

Speaker Change: At 40% incredible incremental margins, that's a little bit higher than what we would normally have had just based on the growth in aerospace and of course continue.

For the North American businesses, we are forecasting organic growth of 2% at the midpoint and for the international businesses. We are forecasting growth of one 5% organic at the midpoint for the full year.

Speaker Change: Synergies.

Speaker Change: A few additional items on the guide corporate G&A is expected to be approximately $230 million interest expense is $450 million that is a reduction of approximately $50 million from FY 'twenty four.

If you look at the mix on organic growth.

Two 5% first half for 5% growth second half.

And.

I will note that this guidance does include sales from the recently announced divestiture that Jenny mentioned, we are expecting that to close sometime in the second quarter and we will give an update once that closes to.

Speaker Change: And other expense is expected to be about $5 million tax rate, we are modeling a 23% tax rate.

Speaker Change: Full year as reported EPS of $23 four adjusted EPS of <unk> 26.

Speaker Change: The impact it has on the company.

Speaker Change: 65, both of those figures are at the midpoint and the range on those both of those ranges is 35.

Speaker Change: We are based on.

Speaker Change: June 30th currency spot rates, and we're forecasting that to be a slight headwind of about a half a percent or $100 million on currency versus prior year.

Speaker Change: On the high end and the low end.

Speaker Change: And if you look at adjusted EPS. It is split 47% first half 53% second half.

Jenny mentioned margin expansion 50 basis points of margin expansion is our plan and in FY 'twenty five we're going to get that by continuing to do exactly what we've done over the last couple of years is really implement.

Speaker Change: In respect to cash flow for the full year, we are giving a range of $3 billion to $3 3 billion that is 315 billion at the midpoint that will be approximately 15, 3% of sales and of course, we expect free cash flow conversion to be greater than a 100%.

Speaker Change: And <unk>.

Jenny: Advance the win strategy.

Speaker Change: Adjusted segment operating margin guidance is $25 four at the midpoint. There is a range of 20 basis points on either side of that and.

Speaker Change: If you look at the far right column on this page Youll see some specifics.

Speaker Change: Segment operating income is split 47% first half, 53% second half if you.

Speaker Change: Specifically about Q1 and these are all at the midpoint reported sales we are forecasting to be plus one.

Speaker Change: Do the math on Incrementals were expecting slightly at.

Speaker Change: At 40% incredible incremental margins, that's a little bit higher than what we'd normally have had just based on the growth in aerospace and of course continuing.

Speaker Change: Organic growth is one 5% positive.

Speaker Change: Adjusted segment margins of $25 two and.

Speaker Change: And adjusted EPS is expected to be $6 five.

Synergies.

Speaker Change: Few additional items on the guide corporate G&A is expected to be approximately $230 million interest.

Speaker Change: As usual we've provided several other details for our guidance in the appendix.

Speaker Change: If you look at slide 17. This is a very similar story to what we just did in FY 'twenty four.

Expenses $450 million that is a reduction of <unk>.

Speaker Change: Approximately $50 million from FY 'twenty four and other expense is expected to be about $5 million tax rate, we are modeling a 23% tax rate.

Speaker Change: Segment operating income is the main driver of our EPS growth that is a $1 51 of EPS growth will continue to have lower interest expense as a result of our great cash flow generation and our deleveraging efforts that will add <unk> <unk> to EPS.

Speaker Change: And full year as reported EPS of $23 four adjusted EPS up 26%.

Speaker Change: 65, both of those figures were at the midpoint and the range on those both of those ranges is 35.

Speaker Change: If you look at the tax rate that will be an unfavorable number just a reminder, that that will be a 23%.

Speaker Change: On the high end and the low end.

Speaker Change: <unk> tax rate that is a headwind of 41.

Speaker Change: And if you look at adjusted EPS. It is split 47% first half <unk>.

Speaker Change: Really compared to a favorable rate that we had in the full year of FY 'twenty four.

Speaker Change: 53% second half.

Speaker Change: Corporate G&A is slightly unfavorable just six.

Speaker Change: In respect to cash flow for the full year, we are giving a range of $3 billion to $3 3 billion that is 315 billion at the midpoint that will be approximately 15, 3% of sales and of course, we expect free cash flow conversion to be greater than a 100%.

Speaker Change: Other expense is 10 unfavorable and share count is just another headwind of seven but if you look at that all in that's our walk to the $26 65 midpoint or a 5% increase.

Speaker Change: Year over year.

Speaker Change: If you look at the far right column on this page you will see some specifics.

Speaker Change: With that gentleman hand, it back to you and ask everyone to reference slide 18, Thanks Todd.

Speaker Change: Specifically about Q1 and these are all at the midpoint reported sales we are forecasting to be plus one.

Speaker Change: As mentioned at our Investor day and demonstrated in our results. This is a different partner.

Speaker Change: Organic growth is one 5% positive.

Speaker Change: We will add more than $10 to EPS and generate an additional 50% free cash flow by fiscal year 2019.

Speaker Change: Adjusted segment margins of $25, two and adjusted EPS is expected to be $6 five.

Speaker Change: Our performance will continue to be accelerated from the win strategy.

Speaker Change: As usual we've provided several other details for our guidance in the appendix.

Speaker Change: Have a longer cycle and more resilient portfolio.

Speaker Change: Well experienced growth from secular trends and we will continue to be great generators and to players at cash.

Speaker Change: Look at Slide 17. This is a very similar story to what we just did in FY 'twenty for.

Speaker Change: Next slide please.

Speaker Change: Segment operating income is the main driver of our EPS growth that is $1 51 of EPS growth will continue to have lower interest expense as a result of our great cash flow generation and our deleveraging efforts that will add <unk> <unk> to EPS.

Speaker Change: We are very proud to be celebrating 60 years on the New York stock Exchange and we will ring. The closing Bell next week on Wednesday August 14th.

Speaker Change: I'll turn it back to Todd to get started with Q&A.

Todd: Okay, Kevin we are ready to open the lines for Q&A and we'll take the first person in the queue certainly if you'd like to be placing the question queue. Please press star one at this time and as a reminder, we ask you. Please limit yourselves to one question and one follow up then return to the queue, if you'd like to remove yourself from the queue. Please press star two our first.

Speaker Change: If you look at the tax rate that will be an unfavorable number just a reminder, that that will be a 23%.

Speaker Change: <unk> tax rate that is a headwind of 41.

Speaker Change: Really compared to a favorable rate that we had in the full year of FY 'twenty four.

Speaker Change: Corporate G&A is slightly unfavorable just six.

Speaker Change: Western is coming from Julian Mitchell from Barclays. Your line is now live.

Speaker Change: Other expense is 10 unfavorable and share count is just another headwind of seven but if you look at that all in that's our walk to the 2665 midpoint or 5% increase.

Julian Mitchell: Hi, good morning.

Julian Mitchell: Maybe just the first question around the first quarter.

Speaker Change: Luke.

Speaker Change: Year over year.

Julian Mitchell: I think first off maybe you could talk about the organic sales guide a little bit.

Speaker Change: With that gentleman hand, it back to you and ask everyone to reference slide 18, Thanks Todd.

Speaker Change: Thank you for dialing in a bit of a deceleration from the June quarter year on year.

Speaker Change: As mentioned at our Investor day and demonstrated in our results. This is a different partner we.

Speaker Change: Even with better orders, so maybe just any commentary around kind of very recent demand trends any big movement months to months.

Speaker Change: We will add more than $10 to EPS and generate an additional 50% free cash flow by fiscal year 'twenty nine.

Speaker Change: Our performance will continue to be accelerated from the win strategy.

Speaker Change: And then sort of on the firm wide P&L for Q1, you're basically saying flat EPS dollars year on year, but with sales growth and margins up so is there something below the line moving around yes Julia.

Speaker Change: A longer cycle and more resilient portfolio.

Speaker Change: <unk> experienced growth from secular trends and we will continue to be great generators and to players at cash.

Speaker Change: Julien. This is this is Todd I can take that yes. There is some seasonality just going from Q4 to Q1, if you look at our historical sales splits in our historical earnings split what we're modeling here is in line with what we've.

Speaker Change: Next slide please.

Speaker Change: We are very proud to be celebrating 60 years on the New York stock Exchange and we will ring. The closing Bell next week on Wednesday August 14th.

Speaker Change: Ill turn it back to Todd to get started with Q&A.

Speaker Change: Historically done.

Speaker Change: Organic growth guide for the total company is plus one.

Todd: Okay, Kevin we are ready to open the lines for Q&A and we will take the first person in the queue.

Speaker Change: For the fourth quarter.

Speaker Change: That is driven by aerospace.

