Q4 2026 Parker-Hannifin Corp Earnings Call

August 6, 2026

Speaker #1: Please stand by. Your meeting is about to begin.

Operator: Please stand by. Your meeting is about to begin. Good morning, everyone. Welcome to Parker-Hannifin Corporation's Fiscal 2026 Fourth Quarter and Full Year Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the prepared remarks, there will be a question and answer session. To ask a question during this period, you will need to press star one on your telephone. If you would like to remove yourself from the queue, please press star two. Please be advised that today's conference is being recorded, and if you should need operator assistance today, please press star zero at any time. I would now like to turn the call over to Mr. Todd Leombruno, Chief Financial Officer. Please go ahead, sir.

Speaker #2: Good morning, everyone. Welcome to Parker-Hannifin Corporation's fiscal 2026 fourth quarter and full year. Earnings conference call and webcast. At this time, all participants are in a listen-only mode.

Operator: Good morning, everyone. Welcome to Parker Hannifin Corporation's Fiscal 2026 Fourth Quarter and Full Year Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the prepared remarks, there will be a question and answer session. To ask a question during this period, you will need to press star one on your telephone. If you would like to remove yourself from the queue, please press star two. Please be advised that today's conference is being recorded, and if you should need operator assistance today, please press star zero at any time. I would now like to turn the call over to Mr. Todd Leombruno, Chief Financial Officer. Please go ahead, sir.

Speaker #2: After the prepared remarks, there will be a question-and-answer session. To ask a question during this period, you will need to press star 1 on your telephone.

Speaker #2: If you would like to remove yourself from the queue, please press star 2. Please be advised that today's conference is being recorded, and if you should need operator assistance today, please press star 0 at any time.

Speaker #2: I would now like to turn the call over to Mr. Todd Leombruno, Chief Financial Officer. Please go ahead, sir.

Speaker #3: Thank you, Bo. I'd like to welcome everyone to Parker's fiscal year 2026. Fourth quarter and full year earnings release webcast. As Bo said, this is Todd Leombruno, Chief Financial Officer, speaking.

Todd Leombruno: Thank you, Beau. I'd like to welcome everyone to Parker's Fiscal Year 2026 Fourth Quarter and Full Year Earnings Release Webcast. As Beau said, this is Todd Leombruno, Chief Financial Officer speaking. With me today, as usual, is Jenny Parmentier, our Chairman and Chief Executive Officer. We have a number of exciting things to review with everyone today, and we appreciate your time this morning. Thanks for joining us. Let's move to slide two to address our disclosures on forward-looking projections and non-GAAP financial measures. Items listed here could cause actual results to vary from our forecast. Our press release, the presentation here, and reconciliations for all those non-GAAP measures were released this morning and are available under the investors section on parker.com. Today, Jenny's going to start with our record FY26 performance.

Todd Leombruno: Thank you Bo. I'd like to welcome everyone to Parker's Fiscal Year 2026 Fourth Quarter and Full Year Earnings Release Webcast. As Bo said, this is Todd Leombruno, Chief Financial Officer speaking. With me today, as usual, is Jenny Parmentier, our Chairman and Chief Executive Officer. We have a number of exciting things to review with everyone today, and we appreciate your time this morning. Thanks for joining us. Let's move to slide two to address our disclosures on forward-looking projections and non-GAAP financial measures. Items listed here could cause actual results to vary from our forecast. Our press release, the presentation here, and reconciliations for all those non-GAAP measures were released this morning and are available under the investors section on parker.com. Today, Jenny's going to start with our record FY26 performance.

Speaker #3: And with me today, as usual, is Jennifer Parmentier, our Chairman and Chief Executive Officer. We have a number of exciting things to review with everyone today, and we appreciate your time.

Speaker #3: This morning, thanks for joining us. Let's move to slide 2 to address our disclosures on forward-looking projections and non-GAAP financial measures. Items listed here could cause actual results to vary from our forecast.

Speaker #3: Our press release, the presentation here, and reconciliations for all those non-GAAP measures were released this morning and are available under the Investors section on parker.com.

Speaker #3: Today, Jenni is going to start with our record FY26 performance. She's going to share some highlights on what we did with capital deployment actions this year, and introduce our new FY31 adjusted segment operating margin target.

Todd Leombruno: She's going to share some highlights on what we did with capital deployment actions this year and introduce our new FY31 adjusted segment operating margin target. She's also going to address an upcoming change to our order rate reporting that will start in FY27. I'm going to follow with some details on our record Q4 financial results. We also initiated our FY27 guidance today, and we will review all the assumptions for what we expect to be a new record year for Parker Hannifin. We'll conclude the call with our normal Q&A portion, and we'll try to address as many questions as we have time for. Now let's move to slide three. Jenny, I will turn it over to you.

Speaker #3: She's also going to address an upcoming change to our order rate reporting that will start in FY27. I'm going to follow with some details on our record fourth quarter, financial results, we also initiated our FY27 guidance today, and we will review all the assumptions for what we expect to be a new record year for Parker-Hannifin.

Speaker #3: We'll conclude the call with our normal Q&A portion, and we'll try to address as many questions as we have time for. Now, let's move to slide 3, and Jenni, I will turn it over to you.

Speaker #4: Thank you, Todd. And thank you to everyone for attending the call today. Our global teams delivered record performance in fiscal year 26, powered by our proven business systems to win strategies.

Jennifer Parmentier: Thank you, Todd, and thank you to everyone for attending the call today. Our global team delivered record performance in fiscal year 2026, powered by our proven business system, The Win Strategy. We achieved top quartile safety performance with a 9% reduction in our recordable incident rate. This was our safest year ever, and we remain focused on being the safest industrial company in the world. We delivered record fiscal year 2026 sales of $21.5 billion, surpassing $20 billion for the first time in Parker's history. Organic growth accelerated to 6.6%, and adjusted segment operating margin expanded 120 basis points to a record 27.3%. Adjusted earnings per share increased 18% to a record $32.31. Cash flow from operations was also a record at $4.4 billion, our first time over $4 billion.

Jenny Parmentier: Thank you, Todd, and thank you to everyone for attending the call today. Our global team delivered record performance in fiscal year 2026, powered by our proven business system, The Win Strategy. We achieved top quartile safety performance with a 9% reduction in our recordable incident rate. This was our safest year ever, and we remain focused on being the safest industrial company in the world. We delivered record fiscal year 2026 sales of $21.5 billion, surpassing $20 billion for the first time in Parker's history. Organic growth accelerated to 6.6%, and adjusted segment operating margin expanded 120 basis points to a record 27.3%. Adjusted earnings per share increased 18% to a record $32.31. Cash flow from operations was also a record at $4.4 billion, our first time over $4 billion.

Speaker #4: We achieved top quartile safety performance with a 9% reduction in our recordable incident rate. This was our safest year ever, and we remain focused on being the safest industrial company in the world.

Speaker #4: We delivered record fiscal year 26 sales of 21.5 billion, surpassing 20 billion for the first time in Parker's history. Organic growth accelerated to 6.6% and adjusted segment operating margin expanded 120 basis points to a record 27.3%.

Speaker #4: Adjusted earnings per share increased 18% to a record 32.31, and cash flow from operations was also a record at 4.4 billion, our first time over 4 billion dollars.

Speaker #4: I'd like to congratulate our team members around the world for achieving and surpassing our fiscal year 29 adjusted segment operating margin target, ahead of schedule.

Jennifer Parmentier: I'd like to congratulate our team members around the world for achieving and surpassing our fiscal year 2029 adjusted segment operating margin target ahead of schedule. Thank you for everything you do to keep each other safe, create value for customers, and demonstrate operational excellence. Slide four, please. Fiscal year 2026 marks the biggest year in Parker-Hannifin's history, with over $15 billion in announced and deployed capital. We announced strategic acquisitions that further build our portfolio of interconnected technologies, giving our application engineers and channel partners more ways to create value for customers. We enhanced our electrification capabilities with the acquisition of Curtis Instruments, completed last September. In November, we announced the pending acquisition of Filtration Group Corporation, which expands our offering of proprietary filtration technologies and increases our filtration aftermarket by 500 basis points.

Jenny Parmentier: I'd like to congratulate our team members around the world for achieving and surpassing our fiscal year 2029 adjusted segment operating margin target ahead of schedule. Thank you for everything you do to keep each other safe, create value for customers, and demonstrate operational excellence. Slide four, please. Fiscal year 2026 marks the biggest year in Parker-Hannifin's history, with over $15 billion in announced and deployed capital. We announced strategic acquisitions that further build our portfolio of interconnected technologies, giving our application engineers and channel partners more ways to create value for customers. We enhanced our electrification capabilities with the acquisition of Curtis Instruments, completed last September. In November, we announced the pending acquisition of Filtration Group Corporation, which expands our offering of proprietary filtration technologies and increases our filtration aftermarket by 500 basis points.

Speaker #4: Thank you for everything you do to keep each other safe, create value for customers, and demonstrate operational excellence. Slide 4, please. Fiscal year 26 marks the biggest year in Parker's history with over 15 billion in announced and deployed capital.

Speaker #4: We announced strategic acquisitions that further build our portfolio of interconnected technologies, giving our application engineers and channel partners more ways to create value for customers.

Speaker #4: We enhanced our electrification capabilities with the acquisition of Curtis Instruments, completed last September. In November, we announced the pending acquisition of filtration group corporation, which expands our offering of proprietary filtration technologies and increases our filtration aftermarket by 500 basis points.

Speaker #4: And just this past May, we announced the pending acquisition of Surplus Commercial Aerospace and Defense Business, adding complementary flight-critical capabilities. We are committed to actively deploying capital, and these transactions are right in line with our stated strategy to acquire companies where we are the clear best owner building on our interconnected technology, creating value for customers, and further compounding earnings growth.