Speaker Change: Certainly if you'd like to be placed in the question queue. Please press star one at this time and as a reminder, we ask you. Please limit yourselves to one question and one follow up then return to the queue, if you'd like to remove yourself from the queue. Please press star two and our first question is coming from Julian Mitchell from Barclays. Your line is now live.

Speaker Change: Continues to be low double digit organic growth is what we're expecting in aerospace, but in the industrial businesses. Both in North America and international we are still expecting that to be down from prior year. So it's low single digits, but it's still down we expect that to improve.

Julian Mitchell: Hi, good morning.

Julian Mitchell: Maybe just the first question around the first quarter outlook.

Speaker Change: Throughout the fiscal year and this is just our best look at roll up. So so you are right. It is it's a little bit of a softer industrial environment, but really offset by strength in aerospace.

Speaker Change: So I think first off maybe to talk about the organic sales guide a little bit.

Speaker Change: I think youre dialing in a bit of a deceleration from the June quarter year on year.

Speaker Change: If you look at margins.

Speaker Change: What we just did in Q4 was all time record for the quarter.

Speaker Change: Even with better orders, so maybe just any commentary around kind of very recent demand trends any big movement months to months.

Speaker Change: We are.

Speaker Change: Guiding to 25, 2% that would be a Q1 record for the company. So it is not an easy.

Speaker Change: And then sort of on the firm wide P&L for Q1, you're basically saying flat EPS dollars year on year, but with sales growth and margins up so is there something below the line moving around.

Speaker Change: Number there it really is it would be a record.

Speaker Change: And to do that in light of some softness on the ADESA side of the business, we're pretty proud about that.

Speaker Change: Below the line stuff that just.

Speaker Change: Yes, Julien. This is this is Todd I could take that there is some seasonality just going from Q4 to Q1. If you look at our historical sales splits in our historical earnings split what we're modeling here is in line with what we have.

Speaker Change: First quarter phenomenon, but nothing abnormal.

Speaker Change: We are.

Speaker Change: Experiencing earnings per share growth and net income growth in Q4 and that really supports what we what we see throughout the balance of the year.

Speaker Change: <unk> historically done.

Speaker Change: Organic growth guide for the total company is plus one.

Speaker Change: That's helpful. Thank you and then maybe as my follow up would be around slide 15. So you have that very helpful color on the end market.

Julian Mitchell: For the for the quarter.

Julian Mitchell: That is driven by aerospace.

Speaker Change: <unk> continues to be low double digit organic growth is what we're expecting in aerospace, but in the industrial businesses. Both in North America and international we are still expecting that to be down from prior year.

Speaker Change: It goes outlook for the year.

Speaker Change: Maybe just any context you could give.

Speaker Change: Sort of maybe fourth quarter.

Speaker Change: Rates in some of those end markets and I suppose in plants and industrial I'm, particularly focused on.

Julian Mitchell: It's low single digits, but it's still down we expect that to improve.

Speaker Change: Seems like the Capex environment is getting a little bit worse out there just wanted to to what you're seeing in the implant and industrial piece. Please sure Julian be happy to do that so if you look at and plant in industrial equipment.

Julian Mitchell: Throughout the fiscal year and this is just our best look at roll up. So so you are right. It is.

Julian Mitchell: A little bit of a softer industrial environment, but really offset by strength in aerospace.

Julian Mitchell: It improved from negative low single digit.

Julian Mitchell: If you look at margins what we just did in Q4 was all time record for the quarter.

Julian Mitchell: In Q3 to neutral in Q4.

Julian: And as you can see on the slide that you're referencing our FY 'twenty guidance forecasting neutral in the first half low single digit in the second half, resulting in a low single digit for the full year.

Julian Mitchell: We are.

Julian Mitchell: Guiding to 25, 2% that would be a Q1 record for the company. So it is not an easy number there. It really is it would be a record and to do that in light of some softness on the industrial side of the business, we're pretty proud about that.

Julian: If you look at transportation.

Speaker Change: It was mid single digit negative in Q4, and that was primarily driven by automotive cars and light trucks.

Julian Mitchell: Below the line stuff that just is.

Speaker Change: Our third casting low single digit negative growth for transportation in the first half.

Julian Mitchell: A first quarter phenomenon, but nothing abnormal.

Speaker Change: We are.

Speaker Change: Mid single digit growth in the second half because we expect automotive to return to growth then.

Speaker Change: Experiencing earnings per share growth and net income growth in Q4 and that really supports where we what we see throughout the balance of the year.

Speaker Change: Work truck strength continues in heavy duty truck is positive now so full year at that low single digit growth.

Speaker Change: That's helpful. Thank you and then maybe as my follow up would be around slide 15. So you have that very helpful color on the end market.

Speaker Change: If you look at off highway it was high single digit negative in Q4.

Speaker Change: And we are forecasting the same for the first half neutral for the second half and mid single digit negative for the full year.

Speaker Change: Articles outlook for the year.

Speaker Change: Maybe just any context you could give.

Speaker Change: Around sort of maybe fourth quarter.

Speaker Change: Inside there, we expect AG to be double digit negative this year.

Speaker Change: Rates in some of those end markets and I suppose in plant any industrial I'm, particularly focused on.

Speaker Change: Offset by construction low single digit positive.

Speaker Change: And so that add some color there and then energy is forecasted to be low single digit for fiscal year 'twenty five.

Speaker Change: Seems like the Capex environment is getting a little bit worse out there.

Speaker Change: Just wanted to what you're seeing in the implant and industrial piece. Please sure Julian be happy to do that so if you look at implant and industrial equipment.

Speaker Change: Neutral in the first half mid single digit in the second half.

Speaker Change: HVA fee was low single digit negative for Q4, but it is improving we are forecasting mid single digit growth for the first half. This was driven by a recent regulation change on refrigerant.

Julian Mitchell: It improved from negative low single digit.

Julian Mitchell: In Q3 and neutral in Q4.

Julian Mitchell: And as you can see on the slide that you're referencing our FY 'twenty guidance forecasting neutral in the first half low single digit in the second half, resulting in a low single digit for the full year.

Speaker Change: And the second half growth forecast is that low single digit growth, but thats dependent on how fast some of these manufacturers get through their inventory and ramp up production under the new regulation. So for the full year, we have them at low single digit.

Julian Mitchell: If you look at transportation.

Speaker Change: It was mid single digit negative in Q4, and that was primarily driven by automotive cars and light trucks.

Speaker Change: That's great. Thank you.

Julien: Thanks Julien.

Speaker Change: Our casting low single digit negative growth for transportation in the first half.

Speaker Change: Thank you next question is coming from David Raso from Evercore ISI. Your line is now live.

Speaker Change: Mid single digit growth in the second half because we expect automotive to return to growth then.

David Raso: Hi. Thank you my question is around your comfort with the organic sales guide right. We have one 5% in the first quarter, we can back into <unk> right. It's three 5% so that 2% faster growth in <unk> from <unk>.

Speaker Change: Work truck strength continues in heavy duty truck is positive now so full year is at that low single digit growth.

Speaker Change: If you look at off highway it was high single digit negative in Q4.

Speaker Change: The impression I get that's coming from industrial going from down 152% in the first quarter, two going slightly positive and I just wanted to get some color on why do we see that turning flat to positive in <unk>, the comps get a little easier in North America, but just any color around that particularly on.

Speaker Change: And we are forecasting the same for the first half neutral for the second half and mid single digit negative for the full year.

Speaker Change: Inside there, we expect AG to be double digit negative this year.

Speaker Change: Offset by construction low single digit positive.

Speaker Change: The mix of orders are you seeing it more from distributors is it the lack of Destocking, maybe from a year ago with the manufacturers just trying to get more comfortable with that delta on year over year growth for industrial one two and then getting the.

Speaker Change: And so that's that's.

Speaker Change: Some color there and then energy is forecasted to be low single digit for fiscal year 'twenty five.

Speaker Change: Neutral in the first half mid single digit in the second half.

Speaker Change: HVA fee was low single digit negative for Q4, but it is improving we are forecasting mid single digit growth for the first half. This is driven by a recent regulation change on refrigerant.

Speaker Change: Essentially yes.

Speaker Change: Slightly positive for <unk>. Thank you.

David: Take that David.

David: Some of the things that Todd mentioned earlier in a total company order rate did go positive two 1% in Q4 industrial North America improved zero in Q4.

Speaker Change: And the second half growth forecast is that low single digit growth, but thats dependent on how fast some of these manufacturers.

Speaker Change: After being negative for us so that that was a positive sign and as Todd mentioned that did and five quarters of negative order entry international orders improved to negative one from negative eight and that was driven by Asia Pacific.

Speaker Change: Get through their inventory and ramp up production under the new regulation. So for the full year, we have them at low single digit.

Speaker Change: That's great. Thank you.

Julien: Thanks Julien.

Speaker Change: Thank you next question is coming from David Raso from Evercore ISI. Your line is now live.

David: Yeah.

Speaker Change: When you look at at the channel that Destocking in the channel started over a year ago, and we believe that it has pretty much played out.

David Raso: Hi. Thank you my question is around your comfort with the organic sales guide we have one 5% in the first quarter, we can back into <unk>, it's three 5% so that 2% faster growth in <unk> from <unk>.

Speaker Change: We see the distribution trend going up but I would say, it's not a step change yet.

Speaker Change: We are actually seeing them add inventory.

Todd: But these are all the things that are into are placed into our guide Todd mentioned also on the backlog remains strong.

Speaker Change: The impression I get that's coming from industrial going from say down one 2% in the first quarter, two going slightly positive and I just wanted to get some color on why do we see that turning flat to positive in <unk>, the comps get a little easier in North America, but just any color around that particularly on.

Todd: Q4 flat with Q3 dollars at near record levels. So all of these things are based are baked into the guide and the reason that.

Speaker Change: We feel good with the organic growth numbers, we have in the first half.

Speaker Change: The mix of orders are you seeing it more from distributors is it the lack of destock, maybe from a year ago with the manufacturers just trying to get more comfortable with that delta on year over year growth for industrial <unk> and then getting the.

Speaker Change: Hey, David David I agree with everything you said there as usual your math is spot on.

David Raso: You mentioned the comps comps are 2% easier.

Speaker Change: Q2.

Speaker Change: Essentially yes.

David Raso: Against the prior so it's a little bit of all of that stuff, but I just wanted to call out the comps.

Speaker Change: Slightly positive for <unk>. Thank you.

Speaker Change: Take that David so.

David Raso: The reason I ask because it doesn't seem like there's much pricing the new pricing for July one so I'm just trying to figure out what's the incremental bump, maybe you're saying, there's a little bit of comp.

Todd: Some of the things that Todd mentioned earlier total company order rate did go positive two 1% in Q4 industrial North America improved zero in Q4.

Speaker Change: After being negative for us so that was a positive sign and as Todd mentioned that did and five quarters of negative order entry international orders improved to negative one from negative eight and that was driven by Asia Pacific.

Speaker Change: You know obviously.

Speaker Change: That's what makes them tick up right. We're back to April I went back to a normal pricing environment. So.

Speaker Change: It's more about the comp.

Speaker Change: Getting easier and if you look at North America, Todd mentioned that we expect Q1 to be flat to Q4.

Speaker Change: Yeah.

Speaker Change: When you look at at the channel that Destocking in the channel started over a year ago, and we believe that it has pretty much played out.

Todd: But that gradual industrial recovery is what we have.

Todd: Really baked into the guide.

Todd: And the growth uptick mainly in the second half.

Speaker Change: We see the distribution trend going up but I would say, it's not a step change yet.

Speaker Change: Easier comps.

Speaker Change: I'll follow up.

Speaker Change: Ultimate was one question you don't have to answer it but I'm curious the verticals that we're now breaking out we know the margins in aerospace obviously, there are highlighted separately, but the other five verticals would you give us a sense of kind of force rank.

Speaker Change: We are actually seeing them add inventory.

Todd: But these are all the things that are into are placed into our guide Todd mentioned also on the backlog remains strong.

Todd: Q4 flat with Q3 dollars at near record levels. So all of these things are based are baked into the guide and the reason that.

Speaker Change: Hello was the margins between those five just so we get a sense of the mix looking at it in this format.

Speaker Change: Yes, we're not going to disclose that David.

Todd: We feel good with the organic growth numbers, we have in the first half.

David Raso: Alright, Thats right alright, thank you.

David Raso: Hey, David.

Speaker Change: Yeah.

Speaker Change: I would tell you just look at those.

David Raso: With everything <unk> said, there as usual your math is spot on.

Speaker Change: <unk> industrial segment those margins are.

David Raso: You mentioned the comps comps are 2% easier in Q2.

Speaker Change: The record levels.

Speaker Change: The international businesses are not that far off from the North America businesses, and it's really just a factor of some softness in Europe, and Asia kind of going through.

David Raso: Against the prior so it's a little bit of all of that stuff, but I just wanted to call out the comps.

David: The reason I the reason I ask because it doesn't seem like there's much pricing the new pricing for July one so I'm just trying to figure out what's the incremental bump, maybe you're saying, there's a little bit of comp.

Speaker Change: A recovery mode.

Speaker Change: But the margins are strong across all of those verticals.

Speaker Change: All the vintages are performing really well and margin expansion.

Speaker Change: And you know obviously.

David: So maybe some pick up right. There we're back to April I went back to a normal pricing environment. So.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Thank you next question is coming from Scott Davis familiar research. Your line is now live.

Speaker Change: It's more about the comp.

Speaker Change: Getting easier and if you look at North America, Todd mentioned that we expect Q1 to be flat to Q4.

Scott Davis: Hey, good morning, Jenny and Todd and congrats on another.

Speaker Change: Another great year growing Scott. Thank you. Thank you.

Todd: But that gradual industrial recovery is what we have.

Scott: I know, it's probably hasnt the answer probably hasnt changed much since the analyst day, but perhaps you could give us a little bit of an update on M&A and what you're seeing I think.

Speaker Change: Really baked into the guide and.

Todd: And the growth uptick mainly in the second half.

Speaker Change: Easier comps.

Speaker Change: I'll follow up.

Speaker Change: Ultimate was one question that you don't have to answer it but I'm curious the verticals that we're now breaking out we know the margins in aerospace obviously, there are highlighted separately, but the other five verticals would you give us a sense of kind of force rank highest to lowest the margins between those five just so we get a sense of the mix looking at it in this form.

Speaker Change: You clearly have the balance sheet space to probably step up and get a little bit more aggressive so.

Scott: Just a little bit of an update would be helpful. Thanks.

Speaker Change: Yeah, you're right.

Speaker Change: Not a lot different but obviously.

Speaker Change: You know.

Speaker Change: We still have some debt to pay down that's still our focus.

Speaker Change: But when we look to acquisitions, we're always working the pipeline.

Speaker Change: Matt.

Matt: Yes, we're not going to disclose that David.

Speaker Change: Those relationships and maintaining and building those relationships, it's really important to us.

David: Alright, Thats right alright, thank you.

David: Yeah.

Speaker Change: I would tell you just look at those the diversified industrial segment those margins are.

Speaker Change: And we've been doing quite a bit of that.

Speaker Change: We're looking for those things, where we are the clear best owner with the interconnected technologies.

Speaker Change: You know their record levels.

Speaker Change: The international businesses are not that far off from the North America businesses, and it's really just a factor of some softness in Europe, and Asia kind of going through.

Speaker Change: Building on the secular trends, but the one thing that I would say the most is that we're looking for deals that are accretive to growth.

Speaker Change: Resiliency margins cash flow and EPS, it really have to take all of those boxes and.

Speaker Change: A recovery mode.

Speaker Change: But the margins are strong across all of those verticals.

Speaker Change: In some cases it really is based on timing. So we like all of the eight core technology and we.

Speaker Change: All the vintages are performing really well and margin expansion.

Speaker Change: Okay.

Speaker Change: We see opportunities to build on the entire portfolio we have.

Speaker Change: Thank you next question is coming from Scott Davis familiar research. Your line is now live.

Speaker Change: Different businesses that we're looking at of all sizes. So question that I get a lot too is you built with each one is the next one is going to be.

Scott Davis: Hey, good morning, Jenny and Todd and congrats on another.

Scott Davis: Another great year.

Scott Davis: Scott. Thank you. Thank you.

Speaker Change: Bigger than that.

Speaker Change: That's not.

Scott Davis: I know, it's probably hasnt answered probably hasnt changed much since the analyst day, but perhaps you could give us a little bit of an update on M&A and what youre seeing I think.

Speaker Change: That's not something that we're focused on we're focused on the right deal.

Speaker Change: With all of that criteria that I just mentioned.

Speaker Change: Okay.

Speaker Change: You clearly have the balance sheet space to probably step up and get a little bit more aggressive so.

Speaker Change: Jenny the portfolio optimization and the small divestiture as the lens here that you guys are looking at.

Speaker Change: Just a little bit of an update would be helpful. I think.

Jenny: Slide 15 lines that the key market vertical stuff that's outside of that verticals or is there a or is it more a function of kind of.

Speaker Change: Yeah, you're right.

Speaker Change: Not a lot different but obviously.

Speaker Change: No.

Speaker Change: We still have some debt to pay down that's still our focus.