Jennifer Parmentier: Just this past May, we announced the pending acquisition of CIRCOR's commercial aerospace and defense business, adding complementary flight critical capabilities. We are committed to actively deploying capital, and these transactions are right in line with our stated strategy to acquire companies where we are the clear best owner, building on our interconnected technologies, creating value for customers, and further compounding earnings growth. We look forward to welcoming our new team members into Parker-Hannifin. Moving to slide five. After setting our fiscal year 2029 targets just over two years ago, we are raising the bar once again and setting a new margin target. As I said earlier, we achieved our fiscal year 2029 margin target early. Now for the fifth time in just over 10 years, we are raising our adjusted segment operating margin target once again.

Jenny Parmentier: Just this past May, we announced the pending acquisition of CIRCOR's commercial aerospace and defense business, adding complementary flight critical capabilities. We are committed to actively deploying capital, and these transactions are right in line with our stated strategy to acquire companies where we are the clear best owner, building on our interconnected technologies, creating value for customers, and further compounding earnings growth. We look forward to welcoming our new team members into Parker-Hannifin. Moving to slide five. After setting our fiscal year 2029 targets just over two years ago, we are raising the bar once again and setting a new margin target. As I said earlier, we achieved our fiscal year 2029 margin target early. Now for the fifth time in just over 10 years, we are raising our adjusted segment operating margin target once again.

Speaker #4: We look forward to welcoming our new team members into Parker. Moving to slide 5. After setting our fiscal year 29 targets just over 2 years ago, we are raising the bar once again and setting a new margin target.

Speaker #4: As I said earlier, we achieved our fiscal year 29 margin target early, and now for the fifth time in just over 10 years, we are raising our adjusted segment operating margin target once again.

Speaker #4: We are raising it by 300 basis points to 30% by fiscal year 31. In addition, we remain committed to organic growth of 4 to 6 percent over the cycle, 17% free cash flow margin, and greater than 10% adjusted EPS growth over the cycle.

Jennifer Parmentier: We are raising it by 300 basis points to 30% by fiscal year 2031. In addition, we remain committed to organic growth of 4% to 6% over the cycle, 17% free cash flow margin, and greater than 10% adjusted EPS growth over the cycle. We are very proud of what the teams have accomplished over the last several years, and we are confident in achieving these targets. Parker-Hannifin has a fantastic track record of achieving and raising margin targets. Margin expansion has been an exciting part of the Parker-Hannifin story for over a decade, and by using The Win Strategy to drive operational excellence in each of our divisions, margin expansion will continue at Parker-Hannifin. Slide six, please. Today, we are announcing a move to rolling 12-month order rates beginning in fiscal year 2027 for our Industrial Segment, aligning all businesses on a rolling 12-month calculation.

Jenny Parmentier: We are raising it by 300 basis points to 30% by fiscal year 2031. In addition, we remain committed to organic growth of 4% to 6% over the cycle, 17% free cash flow margin, and greater than 10% adjusted EPS growth over the cycle. We are very proud of what the teams have accomplished over the last several years, and we are confident in achieving these targets. Parker-Hannifin has a fantastic track record of achieving and raising margin targets. Margin expansion has been an exciting part of the Parker-Hannifin story for over a decade, and by using The Win Strategy to drive operational excellence in each of our divisions, margin expansion will continue at Parker-Hannifin. Slide six, please. Today, we are announcing a move to rolling 12-month order rates beginning in fiscal year 2027 for our Industrial Segment, aligning all businesses on a rolling 12-month calculation.

Speaker #4: We are very proud of what the teams have accomplished over the last several years, and we are confident in achieving these targets. Parker has a fantastic track record of achieving and raising margin targets.

Speaker #4: Margin expansion has been an exciting part of the Parker story for over a decade, and by using the win strategy to drive operational excellence in each of our divisions, margin expansion will continue at Parker-Hannifin.

Speaker #4: Slide 6, please. Today, we are announcing a move to rolling 12-month order rates beginning in fiscal year 27 for our industrial segment, aligning all businesses on a rolling 12-month calculation.

Speaker #4: Parker's portfolio is profoundly different today than it was 20 years ago, when we began disclosing quarterly order rate comparisons for the industrial business. Our portfolio has been shaped by strategic positioning, one of our organic growth enablers, and has been transformed by acquisition.

Jennifer Parmentier: Parker-Hannifin's portfolio is profoundly different today than it was 20 years ago when we began disclosing quarterly order rate comparisons for the Industrial business. Our portfolio has been shaped by strategic positioning, one of our organic growth enablers, and has been transformed by acquisition. Over the last decade, these acquisitions have more than doubled the size of our Aerospace and Engineered Materials businesses. When Filtration Group Corporation closes, we will have more than tripled the size of our Filtration business. These technology platforms combined now represent approximately 65% of our pro forma sales today. This is clearly a different Parker-Hannifin with greater exposure to longer cycle, secular trends, and more resilient end markets. Rolling 12-month orders provide a stronger correlation to near-term organic sales growth. I'll give it back to Todd to review Q4 highlights.

Jenny Parmentier: Parker-Hannifin's portfolio is profoundly different today than it was 20 years ago when we began disclosing quarterly order rate comparisons for the Industrial business. Our portfolio has been shaped by strategic positioning, one of our organic growth enablers, and has been transformed by acquisition. Over the last decade, these acquisitions have more than doubled the size of our Aerospace and Engineered Materials businesses. When Filtration Group Corporation closes, we will have more than tripled the size of our Filtration business. These technology platforms combined now represent approximately 65% of our pro forma sales today. This is clearly a different Parker-Hannifin with greater exposure to longer cycle, secular trends, and more resilient end markets. Rolling 12-month orders provide a stronger correlation to near-term organic sales growth. I'll give it back to Todd to review Q4 highlights.

Speaker #4: Over the last decade, these acquisitions have more than doubled the size of our aerospace and engineered materials businesses. And when filtration group corporation closes, we will have more than tripled the size of our filtration business.

Speaker #4: These technology platforms combined now represent approximately 65% of our pro-form sales today. This is clearly a different Parker, with greater exposure to longer cycle, secular trends, and more resilient end markets.

Speaker #4: And rolling 12-month orders provide a stronger correlation to near-term organic sales growth. I'll give it back to Todd to review fourth-quarter highlights.

Speaker #3: No, thank you, Jenni. I'm going to jump through the fourth quarter. We could have had such a great fiscal year without such a strong finish in the fourth quarter.

Todd Leombruno: Well, thank you, Jenny. I'm going to jump through the Q4. We couldn't have had such a great fiscal year without such a strong finish in the Q4. It was record-setting numbers across the board. The team delivered new records for sales, adjusted segment operating margin, adjusted EBITDA margin, net income, and adjusted EPS, all in the quarter. Sales were up 10% versus prior. Organic was up 8%. That was the strongest quarter of the fiscal year when it comes to organic growth. Really finished the year strong. Currency was just slightly unfavorable at 0.3%, and the Curtis acquisition added 1.5% to the sales. When you look at margins, adjusted segment operating margin for the quarter was 28.0%. That is up 110 basis points from prior year. That is the first time the company has ever generated segment operating margins above 28%.

Speaker #3: It was record-setting numbers across the board. The team delivered new records for sales, adjusted segment operating margin, adjusted EBITDA margin, net income, and adjusted EPS, all in the quarter.

Speaker #3: Sales were up 10% versus prior, organic was up 8%. That was the strongest quarter of the fiscal year when it comes to organic growth.

Speaker #3: Really finished the year strong. Currency was just slightly unfavorable at 0.3%, and the courteous acquisition added 1.5% to the sales. When you look at margins, adjusted segment operating margin for the quarter was 28.0%.

Speaker #3: That is up 110 basis points from the prior year. That is the first time the company has ever generated segment operating margins above 28%. Just a great way to finish the year.

Todd Leombruno: Just a great way to finish the year. Adjusted EBITDA margin was 28.6%. That's up 180 basis points. Adjusted net income was $1.2 billion, which is a 21% return on sales. That actually drove earnings per share up also 21%, and we achieved $9.27 for the quarter. That's the first time the company's ever generated over $9 in a single quarter. Just an outstanding way to finish the year, 8% organic growth, record margins across the board, and 21% EPS growth. Jenny said this already, really we can't thank our teams enough for their continued hard work and dedication throughout the quarter and really finishing the year strong. If we jump to slide nine, this just displays the walk, the $1.58 increase in EPS versus prior year. Really, you could just see what a high-quality quarter this was from the team.

Speaker #3: Adjusted EBITDA margin was 28.6. That's up 180 basis points. And adjusted net income was 1.2 billion. Which is a 21% return on sales. And that actually drove earnings per share up also 21%.

Speaker #3: And we achieved $9.27 for the quarter. That's the first time the company has ever generated over $9 in a single quarter. Just an outstanding way to finish the year: 8% organic growth, record margins across the board, and 21% EPS growth.

Speaker #3: Jenni said this already, but really we can't thank our teams enough for their continued hard work and dedication throughout the quarter and really finishing the year strong.

Speaker #3: If we jump to slide 9, this just displays the walk, the $1.58 increase in EPS versus prior year. Really, you could just see what a high-quality quarter this was from the team: over 80% of the EPS growth came from increased segment operating income dollars.

Todd Leombruno: Over 80% of the EPS growth came from increased segment operating income dollars. That added $1.29 or 17% of the EPS growth versus prior year. Corporate G&A and other, really it's other, contributed $0.25. That was really the result of foreign currency exchange being favorable. Lower share count, we've done a significant amount of share buybacks over the last year. That added $0.09 to the quarter. Lower interest expense added $0.02. Income tax was favorable to our guide. Compared to last year, it was unfavorable by just $0.07. That was really due to just higher favorable discrete items in the prior year. You look at all of that's how we got the $9.27 of adjusted EPS. Just a great way to end the year. If we could go to slide 10, let's take a look at the segments.