Speaker Change: Margin growth potential and kind of more traditional metrics. Its the ladder, we have to see that.

Speaker Change: But when we look to acquisitions, we're always working the pipeline.

Scott Davis: These relationships and maintaining and building those relationships is really important to us.

Speaker Change: Part of our core technologies, our core product offering.

Scott Davis: And we've been doing quite a bit of that.

Speaker Change: Obviously this business with an aerospace and that's a market that we're very fond of but it's on the future profile of the business both margin expansion and growth.

Scott Davis: We're looking for those things, where we are the clear best owner with the interconnected technologies.

Scott Davis: And building on the secular trends, but the one thing that I would say the most is that we're looking for deals that are accretive to growth.

Speaker Change: Okay that makes a ton of sense. Thank you I'll pass it on I appreciate it.

Scott: Thanks Scott.

Mig <unk>: Thank you. Our next question is coming from Mig <unk> from Baird. Your line is now live.

Scott Davis: Resiliency margins cash flow and EPS, it really have to take all of those boxes and.

Speaker Change: Thank you good morning.

Mig: I guess one of the things that kind of stood out to me over the past couple of quarters within New York.

Scott Davis: In some cases it really is based on timing. So we like all of the eight core technology and we.

Speaker Change: Industrial technology platform.

Scott Davis: We see opportunities to build on the entire portfolio we have.

Speaker Change: Motion systems and lowering process control.

Scott Davis: Different businesses that we're looking at of all sizes.

Speaker Change: And the way, we would sort of expect them to kind of industrial downturn.

Speaker Change: Question that I get a lot too is you built with each one is the next one is going to be.

Speaker Change: We're experiencing this whole down high single digit revenue okay.

Scott Davis: Bigger than Mega and that's that's not.

Speaker Change: But your filtration engineered materials platform.

Scott Davis: That's not something that we're focused on we're focused on the right deal with all of that criteria that I just mentioned.

Speaker Change: Pretty remarkably stable. So I guess my question is.

Scott Davis: Okay, and Jenny the portfolio optimization and the small divestiture as the lens here that you guys are looking at.

Speaker Change: Looking back why has that been the case.

Speaker Change: Sort of different than what you've seen in prior downturns.

Speaker Change: Slide 15 lines that the key market vertical stuff that's outside of that verticals or is there a or is it more a function of kind of <unk>.

Speaker Change: And is there an impact on margin from a mix standpoint within your industrial business from this filtration business is hanging in there a little bit better.

Speaker Change: Margin growth potential and kind of more traditional metrics. Its the ladder, we have to see that.

Speaker Change: Yes, so thanks for the question.

Speaker Change: If you think back to the on purpose strategy that we had with our acquisitions to double the size of the filtration <unk> doubled the size of engineered materials and aerospace we've done that with the last four acquisition. So if you take filtration.

Speaker Change: Part of our core technologies, our core product offering.

Speaker Change: Obviously this business with an aerospace and that's a market that we're very fond of but it's the future profile of the business both margin expansion and growth.

Speaker Change: Okay that makes a ton of sense. Thank you I'll pass it on I appreciate it.

Speaker Change: For instance, with the acquisition of CLARCOR, and we greatly increased our aftermarket exposure and filtration.

Scott Davis: Thanks Scott.

Scott Davis: Thank you. Our next question is coming from Mig <unk> from Baird. Your line is now live.

Speaker Change: And that business has become more resilient than it was in the past and when you look at <unk>.

Mig: Thank you good morning.

Mig: I guess one of the things that kind of stood out to me over the past couple of quarters within Europe.

Speaker Change: Lord into engineered materials, and that's where we picked up a lot of that longer cycle business.

Speaker Change: Industrial technology platform.

Speaker Change: And so you see those two groups behaving a little bit differently than the other two that you mentioned that is definitely the main reason.

Speaker Change: Motion systems, and lowering process control kind of behave the way, we would sort of expect them to when you kind of industrial downturn.

Speaker Change: And the margin impact.

Speaker Change: Experiencing this whole down high single digit revenue okay.

Speaker Change: The margin impact is accretive just like the.

Speaker Change: Criteria that we give to the to the acquisition that we would do in the future.

Speaker Change: But your filtration engineered materials platform.

Speaker Change: These have been those have both been very successful deals were.

Speaker Change: Pretty remarkably stable. So I guess my question is looking.

Speaker Change: Energy.

Speaker Change: Looking back why has that been the case.

Speaker Change: Hit and they continue to use the win strategy to improve margin.

Speaker Change: Sort of different than what you've seen in prior downturns.

Speaker Change: Let me give you a little color on this if youre worried we agree with you. The topline has acted exactly as we expected it but I would tell you. The margin expansion has been equally generated by all of these businesses.

Speaker Change: And is there any impact on margin from a mix standpoint within your industrial business from this filtration business is hanging in there a little bit better.

Speaker Change: When you look at that record that we've put up for <unk> for the quarter 25.4.

Speaker Change: Yeah. So thanks for the question Mike.

Speaker Change: If you think back to the on purpose strategy that we had with our acquisitions to double the size of the filtration <unk> doubled the size of engineered materials and aerospace we've done that with the last four acquisition. So if you take filtration.

Speaker Change: That motion systems platform that fluid process control those were equally.

Speaker Change: Contributing to those margins.

Speaker Change: It wouldn't have happened without those two areas.

Speaker Change: And when you look at the cash that we generate those businesses are stellar cash flow generators as well. So it's all part of the mix Thats all while we love the portfolio as it sits in itself generating.

Scott Davis: For instance, with the acquisition of CLARCOR, and we greatly increased our aftermarket exposure and filtration and that business has become more resilient than it was in the past and when you look at.

Speaker Change: All time record numbers and those technologies are very important part of our portfolio and.

Scott Davis: Lord into engineered materials, and that's where we picked up a lot of that longer cycle business and so you see those two groups behaving a little bit differently than the other two that you mentioned that is that is definitely the main reason.

Speaker Change: Participate in the secular trends that we've talked about.

Speaker Change: Thanks for the color I'll pass it on.

Speaker Change: Yeah.

Speaker Change: Thank you next question today is coming from Jamie Cook from <unk> Securities. Your line is now live.

Jamie Cook: Hi, good morning, and congratulations on a nice quarter and guide I guess.

Scott Davis: And the margin impact.

Speaker Change: The margin impact is accretive just like the.

Jamie Cook: My first question tighter journey I'm, just looking at the implied incrementals for the year, the 40% ish.

Speaker Change: The criteria that we give to the to the acquisition that we would do in the future.

Speaker Change: A very good incremental margin above your targeted range on lower organic growth relative to your longer term guide. So is there anything unusual in your yeah.

Speaker Change: These have been those have both been very successful deals where synergies.

Speaker Change: Were hit and they continue to use the win strategy to improve margin.

Speaker Change: And in the mix this year that would allow you to have above average incrementals on a low organic growth versus your targeted range.

Speaker Change: Maybe let me give you a little color on this if you're worried we agree with you. The topline has acted exactly as we expected it but I would tell you. The margin expansion has been equally generated by all of these businesses.

Speaker Change: And then I guess that the follow up question.

Speaker Change: Yes.

Speaker Change: Once you get to that 4% to 6% organic growth like Washington, your incremental margins be better than that.

Speaker Change: When you look at that record that we've put up for <unk> for the quarter 25.4.

Speaker Change: Just given what we're seeing already today, and then Jenny you're probably not going to want to answer answer this but I'm going to ask it anyway.

Speaker Change: That motion systems platform that fluid process control those were equally contributing.

Speaker Change: The order surprise me both on industrial North America, and an international anything you can do to talk to the cadence of what you saw since.

Speaker Change: Contributing to those margins.

Speaker Change: It wouldn't have happened without those.

Speaker Change: Two areas.

Speaker Change: And when you look at the cash that we generate those businesses are stellar cash flow generators as well. So it's all part of the mix. It's all while we love the portfolio as it sits and itself generating.

Jenny: Since April and where we are there.

Speaker Change: Good day orders.

Speaker Change: Outperform your your expectations as well thank you.

Speaker Change: Yes, Jamie let me start on the Incrementals.

Speaker Change: Thank you for the recognition of the quarter, we appreciate that.

Speaker Change: All time record numbers and those technologies are very important part of our portfolio and.

Jamie: Youre right. The Incrementals are a little bit higher than what we have historically.

Speaker Change: Participate in the secular trends that we've talked about.

Jamie: Forecast.

Speaker Change: Thanks for the color I'll pass it on.

Speaker Change: 30% is really kind of over the cycle. So sometimes we think we can do better sometimes it might be a challenge on the topline.

Speaker Change: Okay.