Speaker #3: That added $1.29 or 17% of the EPS growth versus prior year. Corporate GNA and other really it's other contributed 25 cents. And that was really the result of foreign currency exchange being favorable.

Speaker #3: Lower share count: we've done a significant amount of share buybacks over the last year. That added 9 cents to the quarter. And lower interest expense added 2 cents.

Speaker #3: Income tax was favorable to our guide, but unfavorable by just 7 cents. And that was really due to just higher discrete favorable discrete items.

Speaker #3: And the prior year. You look at all of that, that's how we got the 9.27, $9.27 of adjusted EPS, just a great way to end the year.

Speaker #3: If we could go to slide 10, let's take a look at the segments. In total, I already mentioned this, but organic growth was up 8%.

Todd Leombruno: In total, I already mentioned this. Organic growth was up 8%. We expanded margins across the board, 110 basis points in the quarter. Incrementals were 40% for Q4. We are very pleased to see the order rates accelerate across all these businesses. Jenny just mentioned this. Beginning in FY27, we will convert to order reporting for all businesses using a 12-month rolling. I've provided the three-month and the 12-month here. This will be the last quarter we do this going forward for FY27. In the appendix of this deck and in our press release, we provided 8 quarters of historical comparisons, if you're interested in that. In total, orders were up 19% on the three-year comparison. Using the 12-month rolling, it's 12%. Backlog increased 16% versus prior year. It is now a new record at $12.8 billion.

Speaker #3: We expanded margins across the board, 110 basis points in the quarter, and incrementals were 40% for Q4. We are very pleased to see the order rates accelerate across all these businesses.

Speaker #3: Jenni just mentioned this, but beginning in FY27, we will convert to order reporting for all businesses using the 12-month rolling. I've provided the 3-month and the 12-month here, but this will be the last quarter we do this going forward for FY27.

Speaker #3: In the appendix of this deck and in our press release, we've provided 8 quarters of historical comparisons if you're interested in that. But in total, orders were up 19% on the 3-year comparison.

Speaker #3: Using the 12-month rolling, it's 12%. Backlog increased 16% versus prior year, and is now a new record at 12.8 billion dollars. If we move to the North American businesses, sales were 2.2 billion.

Todd Leombruno: If we move to the North American businesses, sales were $2.2 billion. Organic growth was just about 5%. Really, this is just based on a broadening recovery across all those businesses. Margins are up 70 basis points to a record 27.4%. That also exceeded our expectations and really marked the highest quarter of margin performance for the North American businesses of the year. Orders in North America improved +16% on a three-month comparison, and 9% on a rolling 12. Just a great way to finish the year for the North American businesses. Moving to the international businesses, sales were a record $1.6 billion. Organic growth really impressive at 6.5%. Asia Pacific really leading the way for us there. Organic growth in Asia Pacific was 16%. EMEA was positive, but just +1%. Latin America was down 3% versus the prior year.

Speaker #3: Organic growth was just about 5%. Really, this is just a base on a broadening recovery across all those businesses. Margins are up 70 basis points to a record 27.4.

Speaker #3: That also exceeded our expectations, and really marked the highest quarter of margin performance for the North American businesses of the year. Orders in North America, improved to plus 16% on a 3-month comparison.

Speaker #3: And 9% on a rolling 12. Just a great way to finish the year for the North American businesses. Moving to the international businesses, sales were a record, 1.6 billion.

Speaker #3: Organic growth really impressive at 6.5%. AsiaPac really leading the way for us there. Organic growth in Asia Pacific was 16%. EMEA was positive, but just 1% positive.

Speaker #3: And Latin America was down 3 for the versus the prior year. What's great here is adjusted operating margin is a new record at 26.8 for the international businesses.

Todd Leombruno: What's great here is adjusted operating margin is a new record at 26.8% for the international businesses. That is up 210 basis points versus prior year. Orders amazingly strong here, 24% on a three-month comparison, 10% on a rolling 12. Just a nice way to finish the year for our industrial team members based in our international businesses. Aerospace continues to lead the way here. A record $1.9 billion in sales for the quarter. Organic growth of 13.4% versus the prior year. This marks the fourth year, the fourth full fiscal year in a row of double-digit organic growth for aerospace. The team has really outperformed and executed unbelievably well, generated $1.9 billion in sales. Margins are also up in aerospace, up 80 basis points versus the prior year and reached 29.8% for the quarter.

Speaker #3: That is up 210 basis points versus prior year. And orders amazingly strong here, 24% on a 3-month comparison, 10% on a rolling 12. Just a nice way to finish the year.

Speaker #3: For our industrial team members based in our international businesses. Aerospace, continues to lead the way here. A record 1.9 billion in sales for the quarter.

Speaker #3: Organic growth of 13.4% versus the prior year. This marks the fourth year, the fourth full fiscal year in a row, of double-digit organic growth for aerospace.

Speaker #3: The team has really outperformed and executed unbelievably well. Generated 1.9 billion in sales. Margins are also up in aerospace, up 80 basis points versus the prior year, and reached 29.8% for the quarter.

Speaker #3: If you move to orders in aerospace, order rates, unbelievably strong here. Again, 18%. Double-digit growth in both commercial OEM and aftermarket. And really strength in the defense OEM markets.

Todd Leombruno: If you move to orders in aerospace, order rates unbelievably strong here again, 18%, double-digit growth in both commercial OEM and aftermarket, and really strength in the defense OEM markets. Backlog in aerospace is up 15% versus prior year and reached a record $8.5 billion. Just a great series of results from the team. If we can go to slide 11, this highlights our cash flow performance, and we detail some of those capital deployment actions that Jenny mentioned. Cash flow from operations surpassed $4 billion for the first time ever in the history of the company. Really blew it away at $4.4 billion. That's 20.3% of sales. That is up 16% versus the prior year. Free cash flow increased by 17% versus the prior year, and also came in at a record at $3.9 billion. That's 18.2% of sales, and the conversion on that is 107%.

Speaker #3: Backlog in aerospace is up 15% versus prior year, and reached a record 8.5 billion. Just a great series of results from the team. If we can go to slide 11, this highlights our cash flow performance and we detail some of those capital deployment actions that Jenni mentioned.

Speaker #3: Cash flow from operations surpassed $4 billion for the first time ever in the history of the company. Really blew it away at 4.4 billion.

Speaker #3: That's 20.3% of sales. That is up 16% versus the prior year. Free cash flow increased by 17% versus the prior year and also came in at a record $3.9 billion.

Speaker #3: That's 18.2% of sales. And the conversion on that is 107%. In addition, delivering a record year of cash generation, we reached new highs when it comes to deploying capital.

Todd Leombruno: In addition to delivering a record year of cash generation, we reached new highs when it comes to deploying capital. We returned nearly $2 billion to shareholders. That is $1 billion in share repurchases and nearly $1 billion of dividends paid. We invested $500 million of CapEx into our operations to make them safer and more productive. We completed the $1 billion acquisition of Curtis Instruments, and as Jenny said, we announced nearly $12 billion for the acquisitions of Filtration Group Corporation and CIRCOR Aerospace & Defense business. In total, that's nearly $15 billion of capital deployment actions for the year, really underpinning our commitments to be great generators and great deployers of cash. Even with all those actions, we still reduced debt by $1 billion in the quarter, bringing our net debt to adjusted EBITDA to 1.4x.

Speaker #3: We returned nearly $2 billion to shareholders. That is $1 billion in share repurchases. And nearly $1 billion in dividends paid. We invested $500 billion of CapEx into our operations to make them safer.

Speaker #3: And more productive. We completed the $1 billion acquisition of Curtis Instruments and, as Jenni said, we announced nearly $12 billion for the acquisitions of Filtration Group Corporation and Surcourse Aerospace and Defense Business.

Speaker #3: In total, that's nearly $15 billion of capital deployment actions for the year, really underpinning our commitments to be great generators and great deployers of cash.

Speaker #3: And even with all those actions, we still reduced debt by a billion dollars in the quarter. Bringing our net debt to adjusted EBITDA to 1.4 times.

Speaker #3: That is down from 1.7 at this time last year. Just a great year of cash generation. Okay. Now let's move to slide 13 and address our FY27 guidance.

Todd Leombruno: That is down from 1.7 at this time last year. Just a great year of cash generation. Let's move to slide 13 and address our FY27 guidance. Jenny, I'm going to hand it back to you, and she will start with our sales growth forecast by market vertical.

Speaker #3: Jenni and I hand it back to you. And she will start with our sales growth forecast by market vertical.

Speaker #1: Thank you, Todd. I'm on slide 13. Our fiscal year 27 organic growth forecast by key market vertical. For aerospace and defense, our largest vertical, we are guiding high single-digit organic growth.

Jennifer Parmentier: Thank you, Todd. I'm on slide 13. Our fiscal year 2027 organic growth forecast by key market vertical. For aerospace and defense, our largest vertical, we are guiding high single-digit organic growth. We expect another year of robust double-digit growth for commercial OEM and sustained commercial aftermarket growth. Defense orders finished strong, supporting a solid outlook for fiscal year 2027 and beyond. We expect mid-single digit growth for in-plant and industrial. We see signs from distribution that the industrial recovery is broadening as customer demand gradually accelerates. Customer spending on automation continues to lead the growth here. For our transportation vertical, we forecast mid-single digit growth, led by strong growth for heavy-duty trucks driven by production rate increases. This is offset by lower growth assumptions for our automotive business, resulting in mid-single digit growth overall for this vertical.