Speaker Change: Thank you next question today is coming from Jamie Cook from <unk> Securities. Your line is not that high.

Speaker Change: But the way the math works is a little bit funny right aerospace with the strong growth in aerospace and the margin profile that aerospace is operating as it is driving the incrementals for the company a little bit higher than normal.

Jamie Cook: Hi, good morning, and congratulations on a nice quarter and guide I guess.

Jamie Cook: My first question tighter journey I'm, just looking at the implied incrementals for the year, the 40% ish.

Speaker Change: A very good incremental margin above your targeted range on lower organic.

Speaker Change: Also are committed to the $300 million of synergies that we are.

Speaker Change: Organic growth relative to your longer term guide so is there anything unusual in your yeah.

Speaker Change: Have promised for Mega, we expect $50 million of incremental synergies in FY 'twenty five versus FY 'twenty for us So that's putting aerospace a little bit higher than historically, where we've been at and when you look at the industrial businesses.

Speaker Change: And in the mix this year that would allow you to have above average incrementals on a low organic growth versus your targeted range and then I guess that the follow up question is.

Speaker Change: We still see margin expansion, even in a low growth.

Speaker Change: You know once you get to that 4% to 6% organic growth like Washington, your incremental margins be better than that.

Speaker Change: Topline environment. So when you put all that together that's how we came up with the numbers. So we feel we feel really good about that that the team is energized and focused on making sure that we deliver that.

Speaker Change: Just given what we're seeing already today, and then Jenny you're probably not going to want to answer answer this but I'm going to ask it anyway.

Speaker Change: The order surprise me both on industrial North America, and an international anything you can do to talk to like the cadence of what you saw.

Speaker Change: And from an order standpoint, Jamie.

Jamie Cook: On the May call I did something that I normally don't do but made the comment that we were encouraged at the start of the quarter with what we were seeing in orders and obviously that continued and we saw ourselves get to the order condition that we're talking about today at the end of Q4 so.

Speaker Change: Since April and where we are there.

Jenny: Good day orders outperformed your your expectations as well thank you.

Jenny: Yes, Jamie let me start on the Incrementals.

Speaker Change: Thank you for the recognition of the quarter, we appreciate that.

Speaker Change: That played out well for us.

Jamie Cook: Youre right. The Incrementals are a little bit higher than what we have historically.

Speaker Change: But what we have in the guide today.

Speaker Change: Supported by the comments that we've made at those Q4 orders so no no additional color on on orders.

Speaker Change: Forecast and you know that 30% is really kind of over the cycle. So sometimes we think we can do better sometimes it might be a challenge on the top line.

Speaker Change: Okay. Thank you nice job. Thanks, Jami, Thank you Jamie.

Speaker Change: But the way the math works is a little bit funny right aerospace with the strong growth in aerospace and the margin profile that aerospace is operating as it is driving the incrementals for the company a little bit higher than the normal. We also are committed to the $300 million of synergies that we have.

Speaker Change: Thank you. Your next question today is coming from Joe Ritchie from Goldman Sachs. Your line is now live.

Joe Ritchie: Hi, good morning, Jennie and Todd terrific year, not just the corners great year.

Speaker Change: Thank you.

Speaker Change: I'm going to I'm going to tackle the margin question, maybe slightly differently.

Speaker Change: Have promised for Mega, we expect $50 million of incremental synergies in FY 'twenty five versus FY 'twenty for us So that's putting aerospace a little bit higher than historically, where we've been at and when you look at the industrial businesses.

Speaker Change: And so like the exit rate for the industrial businesses.

Speaker Change: We're really strong right both in North America and International if you take a look at the 25% North America, and the $23 nine and international.

Speaker Change: We still see margin expansion even in a.

Speaker Change: Our low growth.

Speaker Change: <unk> either at the high end of your guidance for this year or the been buoyant for the international segment, I guess why isn't it going to be better than that we're going to expect some growth in typically.

Speaker Change: Topline environment. So when you put all that together that's how we came up with with the numbers. So we feel we feel really good about that but the team is energized and focused on making sure that we deliver that.

Speaker Change: And so on that you could you can expand margins even in a no growth environment.

Speaker Change: And from an order standpoint, Jamie.

Jamie Cook: On the May call I did something that I normally don't do but made the comment that we were encouraged at the start of the quarter with what we were seeing in orders.

Speaker Change: Okay.

Speaker Change: Joe I'll start I'm looking at Jay She is smiling.

Jay: Just a few months ago gave you.

Speaker Change: And obviously that continued and we saw ourselves get to the order condition that we're talking about today at the end of Q4 so.

Jay: The FY 'twenty nine tar.

Jay: <unk> targets and if you look at this this is right on track with those FY 'twenty nine targets.

Speaker Change: That played out well for us.

Speaker Change: Aerospace, we're going to expand 100.

Speaker Change: What we have in the guide today.

Speaker Change: Supported by the comments that we've made at those Q4 orders.

Speaker Change: Basis points off of.

Speaker Change: An all time record for that business and.

Speaker Change: No no additional color on on orders.

Speaker Change: When you look at the industrial businesses, we're showing margin expansion there as well.

Speaker Change: Okay. Thank you nice job.

Jamie Cook: Thank you Jamie.

Speaker Change: And really an unbelievably.

Speaker Change: Thank you. Your next question today is coming from Joe Ritchie from Goldman Sachs. Your line is now live.

Speaker Change: Low growth.

Speaker Change: Topline number.

Speaker Change: So we feel really.

Joe Ritchie: Hi, good morning, Jennie and Todd terrific year, not just the corners great year.

Speaker Change: Good about that if you look at the cadence throughout the year.

Speaker Change: Every one of these quarters would be a record margin number for us.

Todd: Thank you.

Speaker Change: I'm going to I'm going to tackle the margin question, maybe slightly differently.

Speaker Change: Greece's.

Speaker Change: Outside of Q2, which is a little bit of seasonal volume.

Speaker Change: And so like the exit rate for the industrial businesses are really strong right. Both in North America and international if you take a look at that.

Speaker Change: They're they're aggressive number so.

Speaker Change: What we feel today, that's what that's what we have confidence in and that was kind of all that went into our guidance.

Speaker Change: The 25% North America, and the 23, 9% and international.

Speaker Change: Just back that up by saying, obviously it was a fantastic year with a fantastic exit rate.

Speaker Change: Squarely either at the high end of your guidance for this year or the bad boys for the International segment, I guess why isn't it going to be better than that but we're going to expect some growth and typically you guys have shown that you could you could expand margins even in a no growth environment.

Speaker Change: But.

Speaker Change: This guidance is realistic and this isn't this isn't a slam dunk for our teams. We we believe in the win strategy. We believe in our ability to continue to expand margins but.

Speaker Change: This is a.

Speaker Change: This isn't easy.

Joe Ritchie: Okay.

Speaker Change: Joe I'll start I'm looking at Jay She is smiling.

Speaker Change: Okay got it.

Jay: Just a few months ago gave you.

Speaker Change: Hi.

Speaker Change: I'm sure you'll make it look easy but.

Jay: The FY 'twenty nine targets and if you look at this this is right on track with those FY 'twenty nine targets.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: That's right yeah.

Speaker Change: Yeah.

Speaker Change: You mentioned that you're still planning to take would be to pay down debt you.

Speaker Change: Aerospace, we're going to expand 100.

Speaker Change: Basis points off of an all time record for that business.

Speaker Change: You got your leverage ratio your net leverage down to two turns so congrats on that I know there was a question earlier.

Speaker Change: <unk>.

Speaker Change: When you look at the industrial businesses, we're showing margin expansion there as well.

Speaker Change: Around M&A.

Speaker Change: Can you just talk to us a little bit about.

Speaker Change: And really an unbelievably low growth.

Speaker Change: What's the kind of ranked leverage ratio that you want to get to before you before you get a little bit more front footed but.

Speaker Change: Topline number.

Speaker Change: So we feel really.

Speaker Change: Good about that if you look at the cadence throughout the year.

Speaker Change: Capital deployment on the M&A side and then there is is there an opportunity to continue to buy back shares as well like how are you thinking about that priority going forward.

Speaker Change: Every one of these quarters would be a record margin number for us.

Speaker Change: Greece's.

Speaker Change: Outside of Q2, which is a little bit of seasonal volume.

Speaker Change: Yes, Joe it's a great question, it's something we talk about constantly here, we've been very clear our target was to get to and operate around two <unk> net debt to adjusted.

Speaker Change: They're they're aggressive number so.

Speaker Change: What we feel today, that's what that's what we have confidence in and that was kind of all of that went into work.

Speaker Change: Adjusted EBITDA leverage we got there we're very proud about that was not easy.

Speaker Change: Just back that up by saying, obviously it was a fantastic year with a fantastic exit rate.

Speaker Change: But the team worked really hard to get there.

Speaker Change: But you know this.

Speaker Change: The way our debt is structured we have several so that that goes all the way out into 2026.

Speaker Change: This guidance is realistic and this isn't this isn't a slam dunk for our teams. We we believe in the win strategy. We believe in our ability to continue to expand margins but.

Speaker Change: So we feel good that we will not.

Speaker Change: This is a.

Speaker Change: We will be putting our cash to good work as we continue to pay down that debt, but I would tell you.

Speaker Change: This isn't easy.

Speaker Change: Okay.

Speaker Change: Our preference continues to be to deploy our capital optionality towards deals and Ginny mentioned it earlier, it's going to be the right deal.

Speaker Change: Okay got it.

Speaker Change: I'm sure you'll make it look easy but.

Speaker Change: Okay.

Speaker Change: Yes. It is.

Speaker Change: That's right.

Ginny: Not going to be one that just happens to be available it's got to be able to grow the top line differently. It's got to be accretive to our margins, it's going to have to be EPS accretive and it's going to have to help generate cash in a way that's different than what the company has been able to generate.

Speaker Change: Yeah.

Speaker Change: You mentioned that you saw.

Speaker Change: Still planning to continue to pay down debt you got your leverage ratio your net leverage down to two turns so congrats on that I know there was a question earlier.

Speaker Change: Around M&A.

Ginny: And if we can't get those done and we have no.

Speaker Change: Can you just talk to us.

Speaker Change: A little bit about.

Ginny: Worries about deploying that elsewhere, we're going to keep our dividend record going and our share buyback is.

Speaker Change: What's the kind of rate leverage ratio that you want to get to before you before you get a little bit more front footed.

Speaker Change: With capital deployment on the M&A side, and then is there is is there an opportunity to continue to buy back shares as well like how are you thinking about that priority going forward.

Ginny: 200 million a year, we're going to do that at a bare minimum and we will be active I could I can assure you that.

Ginny: And you know if the timing and the deal don't line up the way wed like one two in the future.

Speaker Change: Yes, Joe it's a great question, it's something we talk about.

Speaker Change: Constantly here, we've been very clear our target was to get to and operate around two points.

Speaker Change: Well always buy back shares like Todd said, I mean, we believe in Parker.

Todd: Great. Thank you Bob.

Speaker Change: Debt to adjusted EBITDA leverage we got there we're very proud about that was not easy.

Speaker Change: Thank you next question is coming from Stephen Volkmann from Jefferies. Your line is now live.

Speaker Change: The team worked really hard to get there.

Stephen Volkmann: Great. Thanks for taking the question Todd I just missed it when you said that may get synergies in FY 'twenty four.

Speaker Change: The way our debt is structured we have several sole debt that goes all the way out into 2026. So we feel good that we will not.

Stephen Volkmann: Yes.

Speaker Change: We increased those mega synergies I think that was in the second quarter or the third quarter $200 million is what.

Speaker Change: We'll be putting our cash to good work as we continue to pay down that debt, but I would tell you.

Speaker Change: The accumulated synergies were at the end of FY 'twenty four.

Speaker Change: Our preference continues to be to deploy our capital optionality towards deals Jenny mentioned it earlier, it's going to be the right deal, it's not going to be one that just happens to be available it's got to be able to grow.

Stephen Volkmann: We're committed to the 300 million number.

Speaker Change: That would be $50 million in FY, 'twenty, five and an additional $50 million in FY 'twenty six.

Speaker Change: Got it. Thank you and then I'm trying to think just mentally if I back that out.

Jenny: Topline differently, it's got to be accretive to our margins, it's going to have to be EPS accretive and it's going to have to help generate cash in a way that's different than what the company has been able to generate.

Speaker Change: Much did mix add.

Speaker Change: Two sort of other drivers for the margin in aerospace.

Speaker Change: Yes, I mean everything in aerospace is really booming right now aftermarket is especially strong you know the profile of that business.

Jenny: And if we can't get those done and we have no.

Speaker Change: Worries about deploying that elsewhere, we're going to keep our dividend record going and our share buyback is.

Speaker Change: It's the highest margin business, we have and it's been a really robust so.

Speaker Change: If you look at what they did for the quarter I think it was oh.

Speaker Change: $200 million a year, we're going to do that at a bare minimum and we will be active I could I can assure you that.

Speaker Change: 27% margins you know if you look at what we are forecasting for FY 'twenty five it's another 100 basis points of margin expansion in aerospace.

Speaker Change: And you know if the timing and the deal don't line up the way, we'd like one two in the future.

Speaker Change: That gets us.

Speaker Change: 27, and a half a ballpark.

Speaker Change: We'll always buy back shares like Pat said I mean, we believe in Parker.

Speaker Change: <unk>.

Speaker Change: Really.

Speaker Change: <unk> margins in aerospace.

Speaker Change: Great. Thank you both.

Speaker Change: Yeah.

Speaker Change: Great I guess, what I'm trying to think about is assuming that the aftermarket OE mix kind of normalizes at some point, maybe that's a big assumption I don't know, but if it does should we be worried about potential kind of margin headwinds in that scenario.

Speaker Change: Thank you next question is coming from Stephen Volkmann from Jefferies. Your line is that life.

Speaker Change: Okay.

Stephen Volkmann: Great. Thanks for taking the question kind of just missed it when you said the mega synergies in FY 'twenty four.

Speaker Change: Yes.

Speaker Change: We increased those mega synergies I think that was in the second quarter or the third quarter of $200 million is is what.

Speaker Change: No you know when you look at our cumulative of all of the forecast tools that we have that we've improved across the company our best tools remain in the aerospace.

Speaker Change: The accumulated synergies were at the end of FY 'twenty four.

Speaker Change: Verticals.

Speaker Change: We're committed to the 300 million number.

Speaker Change: And I would tell you our team we've had multiple discussions with the team we feel really good about that and.

Speaker Change: That would be $50 million in FY, 'twenty, five and an additional $50 million in FY 'twenty six.

Speaker Change: I don't want to speak outside of FY 'twenty five, but we feel really good about what 25 has the store yeah, we feel very positive about air traffic growth that we were not concerned about that.

Speaker Change: Got it. Thank you and then I'm trying to think just mentally if I back that out.

Speaker Change: Much did mix add relative to sort of other drivers for the margin in aerospace.

Speaker Change: Great. Thank you so much.

Speaker Change: Yes, I mean everything in aerospace is really booming right now aftermarket is especially strong you know the profile of that business.

Speaker Change: Thank you. Our next question today is coming from Nathan Jones from Stifel. Your line is now live.

Nathan Jones: Good morning, everyone. Good morning.

Speaker Change: It's the highest margin business, we have and it's been a really robust so.

Nathan Jones: I'm going to go back to the revenue guide for as long as I can remember pocket has been guiding for a revenue slate.

Speaker Change: If you look at what they did for the quarter I think it was oh.

Speaker Change: 27% margins you know if you look at what we are forecasting for FY 'twenty five it's another 100 basis points of margin expansion in aerospace.

Nathan Jones: 42.

Nathan Jones: So I wanted to ask you've got a much larger backlog now that you've had historically said potentially it's embedded visibility.

Speaker Change: That gets us.

Speaker Change: Adding to that.

Speaker Change: 27, and a half.

Nathan Jones: Yes.

Speaker Change: Ballpark so.

Speaker Change: So I'm just interested on on what your visibility into that second half revenue guide is.

Speaker Change: Really strong margins in aerospace.

Speaker Change: Great I guess, what I'm trying to think about is assuming that the aftermarket OE mix kind of normalizes at some point, maybe that's a big assumption I don't know, but if it does should we be worried about potential kind of margin headwinds in that scenario.

Speaker Change: Based on where the backlog is and what kind of macroeconomic assumptions that you've got baked in there a lot of peers and competitors have been talking about lower capex spending going forward.

Speaker Change: But it's.

Speaker Change: Maybe that you guys went into the downturn, but you're coming out of it but just any color you can give us there.

Speaker Change: No you know when you look at our cumulative of all of the forecast tools that we have that we've improved across the company our best tools remain in the aerospace.

Speaker Change: Well, yes, just to run through it a little bit obviously, you know for aerospace.

Speaker Change: Aerospace as we talked about we have a eight 5% organic growth and out there in the first half is at 11% second half of two 6% and that's really based on the comps get pretty tough when you get into the into the second half. So obviously, we feel really good about aerospace.

Speaker Change: Verticals.

Speaker Change: And I would tell you our team we've had multiple discussions with the team we feel really good about that and you.