Jenny Parmentier: Thank you, Todd. I'm on slide 13. Our fiscal year 2027 organic growth forecast by key market vertical. For aerospace and defense, our largest vertical, we are guiding high single-digit organic growth. We expect another year of robust double-digit growth for commercial OEM and sustained commercial aftermarket growth. Defense orders finished strong, supporting a solid outlook for fiscal year 2027 and beyond. We expect mid-single digit growth for in-plant and industrial. We see signs from distribution that the industrial recovery is broadening as customer demand gradually accelerates. Customer spending on automation continues to lead the growth here. For our transportation vertical, we forecast mid-single digit growth, led by strong growth for heavy-duty trucks driven by production rate increases. This is offset by lower growth assumptions for our automotive business, resulting in mid-single digit growth overall for this vertical.

Speaker #1: We expect another year of robust double-digit growth for commercial OEM and sustained commercial aftermarket growth. Defense orders finished strong, supporting a solid outlook for fiscal year 27 and beyond.

Speaker #1: We expect mid-single-digit growth for implant and industrial. We see signs from distribution that the industrial recovery is broadening, as customer demand—particularly for automation—continues to lead the growth here.

Speaker #1: For our transportation vertical, we forecast mid-single-digit growth, led by strong growth for heavy-duty trucks driven by production rate increases. This is offset by lower growth assumptions for our automotive business, resulting in mid-single-digit growth overall for this vertical.

Speaker #1: Moving to our highway. We are guiding mid-single-digit growth driven by a continuation of the trends we saw in fiscal year 26. We see continued strong growth in construction and mining, offset by continued softness in agriculture.

Jennifer Parmentier: Moving off highway, we are guiding mid-single digit growth driven by a continuation of the trends we saw in fiscal year 2026. We see continued strong growth in construction and mining, offset by continued softness in agriculture. We also expect mid-single digit growth for energy. We see strong and sustained long-cycle growth from our businesses supporting gas turbine power generation, while we are expecting oil and gas to be flat this year. Lastly, we are guiding mid-single digit growth in HVAC and refrigeration. We expect commercial HVAC to lead growth, and we see our residential business improving as inventory stabilizes. For the first time ever, we are guiding positive sales growth across all market verticals, resulting in an organic growth forecast of 7% at the midpoint. I'll give it back to Todd, and he'll share more details on our guidance.

Jenny Parmentier: Moving off highway, we are guiding mid-single digit growth driven by a continuation of the trends we saw in fiscal year 2026. We see continued strong growth in construction and mining, offset by continued softness in agriculture. We also expect mid-single digit growth for energy. We see strong and sustained long-cycle growth from our businesses supporting gas turbine power generation, while we are expecting oil and gas to be flat this year. Lastly, we are guiding mid-single digit growth in HVAC and refrigeration. We expect commercial HVAC to lead growth, and we see our residential business improving as inventory stabilizes. For the first time ever, we are guiding positive sales growth across all market verticals, resulting in an organic growth forecast of 7% at the midpoint. I'll give it back to Todd, and he'll share more details on our guidance.

Speaker #1: We also expect mid-single-digit growth for energy. We see strong and sustained long-cycle growth from our businesses supporting gas turbine power generation. While we are expecting oil and gas to be flat this year.

Speaker #1: Lastly, we are guiding mid-single-digit growth in HVAC and refrigeration. We expect commercial HVAC to lead growth, and we see our residential business improving as inventory stabilized.

Speaker #1: For the first time ever, we are guiding positive sales growth across all market verticals, resulting in an organic growth forecast of 7% at the midpoint.

Speaker #1: I'll give it back to Todd, and he'll share more details on our guidance.

Speaker #3: Thank you, Jenni. I'm on slide 14, and I'm just going to go through some of the details here. Reported sales growth for the year is going to be in the range of 5.5 to 8.5 or 7% at the midpoint.

Todd Leombruno: Thank you, Jenny. I'm on slide 14. I'm just going to go through some of the details here. Reported sales growth for the year is going to be in the range of 5.5% to 8.5%, or 7% at the midpoint. That will calculate to approximately $23 billion in annual sales for the company. Sales are modeled as usual, 48% in H1, 52% in H2. Consistent with what we've done historically, this guidance does not yet include any impact from the pending Filtration Group or CIRCOR acquisitions. We will provide current data on those transactions as soon as they close. When you look at organic growth, the range is the same, 5.5% to 8.5%, or 7% at the midpoint. Specifically for the North American businesses, we're expecting 6.5% organic growth at the midpoint.

Speaker #3: That will calculate to approximately $23 billion in annual sales for the company. Sales are modeled as usual, 48% in the first half, 52% in the second half.

Speaker #3: Consistent with what we've done historically, this guidance does not yet include any impact from the pending filtration group or Surcourse acquisitions. We will provide current data on those transactions.

Speaker #3: As soon as they close. When you look at organic growth, the range is the same, 5.5 to 8.5 or 7% at the midpoint. Specifically for the North American businesses, we're expecting 6.5% organic growth at the midpoint.

Speaker #3: And for the international industrial businesses, we expect 5.5% organic growth at the midpoint. Aerospace, we expect 8.5% organic growth at the midpoint. And again, that's coming off of four years of double-digit organic growth.

Todd Leombruno: For the international industrial businesses, we expect 5.5% organic growth at the midpoint. Aerospace, we expect 8.5% organic growth at the midpoint. Again, that's coming off of 4 years of double-digit organic growth, so the base is very high. Currency is based on our 30 June spot rates, and is expected to be just slightly unfavorable by a half a point. Previously completed acquisitions, this is really Curtis, adds approximately 0.5% for the year of FY27. On adjusted segment operating margins, we're guiding 27.7% at the midpoint. That's 40 basis points above prior year, and there will be margin expansion across all of our businesses. When it comes to incrementals, we're forecasting that near the top end of our stated 30% to 35% range for the full year. Just a few additional guidance items. Corporate G&A is expected to be about $200 million.

Speaker #3: So the base is very high. Currency is based on our June 30th spot rates and expected to be just slightly unfavorable by a half a point.

Speaker #3: And previously completed acquisitions, this is really Curtis, adds approximately 0.5% for the year. Of FY27. On adjusted segment operating margins, we're guiding 27.7 at the midpoint.

Speaker #3: That's 40 basis points above the prior year, and there will be margin expansion across all of our businesses. When it comes to incrementals, we're forecasting to be near the top end of our stated 30 to 35% range for the full year.

Speaker #3: Just a few additional guidance items. Corporate G&A is expected to be about $200 million. Interest expense is about $340 million. That, again, excludes any pending debt we take on when filtration group and Surcourse closes.

Todd Leombruno: Interest expense is about $340 million. That again, excludes any pending debt we take on when Filtration Group and CIRCOR closes. Other expense is forecasted to be around $100 million. Tax rate, the full-year tax rate, we are guiding to 22.5%. EPS, full-year adjusted EPS is going to be $34.75 at the midpoint. That's an increase of 8% versus prior year. The range on that is ±$0.50 on either side. The split on EPS is 47% H1, 53% in H2. For cash flow, we're expecting a range of $3.4 to 3.9. That is free cash flow with conversion of approximately 100%. Now, on the right-hand side of the page, just some details for Q1 of FY27, and all of these are at the midpoint. Reported sales are forecast to be positive, approximately 9%.

Speaker #3: And other expense is forecasted to be around $100 million. Tax rate, the full year tax rate, we are guiding to 22.5%. EPS, full year adjusted EPS is going to be 34.75 at the midpoint.

Speaker #3: That's an increase of 8% first prior year. The range on that is plus or minus 50 cents on either side. The split on EPS is 47% first half, 53% in the second half.

Speaker #3: And for cash flow, we're expecting a range of 3.4 to 3.9. That is free cash flow with conversion of approximately 100%. Now, on the right-hand side of the page, just some details for the first quarter.

Speaker #3: Of FY27, on all of these are at the midpoint. Reported sales are forecasted to be positive, approximately 9%. Organic growth is expected to be positive at approximately 8%.

Todd Leombruno: Organic growth is expected to be positive at approximately 8%. For the quarter, we're forecasting adjusted segment operating margins at 27.7%, and adjusted EPS is expected to be just a little over $8 at $8.07 for the quarter. As usual, there are lots of additional guidance details in the appendix. On slide 15, if you look at the bridge, this just shows the growth versus prior year. We're forecasting an increase of 8.5% in segment operating income dollars. That is a little over $3 of additional EPS for the year. Lower interest rate resulting from what we've been able to pay down in the year adds about $0.38. Lower share count will add $0.07. We've got a little bit of a headwind here on tax. That's using a forecasted rate of 22.5%. That does not include any discrete items that are not yet known.

Speaker #3: For the quarter, we're forecasting adjusted segment operating margins at 27.7. And adjusted EPS is expected to be just over a little over $8 at $8.07 for the quarter.

Speaker #3: As usual, there are lots of additional guidance details in the appendix. On slide 15, if you look at the bridge, this just shows the growth versus prior year.

Speaker #3: We're forecasting an increase of 8.5% in segment operating income dollars. That is a little over $3 of additional EPS for the year. Lower interest rate resulting from what we've been able to pay down in the year adds about 38 cents.

Speaker #3: Lower share count will add 7. We've got a little bit of a headwind here on tax that's using a forecasted rate of 22.5%. That did not include any discrete items that are not yet known.

Speaker #3: And it is a bit of a headwind from what we've experienced in FY26. Nothing unusual there, just still unknown. Corporate G&A and other—it's really 'other'—is forecasted to be unfavorable by $0.14.