Speaker Change: You know I don't want to speak outside of FY 'twenty five, but we feel really good about what 25 has a store yeah. We feel very positive about air traffic growth that we were not concerned about that.

Speaker Change: We have good visibility.

Speaker Change: Over high backlog there right so no concerns there.

Speaker Change: Great. Thank you so much.

Speaker Change: When you look at North America as Tom mentioned, we are guiding to 2% organic growth minus one in the first half and we as we've talked about.

Speaker Change: Thank you. Our next question today is coming from Nathan Jones from Stifel. Your line is now live.

Nathan Jones: Good morning, everyone. Good morning.

Speaker Change: That's based off of.

Tom: A typical Q1 and based off of what we see today in the orders and the information that we have from our customers.

Speaker Change: I'm going to go back to the revenue guide for as long as I can remember pocket.

Speaker Change: Revenue slipped one edge to do up to 42.

Tom: Again, we expect.

Speaker Change: Softness in off highway all year and transportation in the first half so kind of going back to those forecast for the market verticals. We do expect a gradual industrial recovery as we as we've mentioned here and that's what we have baked in so again.

Nathan Jones: So I wanted to ask you've got a much larger backlog now that you've had historically said potentially it's embedded visibility.

Speaker Change: Adding to that.

Speaker Change: Uh huh.

Speaker Change: So I'm just interested on on what your visibility into that second half revenue guide is.

Speaker Change: The growth uptick is mainly in the second happened and it is somewhat on easier comps. Those are those are the inputs that we're looking at an international one 5% organic growth again negative 1% in the first half second half at three 5%.

Speaker Change: Based on where the backlog is and what kind of macroeconomic assumptions that you've got baked in there a lot of peers and competitors have been talking about lower capex spending going forward.

Speaker Change: But it's it may maybe that you guys went into the downturn, but you're coming out of it but just any color you can give us there.

Speaker Change: As we mentioned.

Speaker Change: Order rates improved, but theres still a negative territory, our guidance assumes that Asia Pacific turns positive.

Speaker Change: Well, yes, just to run through it a little bit obviously, you know for.

Speaker Change: Offset by continued weakness in Europe. So that's.

Speaker Change: Aerospace as we talked about we have a eight 5% organic growth out there in the first half is at 11% second half to 6% net.

Speaker Change: That's what we're looking at right now again softness around end markets in Europe neutral growth in the guide for the full year.

Speaker Change: Its because the comps get pretty tough when you get into the into the second half. So obviously, we feel really good about aerospace.

Speaker Change: So that's what we have built into the guide.

Speaker Change: Do you need things like interest rate cuts to smooth some of that recovery that youre looking for in the second half in various parts of the industrial economy that kind of what are the underlying assumptions that you've got the in school.

Speaker Change: We have good visibility.

Speaker Change: <unk>.

Speaker Change: Hi backlog there right. So no concerns there when you look at North America as Tom mentioned, we are guiding to 2% organic growth minus one in the first half and we as we've talked about that.

Speaker Change: It met expectations.

Speaker Change: Yeah. This is Todd those certainly would be helpful. There is no doubt about it.

Speaker Change: That's based off of.

Speaker Change: A typical Q1 and based off of what we see today in the orders and the information that we have from our customers.

Speaker Change: What we have baked into the numbers is really again, you've heard us talk about our forecast. So we have a variety of.

Speaker Change: Again, we expect.

Speaker Change: Continued softness in off highway all year and transportation in the first half so kind of going back to those forecast for the market verticals we.

Speaker Change: Macro economic forecast that we're using there is nothing outside of anything that youre not seeing yourself.

Speaker Change: It really is driven by great aerospace performance.

Speaker Change: Do you expect a gradual industrial recovery is as we've mentioned here and that's what we have baked in so again.

Speaker Change: A gradual recovery in the industrial markets, mainly in the second half of the fiscal year and that's based off of what we've seen orders do for many many many years.

Speaker Change: The growth uptick is mainly in the second half in and it is somewhat on easier comps. Those are those are the inputs that we're looking at an international one.

Speaker Change: We were really glad to see North American orders.

Speaker Change: 5% organic growth again negative 1% in the first half second half at three 5%.

Speaker Change: Turn not negative and we were really happy to see the industrial orders moved to minus one so all of that is.

Speaker Change: As we mentioned.

Speaker Change: Order rates improved, but theres still a negative territory, our guidance assumes that Asia Pacific turned positive.

Speaker Change: What we've been using to build our forecast.

Speaker Change: Awesome, Thanks for taking my questions Okay.

Speaker Change: Thanks, Thank you.

Speaker Change: Offset by continued weakness in Europe. So.

Speaker Change: Thank you next question is coming from Jeffrey Sprague from vertical Research partners. Your line is now live.

Speaker Change: That's what we're looking at right now again softness around end markets in Europe neutral growth in the guide for the full year.

Jeffrey Sprague: Thank you and good morning, everyone.

Speaker Change: So that's that's what we have built into the guide.

Jeffrey Sprague: Hey, a lot of ground covered here a couple of things for me first just on.

Speaker Change: Do you need things like interest rate cuts to smooth some of that recovery that youre looking for in the second half in various parts of the industrial economy.

Speaker Change: The divestiture Johnny or Todd.

Speaker Change: I think it sounds like it's kind of part and parcel to your kind of normal process.

Speaker Change: What are the underlying assumptions that you've got that.

Speaker Change: Viewing the portfolio and assets, but should.

Speaker Change: Inform that expectation.

Speaker Change: Should we view this as largely kind of a one off and obviously it just kind of came with something you've recently acquired or theirs.

Speaker Change: Yeah. This is Todd, although certainly would be helpful. Theres no doubt about it.

Speaker Change: What we have baked into the numbers is really again, you've heard us talk about our forecast. So we have a variety of macroeconomic.

Speaker Change: Kind of other pieces here and there that could be methodically coming out is.

Speaker Change: Is your margin structure has moved up right in your you know your threshold for what's good enough rises does that cause some additional things to shake out of the portfolio.

Speaker Change: Macroeconomic forecast that we're using there is nothing outside of anything that youre not seeing yourself.

Speaker Change: It really is driven by great aerospace performance.

Speaker Change: At Investor Day, we mentioned that we would continue to trim around the portfolio, but.

Speaker Change: A gradual recovery in the industrial markets, mainly in the second half of the fiscal year and that's based off of what we've seen orders do for many many many years.

Speaker Change: Not anything significant you know all of our businesses have to perform every year we go through.

Speaker Change: An analysis of our businesses the best owner analysis.

Speaker Change: We were really glad to see North American orders.

Speaker Change: Nothing significant Jeff it would be.

Speaker Change: Just some trimming around the portfolio.

Speaker Change: Turn not negative and we were really happy to see the industrial orders moved to minus one so all of that is.

Jeff: And could you also just share with US your view on Aero for 2025 in terms of the big buckets commercial OE versus aftermarket military OE versus aftermarket absolutely.

Speaker Change: What we've been using to build our forecast.

Speaker Change: Awesome, Thanks for taking my questions.

Speaker Change: Thank you.

Speaker Change: On commercial OE, we are forecasting high single digit.

Speaker Change: Thank you next question is coming from Jeffrey Sprague from vertical Research partners. Your line is now live.

Speaker Change: No really big staff.

Speaker Change: Narrow body rates and wide body ramp up.

Jeffrey Sprague: Thank you good morning, everyone.

Jeffrey Sprague: Hey, a lot of ground covered here a couple of things for me first just on.

Speaker Change: Commercial aftermarket low double digits and again.

Speaker Change: The divestiture Johnny or Todd.

Speaker Change: Air traffic recovery broad base growth there been very strong as we've talked about today.

Speaker Change: I think it sounds like it's kind of part and parcel to your kind of a normal process.

Speaker Change: Defense OE mid single digit.

Speaker Change: Viewing the portfolio and assets, but should.

Speaker Change: <unk>, increasing defense budgets and continued demand for legacy fighters in that defense aftermarket high single digit and again pointing to those.

Speaker Change: Should we view this as largely kind of a one off and obviously it just kind of came with something you've recently acquired or theirs.

Speaker Change: Private partnerships, we have with that with the depth that has really proved to be great growth for us.

Speaker Change: Kind of other pieces here and there that could be methodically coming out is.

Speaker Change: Is your margin structure has moved up right in your you know your threshold for what's good enough Rice's does that cause some additional things to shake out of the portfolio.

Speaker Change: And again retrofits repairs upgrades.

Speaker Change: So really going to be a strong year for aerospace and high single digit at eight 5%.

Speaker Change: At Investor Day, we mentioned that we would continue to trim around the portfolio, but.