Todd Leombruno: It is a bit of a headwind from what we've experienced in FY26. Nothing unusual there, just still unknown. Corporate G&A and other, it's really other, is forecasted to be -$0.14. All that will be in the other line, and that's really due to the non-repeat of some favorable foreign currency exchange that we experienced in FY26. In summary, the adjusted EPS is $34.75. That's up 8%. With that, Jenny, I will hand it back to you.

Speaker #3: All of that will be in the other line, and that’s really due to the non-repeat of some favorable foreign currency exchange that we experienced in FY26.

Speaker #3: In summary, the adjusted EPS is 34.75. That's up 8%. And with that, Jenni, I will hand it back to you.

Speaker #1: Thanks, Todd. On our final slide, a reminder of what drives Parker. Safety engagement and ownership are the foundation of our culture. It is our team members living up to our purpose every day that drives top quartile performance and allows us to be great generators and employers of tech.

Jennifer Parmentier: Thanks, Todd. On our final slide, a reminder of what drives Parker. Safety, engagement, and ownership are the foundation of our culture. It is our team members living up to our purpose every day that drives top quartile performance and allows us to be great generators and deployers of cash.

Jenny Parmentier: Thanks, Todd. On our final slide, a reminder of what drives Parker. Safety, engagement, and ownership are the foundation of our culture. It is our team members living up to our purpose every day that drives top quartile performance and allows us to be great generators and deployers of cash.

Speaker #3: Okay, Beau, we are ready to start the Q&A portion of the call.

Todd Leombruno: Okay, Bo, we are ready to start the Q&A portion of the call.

Speaker #4: Certainly, sir. Thank you. Ladies and gentlemen, at this time, if you do have any questions, please press star one on your telephone to withdraw your question at any time.

Operator: Certainly, sir. Thank you. Ladies and gentlemen, at this time, if you do have any questions, please press star one on your telephone. To withdraw your question at any time, please press star two. Others can hear your questions clearly, we ask that you please pick up your handset for best sound quality. We'll go first today to Scott Davis with Melius Research.

Speaker #4: Please press star two. To ensure others can hear your questions clearly, we ask that you please pick up your handset for the best sound quality.

Speaker #4: We'll go first today to Scott Davis with Melius Research.

Speaker #5: Hey, good morning, Jenni, Todd, and Jeff. Congrats on a great year. It must sound like a broken record, because you've had quite a few of them in the last few years anyways.

Scott Davis: Hey, good morning, Jenny, Todd, and Jeff.

Todd Leombruno: Morning.

Scott Davis: Congrats on a great year. It must sound like a broken record because you've had quite a few of them the last few years anyways.

Speaker #5: But.

Speaker #1: Thank you.

Jennifer Parmentier: Thank you.

Jenny Parmentier: Thank you.

Speaker #5: And just to clean up item here, what are the final hurdles left to close the filtration group and Surcourse? Any major hurdles?

Scott Davis: Just a cleanup item here. What are the final hurdles left to close the Filtration Group and CIRCOR? Any major hurdles?

Speaker #1: No major hurdles. We still anticipate closing both of them. During the second half of this calendar year, the first half of our fiscal year, as you know, closing remains subject to all the customary conditions pending regulatory clearances.

Jennifer Parmentier: No major hurdles. We still anticipate closing both of them during H2 of this calendar year, H1 of our fiscal year. As you know, closing remains subject to all the customary conditions pending regulatory clearances. The process is ongoing and continuing to progress on both of them.

Jenny Parmentier: No major hurdles. We still anticipate closing both of them during H2 of this calendar year, H1 of our fiscal year. As you know, closing remains subject to all the customary conditions pending regulatory clearances. The process is ongoing and continuing to progress on both of them.

Speaker #1: But the process is ongoing, and continuing to progress on both of them.

Speaker #5: Okay, fair enough. And then just as a follow-up, when you look at your targets, your new targets on slide five, and can you give us a sense of maybe where you're most comfortable and least comfortable if that's such a thing?

Scott Davis: Okay, fair enough. Just as a follow-up, when you look at your targets, your new targets on slide five, can you give us a sense of maybe where you're most comfortable and least comfortable, if that's such a thing? I'm sure there's some minimum level of comfort, but just love to get a sense of where you feel are going to be the easier targets to hit versus the harder targets to hit.

Speaker #5: I'm sure there's some minimum level of comfort, but just love to get a sense of where you feel are going to be the easier targets to hit versus the harder targets to hit.

Speaker #3: Hey, Scott, I'll start with that and I'll let Jenni jump in here. None of these targets are easy by any stretch of imagination, but what gives me great confidence is the way our team embraces them.

Todd Leombruno: Hey, Scott, I'll start with that. I'll let Jenny jump in here. None of these targets are easy by any stretch of the imagination, what gives me great confidence is the way our team embraces them. I've told you this many times before. I've never seen such alignment across the company. These are not easy to achieve by any stretch of the imagination. I look at our track record, we are just so proud of what we've been able to accomplish here. Raising that margin target to 30, that's a big number, right? That is a big number. It's 300 basis point improvement. If you look at what we've done in the past, I have great confidence that we're going to be able to achieve that. We've done a great job on the EPS CAGR.

Speaker #3: I've told you this many, many times before: I've never seen such alignment across the company. These are not easy to achieve by any stretch of the imagination.

Speaker #3: I look at our track record, and we are just so proud of what we've been able to accomplish here. Raising that margin target to 30, that's a big number, right?

Speaker #3: That is a big number. It's 300 basis point improvement. But if you look at what we've done in the past, I have great confidence that we're going to be able to achieve that.

Speaker #3: We've done a great job on the EPS CAGR, if you can get margin expansion and top-line growth, sprinkle in a little bit of accretive capital allocation, that works as well.

Todd Leombruno: If you can get margin expansion and top-line growth, sprinkle in a little bit of accretive capital allocation, that works as well. I feel really good about this. I don't really have any concerns.

Speaker #3: So I feel really good about this. I don't really have any concerns.

Speaker #1: No, I mean, I echo Todd's comments. The win strategy has never been stronger, and the alignment has never been stronger. Obviously, in these targets, we've included the acquisitions that we've yet to close.

Jennifer Parmentier: No, I echo Todd's comments. The Win Strategy has never been stronger, the alignment has never been stronger. Obviously, in these targets, we've included the acquisitions that we've yet to close. We're going to use our integration playbooks and do a great job as we have done in the past. The team's going to continue to do what we've been doing.

Jenny Parmentier: No, I echo Todd's comments. The Win Strategy has never been stronger, the alignment has never been stronger. Obviously, in these targets, we've included the acquisitions that we've yet to close. We're going to use our integration playbooks and do a great job as we have done in the past. The team's going to continue to do what we've been doing.

Speaker #1: We're going to use our integration playbooks and do a great job as we have done in the past. And the team's going to continue to do what we've been doing.

Speaker #5: Well, good to hear. I wish you guys the best. Have a great next year. I'll pass it on.

Scott Davis: Well, good to hear. I wish you guys the best. Have a great next year. I will pass it on.

Speaker #3: Appreciate it.

Speaker #1: Thanks, Scott.

Todd Leombruno: Appreciate it.

Speaker #4: We'll go next now to Jeff Sprague with Vertical Research.

Jennifer Parmentier: Thanks, Scott.

Jenny Parmentier: Thanks, Scott.

Operator: We will go next now to Jeff Sprague with Vertical Research.

Speaker #3: Hey, thanks. Good morning, everyone.

Jeff Sprague: Hey, thanks. Good morning, everyone. Where to start? I'm embarrassed of my riches here. I guess the first thing is just on the strength of the orders on the rolling three basis here in the quarter, particularly in international. Can you just provide a little bit more color on what was going on there? Was there something that proved to be a real catalyst in a couple key end markets?

Speaker #1: Jeff.

Speaker #3: So where to start? I'm embarrassed on our witches here. I guess the first thing is just on the strength of the orders on the rolling three basis here in the quarter.

Speaker #3: Particularly in international, but can you just provide a little bit more color on what was going on there? What was there something that proved to be a real catalyst in a couple of key end markets?

Speaker #1: Yeah, I would tell you for international, Jeff, it was really a nice driven by electronics. I mean, there was really it was 24% with the 312 method.

Jennifer Parmentier: Yeah. I would tell you for international, Jeff, it was really nice, driven by electronics. It was 24% with the three-twelve method, and last year it was zero. It was an easy comp of zero. It was really driven by electronics. Double-digit growth for Asia Pacific and mid-single digit growth for EMEA. Positive orders across all the major market verticals, but really the strength is electronics.

Jenny Parmentier: Yeah. I would tell you for international, Jeff, it was really nice, driven by electronics. It was 24% with the three-twelve method, and last year it was zero. It was an easy comp of zero. It was really driven by electronics. Double-digit growth for Asia Pacific and mid-single digit growth for EMEA. Positive orders across all the major market verticals, but really the strength is electronics.

Speaker #1: And last year, it was zero. So it was an easy comp with zero. But it was really driven by electronics and implants. Double-digit growth for Asia Pacific and mid-single-digit growth for EMEA.

Speaker #1: So positive orders across all the major market verticals, but really the strength is electronics.

Speaker #3: And then just thinking about the new framework here, if we look at the rolling four exit for Q4 2025, right, it almost exactly called the 2026 organic growth for both NA and international.

Jeff Sprague: Just thinking about the new framework here. If we look at the rolling four exit for Q4 2025, it almost exactly called the 2026 organic growth for both NA and international. I guess the question here is, if we're exiting at nine to 10 here in Q4 on the rolls, what's sort of the gap or the hedge between sort of the five to eight or the four to seven that you're giving us in North America and international? Anything else to be aware of in that equation?