Speaker Change: Great I'll leave it there. Thanks a lot. Thank you I appreciate it.

Speaker Change: Not anything significant you know all of our businesses have to perform every year we go through.

Nicole <unk>: Thank you. Your next question is coming from Nicole <unk> from Deutsche Bank. Your line is not a lot.

Nicole: Yeah. Thanks, good morning, guys.

Speaker Change: An analysis of our businesses the best owner analysis.

Paul: Morning, Paul.

Nicole <unk>: I just wanted to ask another question on the divestiture and we all have the revenue number that was in the press release, but I guess any color on whether the divestiture will be accretive to margins and can you just confirm that that's all coming out of the industrial North America segment.

Speaker Change: But again nothing significant Jeff it would be just some trimming around the portfolio.

Jeff: And could you also just share with US your view on Aero for 2025 in terms of the big buckets commercial OE versus aftermarket military OE versus aftermarket.

Speaker Change: Yeah, Nicole this is Todd.

Todd: We'll all come out of the industrial North America segment.

Speaker Change: Absolutely so on commercial OE, we are forecasting high single digit.

Speaker Change: Businesses.

Speaker Change: You know.

Speaker Change: We do expect that to close sometime in Q2.

Speaker Change: The really big stuff.

Speaker Change: Narrow body rates and wide body ramp up.

Speaker Change: It will be margin accretive there is no doubt about it I'd rather wait until we get the actual close date to give you the exact color on that.

Speaker Change: Commercial aftermarket low double digits and again.

Speaker Change: Air traffic recovery broad based growth there been very strong as we talked about today.

Ginny: Ginny talked about it.

Ginny: It's a great business.

Ginny: Maybe not perfectly aligned with our core products.

Speaker Change: Defense O a mid single digit increase.

Ginny: If you look at.

Speaker Change: An increase increasing defense budgets and continued demand for legacy fighters, and then defense aftermarket high single digit and again pointing to those public private partnerships, we have with the with the depth of it that's really proved to be great growth for us.

Ginny: The enterprise value that we got for that business, it's $560 million of enterprise value.

Ginny: So there will be a gain on that and like I said, we'll be looking to share more of that once it closes.

Speaker Change: Got it that's really helpful. Thanks, Todd and then on the outlook for international It sounds like you guys are expecting Europe to be down again, if you could kind of confirm your thoughts there and I know, it's small for you, but any color on what you're seeing in China. Thank you.

Speaker Change: And again retrofits repairs upgrades.

Speaker Change: So really are going to be a strong year for aerospace high single digit at eight 5%.

Speaker Change: Great I'll leave it there thanks a lot. Thank you.

Speaker Change: I appreciate it.

Speaker Change: Yeah. So.

Nicole <unk>: Thank you. Your next question is coming from Nicole <unk> from Deutsche Bank. Your line is now live.

Speaker Change: The guide does assume that Asia Pacific turns positive.

Nicole: Thanks, Good morning, guys good morning.

Speaker Change: Offset by continued weakness in Europe. So the full year for Europe is neutral to fiscal year 'twenty. Four so just just continued softness there.

Nicole <unk>: I just wanted to ask another question on the divestiture and we all have the revenue number that was in the press release, but I guess any color on whether the divestiture will be accretive to margins and can you just confirm that that's all coming out of the industrial North America segment.

Speaker Change: What I would say in China.

Speaker Change: Growth improved to negative low single digits in Q4, and Q4 orders increased due to some project orders so.

Speaker Change: Yeah, Nicole this is Todd.

Todd: It will all come out of the industrial North America segment.

Speaker Change: There is some positive there.

Speaker Change: Businesses.

Speaker Change: Thank you I'll pass it on.

Speaker Change: Do you know.

Speaker Change: We do expect that to close sometime in Q2.

Speaker Change: Cool thank you.

Kevin: Kevin I think just in light of time I think we have five minutes left maybe one last question sure final question today is coming from Brett Linzey from Mizuho Securities. Your line is alive.

Speaker Change: It will be margin accretive there is no doubt about it I'd rather wait until we get the actual close date to give you exact color on that.

Ginny: Ginny talked about it.

Ginny: It's a great business.

Brett Linzey: Hey, good morning congratulations.

Ginny: Just maybe not perfectly aligned with our core products.

Brett Linzey: Thank you.

Speaker Change: Yeah just.

Brett Linzey: Just a question on the margin outlook, but specifically gross margins. So another strong year in 'twenty for what you're now seeing a better mix of secular in these applications are you embedding a higher than normal gross margin lift in the 25 outlook as you're.

Ginny: If you look at the.

Ginny: The enterprise value that we got for that business, it's $560 million of enterprise value.

Speaker Change: So there will be a gain on that and like I said, we'll be looking to share more of that once it closes.

Speaker Change: Got it that's really helpful. Thanks, Todd and then on the outlook for international It sounds like you guys are expecting Europe to be down again, if you could kind of confirm your thoughts there and I know, it's small for you, but any color on what you're seeing in China. Thank you.

Brett Linzey: Seeing some traction here.

Brett Linzey: Yes, Brett this is Todd thanks for noticing that we've been working hard on.

Todd: On all elements of profitability for a long time here.

Speaker Change: When you look at that 50 basis points of segment operating income expansion. The vast majority of that will come in the gross margin line.

Speaker Change: Yeah. So.

Speaker Change: The guide does assume that Asia Pacific turns positive.

Brett: Okay got it great and then I apologize if I missed it on off highway. So appreciate the color on AG versus construction, but was wondering if you could dimension the outlook between OE versus distribution business in off highway and what's your level of visibility is on some of the OE inventories.

Speaker Change: Set by continued weakness in Europe. So the full year for Europe is neutral to fiscal year 'twenty. Four so just just continued softness there.

Speaker Change: I would say in China, you know growth improved to negative low single digits in Q4, and Q4 orders increased due to some project orders so.

Speaker Change: I mean, I don't I don't have a good picture of that that I can share with you today, but perhaps we can pick that up in a call back.

Speaker Change: There is there is some positive there.

Ginny: Thank you I'll pass it on.

Speaker Change: Sounds good I'll leave it there.

Speaker Change: Thanks to cool Thank you take.

Brett: Appreciate it Brett.

Kevin: Hey, Kevin I think just in light of time I think we have five minutes left maybe one last question sure final question today is coming from Brett Linzey from Mizuho Securities. Your line is that life.

Speaker Change: Thank you we reached end of our question and answer session I would like to turn the floor back over for any further closing comments.

Brett: Okay, Kevin. Thank you and this concludes our earnings webcast. Thanks to.

Brett Linzey: Hey, good morning congratulations.

Kevin: Everyone for joining us today.

Brett Linzey: Thank you.

Jeff: As always we do appreciate your attention interest and support of Parker, if anyone's got any more follow up questions, whether that's on the quarter of the year or the FY 'twenty five guide Jeff.

Brett Linzey: Yeah.

Brett Linzey: Just a question on the margin outlook, but specifically gross margins. So another strong year in 'twenty for what you're now seeing a better mix of secular in these applications are you embedding a higher than normal gross margin lift in the 25 outlook as you're.

Speaker Change: Jeff Miller, our VP of Investor Relations and <unk>, our director of Investor Relations will be available throughout.

Brett: Throughout the day, and even if tomorrow if needed.

Speaker Change: You're seeing some traction here.

Speaker Change: Yes, Brett this is Todd thanks for noticing that we've been working hard on.

Brett: I hope everyone has a great day, we appreciate it.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Todd: On all elements of profitability for a long time here when.

Speaker Change: When you look at that 50 basis points of segment operating income expansion. The vast majority of that will come in the gross margin line.

Brett Linzey: Okay got it great and then I apologize if I missed it on off highway. So appreciate the color on AG versus construction, but was wondering if you could dimension the outlook between OE versus just the distribution business in off highway and what's your level of visibility is on some of the OE inventories right.

Speaker Change: I mean, I don't I don't have a good picture of that that I can share with you today, but perhaps we can pick that up in a call back.

Speaker Change: Sounds good I'll leave it there.

Brett Linzey: Appreciate it Brett.

Speaker Change: Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further closing comments.

Kevin: Okay, Kevin Thank you.

Speaker Change: This concludes our earnings.

Kevin: Earnings webcast, thanks to everyone for joining us today.

Kevin: As always we do appreciate your attention interest and support of Parker, if anyone's got any more follow up questions, whether that's on the quarter of the year or the FY 'twenty guide.

Speaker Change: Jeff Miller, our VP of Investor Relations and young for our director of Investor Relations will be available throughout.

Speaker Change: Throughout the day and even its tomorrow if needed.

Speaker Change: I hope everyone has a great day, we appreciate it.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Speaker Change: Yeah.