Speaker #3: So I guess the question here is, if we're exiting at 9 to 10 here in Q4 on the roll, what's sort of the gap or the hedge between sort of the 5 to 8 or the 4 to 7 that you're giving us in North America and international?

Speaker #3: Anything else could be aware of in that equation?

Speaker #1: Yeah, what I would say, Jeff, is that obviously the orders remain a leading indicator, but they're not an exact forecast. I think that the 12-12 gives us much closer, as you already pointed out.

Jennifer Parmentier: What I would say, Jeff, is that obviously the orders remain a leading indicator, but they're not an exact forecast. I think that the 12% gets us much closer, as you already pointed out, and the guidance really in line with the progression of the orders that we've been seeing. Coming out of FY26 is 3.5% and guiding to 6%, we're really excited about that and really happy to see that industrial business be above 6%. This is at the high end of our target range, too, over the cycle, 4% to 6%.

Jenny Parmentier: What I would say, Jeff, is that obviously the orders remain a leading indicator, but they're not an exact forecast. I think that the 12% gets us much closer, as you already pointed out, and the guidance really in line with the progression of the orders that we've been seeing. Coming out of FY26 is 3.5% and guiding to 6%, we're really excited about that and really happy to see that industrial business be above 6%. This is at the high end of our target range, too, over the cycle, 4% to 6%.

Speaker #1: And the guidance really in line with the progression of the orders that we've been seeing. Coming out of FY26 at 3.5% and guiding to 6%, we're really excited about that.

Speaker #1: And really happy to see that industrial business be above 6%. And this is at the high end of our target range too, over the cycle 4 to 6%.

Speaker #1: We also, I would add, have we have 10% of aerospace and defense business on the in the industrial. So that tends to be even a little bit longer.

Jeff Sprague: Yeah

Jeff Sprague: Yeah.

Jennifer Parmentier: have 10% of aerospace and defense business in the industrial. That tends to be even a little bit longer.

Jenny Parmentier: We have 10% of aerospace and defense business in the industrial. That tends to be even a little bit longer.

Speaker #3: Even longer, yeah. All right, great. Thanks for that color. I appreciate it.

Jeff Sprague: Even longer. Yeah. All right, great. Thanks for that color. I appreciate it.

Speaker #5: Todd, I would just add, when you look at the industrial businesses, we are showing an increase from Q4 on an organic basis. When you look at the full year, the comps in the second half get a little bit tougher.

Todd Leombruno: Todd, I would just add, when you look at the industrial businesses, we are showing an increase from Q4 on an organic basis. When you look at the full year, the comps in the H2 get a little bit tougher. While the organic growth numbers are a little bit lower, it's from a percentage standpoint, a little bit more weighted in Q1 and Q2.

Speaker #5: So while the organic growth numbers are a little bit lower, it's a little bit more from a percentage standpoint, a little bit more weighted.

Speaker #5: Q1 and Q2.

Speaker #3: Understood. Thank you.

Jeff Sprague: Understood. Thank you.

Speaker #4: We'll go next now to Chris Snyder of Morgan Stanley.

Operator: We'll go next now to Chris Snyder of Morgan Stanley.

Speaker #5: Thank you. Maybe just following up on some of that commentary on the Industrial business line. So, you guys guided every vertical to mid-single-digit growth in Industrial for next year.

Chris Snyder: Thank you. Maybe just following up on some of that commentary on the industrial business line. You guys guided every vertical to mid-single digit growth in industrial for next year. Can you just maybe talk about ones maybe that are exiting with more strength or the ones where you guys feel better about the prospects and the opportunity into 2027? Thank you.

Speaker #5: Can you maybe talk about the ones that are exiting with more strength, or the ones where you guys feel better about the prospects and the opportunity into '27?

Speaker #5: Thank you.

Speaker #1: Well, what I would say is, again, I'll repeat, as a reminder, 10% of industrial sales are tied to aerospace and defense, growing high single digits.

Jennifer Parmentier: Well, what I would say is, again, I'll repeat, as a reminder, 10% of industrial sales are tied to aerospace and defense, growing high single digits. That is very strong. While it's not large enough to be a vertical, we are expecting another year of strong electronics and data center business. When we look at the market vertical forecast, we look at in-plant and industrial equipment, we've been saying for quite some time, a gradual recovery here. It's been very encouraging to see that the demand is improving, and we expect gradual acceleration on a broadening recovery. We've seen distribution orders be strong in the Q4. We're not calling a full restock yet, but we have heard from some distributors that they are doing more stocking than they have done in the past. We feel really good about what's going to happen in in-plant industrial.

Jenny Parmentier: Well, what I would say is, again, I'll repeat, as a reminder, 10% of industrial sales are tied to aerospace and defense, growing high single digits. That is very strong. While it's not large enough to be a vertical, we are expecting another year of strong electronics and data center business. When we look at the market vertical forecast, we look at in-plant and industrial equipment, we've been saying for quite some time, a gradual recovery here. It's been very encouraging to see that the demand is improving, and we expect gradual acceleration on a broadening recovery. We've seen distribution orders be strong in the Q4. We're not calling a full restock yet, but we have heard from some distributors that they are doing more stocking than they have done in the past. We feel really good about what's going to happen in in-plant industrial.

Speaker #1: So that is very strong. While it's not large enough to be a vertical, we are expecting another year of strong electronics and data center business.

Speaker #1: When we look at the market vertical forecast and we look at implant and industrial equipment, we've been saying for quite some time a gradual recovery here.

Speaker #1: And it's been very encouraging to see that demand is improving. We expect gradual acceleration on a broadening recovery. We've seen distribution orders be strong in the fourth quarter.

Speaker #1: We're not calling a full restock yet, but we have heard from some distributors that they are doing more stocking than they have done in the past.

Speaker #1: So we feel really good about what's going to happen in implant and industrial. Transportation, strong heavy-duty truck orders. Build rates are increasing. When you look at off-highway, acceleration in construction has been driven by infrastructure spend.

Jennifer Parmentier: Transportation, strong heavy-duty truck orders. Build rates are increasing. When you look at off-highway, acceleration in construction has been driven by infrastructure spend. As I commented earlier, we see strong power gen growth in the energy vertical. A lot to be excited about here, and we feel good about the guide here at mid-single digit growth.

Jenny Parmentier: Transportation, strong heavy-duty truck orders. Build rates are increasing. When you look at off-highway, acceleration in construction has been driven by infrastructure spend. As I commented earlier, we see strong power gen growth in the energy vertical. A lot to be excited about here, and we feel good about the guide here at mid-single digit growth.

Speaker #1: And as I commented earlier, we see strong power gen growth in the energy vertical. So a lot to be excited about here. And we feel good about the guide here at mid-single-digit growth.

Speaker #5: Absolutely. Thank you for that, Jenny. And then maybe going over to the M&A side. So obviously, you have the two big deals that are closing over the next quarter or so.

Chris Snyder: Absolutely. Thank you for that, Jenny. Maybe going over to the M&A side. Obviously, you have the two big deals that are closing over the next quarter or so. Can you just maybe talk about the appetite or bandwidth to do incremental deals in 2027? Or is it going to be a year more about focusing on just integrating those two businesses? Anything you could just kind of talk about the appetite, the willingness. Even anything just on the pipeline of opportunities you guys see. Thank you.

Speaker #5: Can you just maybe talk about the appetite or bandwidth to do incremental deals in 27? Or is it going to be a year more about focusing on just integrating those two businesses?

Speaker #5: So anything you could just kind of talk about the appetite, the willingness, and then even anything just on the pipeline of opportunities you guys see.

Speaker #5: Thank you.

Speaker #1: Yeah. So obviously, we're very, very committed to continuing to actively deploy our capital. We're going to get these two acquisitions closed. The teams are going to work hard on integration.

Jennifer Parmentier: Yeah. Obviously we're very committed to continuing to actively deploy our capital. We're going to get these two acquisitions closed. The teams are going to work hard on integration. The work on the pipeline never stops. We are always working on that pipeline, building relationships with targets. Many times we're not in control of the timing of when these targets become available. We monetize three with our leverage with these two deals. It'll take us about six quarters to get that back down to two. I would say we still have an appetite, but we're going to stay true to doing what makes sense for the company.

Jenny Parmentier: Yeah. Obviously we're very committed to continuing to actively deploy our capital. We're going to get these two acquisitions closed. The teams are going to work hard on integration. The work on the pipeline never stops. We are always working on that pipeline, building relationships with targets. Many times we're not in control of the timing of when these targets become available. We monetize three with our leverage with these two deals. It'll take us about six quarters to get that back down to two. I would say we still have an appetite, but we're going to stay true to doing what makes sense for the company.

Speaker #1: But the work on the pipeline never stops. We are always working on that pipeline, building relationships with targets. Many times, we're not in control of the timing of when these targets become available.

Speaker #1: So we might touch three with our leverage with these two deals. It'll take us about six quarters to get that back down to two.

Speaker #1: So I would say we still have an appetite, but we're going to stay true to doing what makes sense for the company.

Speaker #5: Thank you.

Chris Snyder: Thank you.

Speaker #4: We'll go next now to Steve Volkmann of Jefferies.

Operator: We'll go next now to Stephen Volkmann of Jefferies.

Operator: We'll go next now to Steve Volkmann of Jefferies.

Speaker #5: Hi. Good morning, guys. Echo the embarrassment of riches. I think you've tripled the margin since I started covering you guys. But in the spirit of what have you done for me lately, I'm curious.

Stephen Volkmann: Hi. Good morning, guys. I echo the embarrassment of riches. I think you've tripled the margin since I started covering you guys. In the spirit of what have you done for me lately, I'm curious, I think 2027 we might be on track for an analyst day, and I know we've had Win 3.0 here doing well for the last few years. Is there a Win 4.0, and sort of what's next for the Win Strategy? How do you progress from here?

Steve Volkmann: Hi. Good morning, guys. I echo the embarrassment of riches. I think you've tripled the margin since I started covering you guys. In the spirit of what have you done for me lately, I'm curious, I think 2027 we might be on track for an analyst day, and I know we've had Win 3.0 here doing well for the last few years. Is there a Win 4.0, and sort of what's next for the Win Strategy? How do you progress from here?

Speaker #5: I think 27 might be we might be on track for an analyst day. And I know we've had win 3.0 here. Doing well for the last few years.

Speaker #5: Is there a win 4.0 and sort of what's next for the win strategy? How do you progress from here?

Speaker #1: So there will be a win 4.0, definitely there will be. And we're talking about the next investor day now. So I would say stay tuned.

Jennifer Parmentier: There will be a Win 4.0. Definitely there will be. We're talking about the next Investor Day now. I would say stay tuned. We definitely think that we'll have more things to share in the future.

Jenny Parmentier: There will be a Win 4.0. Definitely there will be. We're talking about the next Investor Day now. I would say stay tuned. We definitely think that we'll have more things to share in the future.

Speaker #1: But we definitely think that we'll have more things to share in the future.

Speaker #3: Steve, I just checked that. I just checked the map, Steve. You are correct. We have tripled margins since you've been covering us.

Todd Leombruno: Steve, I just checked the math.

Stephen Volkmann: Okay. All right. We'll wait for that.

Steve Volkmann: Okay. All right. We'll wait for that.

Todd Leombruno: I just checked the math, Steve. You are correct. We have tripled margins since you've been covering us, so

Speaker #5: Yeah. I got it right. So just a quick follow-up here. Are your orders getting a lot lumpier? Are you taking in some really chunky orders now?

Stephen Volkmann: Yeah. I got it right. Just a quick follow-up here. Are your orders getting a lot lumpier? Are you taking in some really chunky orders now and the uncertainty around that, maybe that's behind the switch to the trailing 12 and maybe expecting that the Q4 might not be repeated going forward?

Steve Volkmann: Yeah. I got it right. Just a quick follow-up here. Are your orders getting a lot lumpier? Are you taking in some really chunky orders now and the uncertainty around that, maybe that's behind the switch to the trailing 12 and maybe expecting that the Q4 might not be repeated going forward?

Speaker #5: And the uncertainty around that, maybe that's behind the switch to the trailing 12 and maybe expecting that the fourth quarter might not be repeated going forward?

Speaker #1: I wouldn't say you're sitting here today that I don't think the fourth quarter could be repeated. I will tell you that international orders have been very choppy in the past.

Jennifer Parmentier: I wouldn't say sitting here today that I don't think the Q4 could be repeated. I will tell you that international orders have been very choppy in the past. We've also seen some quarters where we've had some high aerospace and defense orders that are very long-term, that have hit some of our businesses and then the next couple of quarters, we don't see that. We do think that this method of 12/12 is a much better correlation to what we can see for near-term organic growth. The business is just so different than it was when we started reporting these quarterly order rate comparisons. Aerospace, engineered materials, and filtration used to be 35% of the company, and now it's 65% of the company. We really think that this is going to give a more accurate view of what's to come for organic growth.

Jenny Parmentier: I wouldn't say sitting here today that I don't think the Q4 could be repeated. I will tell you that international orders have been very choppy in the past. We've also seen some quarters where we've had some high aerospace and defense orders that are very long-term, that have hit some of our businesses and then the next couple of quarters, we don't see that. We do think that this method of 12/12 is a much better correlation to what we can see for near-term organic growth. The business is just so different than it was when we started reporting these quarterly order rate comparisons. Aerospace, engineered materials, and filtration used to be 35% of the company, and now it's 65% of the company. We really think that this is going to give a more accurate view of what's to come for organic growth.

Speaker #1: We've also seen some quarters where we've had some high aerospace and defense orders that are very long-term, that have hit some of our businesses.

Speaker #1: And then the next couple of quarters, we don't see that. So we do think that this method of 12/12 is a much better correlation to what we can see for near-term organic growth.

Speaker #1: The business is just so different than it was when we started reporting these quarterly order rate comparisons. Aerospace engineered materials and filtration used to be 35% of the company.

Speaker #1: And now it's 65% of the company. So we really think that this is going to give a more accurate view of what's to come for organic growth.

Speaker #3: Steve, I would just add when you're when you think about orders that are lumpy, the aerospace business is the business that jumps off the page.

Todd Leombruno: Steve, I would just add.

Stephen Volkmann: Fair enough. Thanks.

Steve Volkmann: Fair enough. Thanks.

Todd Leombruno: When you think about orders that are lumpy, the aerospace business is the business that jumps off the page. Today, 10% of the industrial business is aerospace and defense end markets. That does create some choppiness, whether that's in the industrial international businesses or the North America businesses. What Jenny said is we feel that this is just a better way to look at it.

Speaker #3: Today, 10% of the industrial business is aerospace and defense and markets. So that does create some choppiness, whether that's in the industrial international businesses or in the North America businesses.

Speaker #3: So, what Jenny said is, we feel that this is just a better way to look at it.

Speaker #5: Thanks. I'll pass it on. Thank you.

Stephen Volkmann: Thanks. I'll pass it on. Thank you.

Steve Volkmann: Thanks. I'll pass it on. Thank you.

Speaker #3: Thanks.

Todd Leombruno: Thanks.

Speaker #4: We'll go next now to Andy Capowitz at Citigroup.

Operator: We'll go next now to Andrew Kaplowitz at Citigroup.

Operator: We'll go next now to Andy Kaplowitz at Citigroup.

Speaker #6: Hey, good morning, everyone. Nice quarter.

Andrew Kaplowitz: Hey, good morning, everyone. Nice quarter.

Andy Kaplowitz: Hey, good morning, everyone. Nice quarter.

Speaker #1: Thanks, Andy.

Jennifer Parmentier: Thanks, Andy.

Jenny Parmentier: Thanks, Andy.

Speaker #6: Jenny, I think you prudently initially forecasting 7 to 10 percent growth for Aero and FY27. But as you said, you've now had four years in a row of double-digit growth in Aero.

Andrew Kaplowitz: Jenny, I think you prudently initially forecasting 7% to 10% growth for aero in FY27, but as you've said, you've now had four years in a row of double-digit growth in aero and I think backlogs up mid-teens. Maybe give us a little more lay of the land between what you're seeing commercial aero and defense. Are you still forecasting strong commercial aero aftermarket growth in FY27, for instance, or do you expect a significantly higher OE-related growth?

Andy Kaplowitz: Jenny, I think you prudently initially forecasting 7% to 10% growth for aero in FY27, but as you've said, you've now had four years in a row of double-digit growth in aero and I think backlogs up mid-teens. Maybe give us a little more lay of the land between what you're seeing commercial aero and defense. Are you still forecasting strong commercial aero aftermarket growth in FY27, for instance, or do you expect a significantly higher OE-related growth?

Speaker #6: And I think that goes up to 19. So, maybe give us a little more lay of the land between what you're seeing in commercial Aero and defense.

Speaker #6: Are you still forecasting strong commercial Aero aftermarket growth in FY27, for instance, or do you expect to see much higher OE-related growth?

Speaker #1: Yeah. So I'll give you the rundown of what we have built into the guidance. So for commercial OEM, well, first of all, the OE aftermarket split that we have in the guidance is 52% OE, 48% aftermarket.

Jennifer Parmentier: Yeah. I'll give you the rundown of what we have built into the guidance. For commercial OEM-- Well, first of all, the OE aftermarket split that we have in the guidance is 52% OE, 48% aftermarket. We just ended the year at 51 OE, 49 aftermarket. We're planning on higher OE mix here. Commercial OEM, we see mid-teens growth for the fiscal year, and that's really built on commercial aircraft build rate increases. Aircraft demand is still greater than supply and wide bodies are growing to meet international traffic demand. Commercial MRO, we're saying plus mid-single digit growth for fiscal year 2027. There's still a lot of older aircraft flying. The fleet still relies on that. Engine repair shop visits and component restocking continues. Again, international traffic continues to grow faster than domestic. On defense OEM, mid-single digit growth.

Jenny Parmentier: Yeah. I'll give you the rundown of what we have built into the guidance. For commercial OEM-- Well, first of all, the OE aftermarket split that we have in the guidance is 52% OE, 48% aftermarket. We just ended the year at 51 OE, 49 aftermarket. We're planning on higher OE mix here. Commercial OEM, we see mid-teens growth for the fiscal year, and that's really built on commercial aircraft build rate increases. Aircraft demand is still greater than supply and wide bodies are growing to meet international traffic demand. Commercial MRO, we're saying plus mid-single digit growth for fiscal year 2027. There's still a lot of older aircraft flying. The fleet still relies on that. Engine repair shop visits and component restocking continues. Again, international traffic continues to grow faster than domestic. On defense OEM, mid-single digit growth.

Speaker #1: And we just ended the year at 51 OE, 49 aftermarket. So we're planning on higher OE mix here. Commercial OEM, we see mid-teens growth for the fiscal year.

Speaker #1: And that's really built on commercial aircraft build rate increases. Aircraft demand is still greater than supply, and wide bodies are growing to meet international traffic demand.

Speaker #1: Commercial MRO, we're saying plus mid-single-digit growth for fiscal year aircraft line. The fleet still relies on that. Engine repair shop visits and component restocking continues.

Speaker #1: And again, international traffic continues. To grow faster than domestic. On defense OEM, mid-single-digit growth. Demand for legacy and missile programs continues. Increasing defense budgets in response to what's going on in the world.

Jennifer Parmentier: Demand for legacy and missile programs continues. Increasing defense budgets in response to what's going on in the world and F-35 deliveries are at peak. Defense MRO, plus mid-single digit growth, and that's really based on fleet upgrades and service extensions, increasing defense budgets, and a focus on retrofits and upgrades. Bringing that all together is how we've come up with the guidance for the full year.

Jenny Parmentier: Demand for legacy and missile programs continues. Increasing defense budgets in response to what's going on in the world and F-35 deliveries are at peak. Defense MRO, plus mid-single digit growth, and that's really based on fleet upgrades and service extensions, increasing defense budgets, and a focus on retrofits and upgrades. Bringing that all together is how we've come up with the guidance for the full year.

Speaker #1: And F-35 deliveries are at peak. Defense MRO plus mid-single-digit growth, and that's really based on fleet upgrades and service extensions, increasing defense budgets, and a focus on retrofits and upgrades.

Speaker #1: So bringing that all together is how we've come up with the guidance for the full year.

Speaker #6: Very helpful, Jenny. And then Todd, for the FY27 margin guide, it was nice to hear that you're going to the high end of your normal 30 to 35 percent incrementals.

Andrew Kaplowitz: Very helpful, Jenny. Todd, for the FY27 margin guide, it was nice to hear that you've gotten to the high end of your normal 30% to 35% incrementals. Obviously, you've been trending closer to 40%. How should we think about mix or any price costs headwinds impacting the businesses in FY27? I assume you do want to be somewhat conservative given those things.

Andy Kaplowitz: Very helpful, Jenny. Todd, for the FY27 margin guide, it was nice to hear that you've gotten to the high end of your normal 30% to 35% incrementals. Obviously, you've been trending closer to 40%. How should we think about mix or any price costs headwinds impacting the businesses in FY27? I assume you do want to be somewhat conservative given those things.

Speaker #6: But obviously, you've been trending closer to 40. So how should we think about mix or any price cost headwinds impacting the businesses in FY27?

Speaker #6: I those things.

Speaker #3: Yeah. That's a great point. When it comes to price, we're obviously going to cover any increases that come across, whether that is tariffs, whether that is labor, whether that's logistics, commodities.

Todd Leombruno: Yeah, that's a great point. When it comes to price, we're obviously going to cover any increases that come across, whether that is tariffs, whether that is labor, whether that's logistics, commodities. That will be in there. We've said this constantly, we want to return to a normal pricing environment. What better time to do that is when you're in a moment of growth here. When you look across the businesses, we are at the higher end of that 30% to 35% range. It feels good when we pressure tested it internally. I would say there's nothing that looks abnormal when it comes to timing on those incrementals.

Speaker #3: So that will be in there. But we've said this constantly. We want to return to a normal pricing environment. And what better time to do that was when you're in an element of growth here.

Speaker #3: So when you look across the businesses, we are at the higher end of that 30 to 35 percent range. It feels good when we look at when we pressure tested it internally.

Speaker #3: And I would say there's nothing that looks abnormal when it comes to timing on those incrementals. Yep. Thank you.

Andrew Kaplowitz: Great. Thanks, Todd.

Andy Kaplowitz: Great. Thanks, Todd.

Todd Leombruno: Yep. Thank you.

Speaker #4: We'll go next now to Meg Dobre at Baird.

Operator: We'll go next now to Mircea Dobre at Baird.

Operator: We'll go next now to Mig Dobre at Baird.

Speaker #7: Hey. Thank you. A couple of longer-term questions that I guess I'm just going to roll into one. From a capacity standpoint, when we kind of look at your growth, right, you talk about higher growth than what you've had in the past.

Mircea Dobre: Hey. Thank you. A couple of longer-term questions that I guess I'm just going to roll into one. From a capacity standpoint, when we look at your growth, you talk about higher growth than what you've had in the past, and I'm sort of curious as to where you are from a capacity standpoint in your manufacturing facilities to be able to deliver on that sustained higher growth over the next few years. Maybe it'd be helpful if you can comment on that. I'm thinking about the industrial business specifically. Related to all of this, you guide for CapEx here, 2.5% of sales, which is pretty much consistent with what you've done historically. A lot of other industrial companies that are talking about higher growth are also talking about higher CapEx and investing in capacity.

Mig Dobre: Hey. Thank you. A couple of longer-term questions that I guess I'm just going to roll into one. From a capacity standpoint, when we look at your growth, you talk about higher growth than what you've had in the past, and I'm sort of curious as to where you are from a capacity standpoint in your manufacturing facilities to be able to deliver on that sustained higher growth over the next few years. Maybe it'd be helpful if you can comment on that. I'm thinking about the industrial business specifically. Related to all of this, you guide for CapEx here, 2.5% of sales, which is pretty much consistent with what you've done historically. A lot of other industrial companies that are talking about higher growth are also talking about higher CapEx and investing in capacity.

Speaker #7: And I'm sort of curious as to where you are from a capacity standpoint in your facilities' manufacturing facilities to be able to deliver on that sustained higher growth over the next few years.

Speaker #7: So maybe it'd be helpful if you can comment on that. And I'm thinking about the industrial business specifically. And related to all of this, you guide for CAPEX here two and a half percent of sales, which is pretty much consistent with what you've done historically.

Speaker #7: A lot of other industrial companies that are talking about higher growth are also talking about higher CAPEX and investing in capacity. So I'm curious if your circumstances are different and whether or not we should be planning for maybe a little more CAPEX as we think about later in a decade or maybe early 2030.

Stephen Volkmann: I'm curious if your circumstances are different and whether or not we should be planning for maybe a little more CapEx as we think about?

Mig Dobre: I'm curious if your circumstances are different and whether or not we should be planning for maybe a little more CapEx as we think about? Later in the decade or maybe early 2030. Thank you.

Nathan Jones: later in the decade or maybe early 2030. Thank you.

Speaker #7: Thank you.

Speaker #1: Yeah. So actually, Meg, the last outside of the last couple of years, we were really more around 2% or a little bit under. And it's just within the last couple of years that we're higher at two and a half percent.

Jennifer Parmentier: Yeah. Actually, Mig, outside of the last couple of years, we were really more around 2% or a little bit under, and it's just within the last couple of years that we're higher at 2.5%. We have definitely invested in capacity over the last couple of years, and we have some capacity expansion built into this year. I think in some businesses, the capacity is already there. Others, we can see that we had to improve. We're not expecting anything more than we've guided to right now. Another thing, too, that I would tell you is just our ongoing continuous improvement culture and everything that we do with Kaizen and our lean tools. The whole output of that is, number 1, a better working environment for the team member, but higher output and efficiency. We've really greatly benefited from that over the last several years.

Jenny Parmentier: Yeah. Actually, Mig, outside of the last couple of years, we were really more around 2% or a little bit under, and it's just within the last couple of years that we're higher at 2.5%. We have definitely invested in capacity over the last couple of years, and we have some capacity expansion built into this year. I think in some businesses, the capacity is already there. Others, we can see that we had to improve. We're not expecting anything more than we've guided to right now. Another thing, too, that I would tell you is just our ongoing continuous improvement culture and everything that we do with Kaizen and our lean tools. The whole output of that is, number 1, a better working environment for the team member, but higher output and efficiency. We've really greatly benefited from that over the last several years.

Speaker #1: And we have definitely invested in capacity over the last couple of years. And we have some capacity expansion built into this year. So I think in some businesses, the capacity is already there.

Speaker #1: Others, we can see that we had to improve. But we're not expecting anything more than we've guided to right now. Another thing too that I would tell you is just our ongoing continuous improvement culture.

Speaker #1: And everything that we do with Kaizen and our lean tools the whole output of that is, number one, a better working environment for the team member.

Speaker #1: But higher output and efficiency and we've really greatly benefited from that over the last several years. So I think that has kept some of our capacity expansion at a much lower rate than possibly others.

Jennifer Parmentier: I think that has kept some of our capacity expansion at a much lower rate than possibly others. We have invested in capacity. We'll continue to do so.

Jenny Parmentier: I think that has kept some of our capacity expansion at a much lower rate than possibly others. We have invested in capacity. We'll continue to do so.

Speaker #1: But we have invested in capacity. We'll continue to do so.

Speaker #7: That's good for me. Thank you.

Mircea Dobre: That's it for me. Thank you.

Mig Dobre: That's it for me. Thank you.

Speaker #4: We'll go next now to Jamie Cook with Truist.

Operator: We'll go next now to Jamie Cook with Truist.

Speaker #6: Good afternoon and congrats on another fantastic order. Guidance raise. I guess a couple of questions just, Jenny, back to Sprig's question. I don't think you commented on the strength in North America orders, the F-16 percent.

Jamie Cook: Good afternoon, congrats on another fantastic order and guidance raise. I guess a couple questions. Just Jenny, back to Jeffrey's question. I don't think you commented on the strength in North America orders. You're up 16%, what were the end market drivers there, and was there any lumpiness? Even within international, you commented specifically on electronics. Just trying to get a feel for what's going on in the other end markets. I guess my second question is just congrats on raising the medium-term targets to 30%. How do we think about what's implied in that margin target in terms of international versus aerospace? Do you think over the next several years we can get to a point where international closes the gap on aerospace, or does aerospace continue to move higher to get you to that 30%? Thank you.

Speaker #6: So sort of what were the end market drivers there? And was there any lumpiness? And even within international, you commented specifically on electronics, just trying to get a feel for what's going on in the other end markets.

Speaker #6: And then I guess my second question is just congrats on raising the medium-term targets to 30%. How do we think about what's implied in that margin target in terms of international versus aerospace?

Speaker #6: Do you think over the next several years, we can get to a point where international closes the gap on aerospace? Or does aerospace continue to move higher to get you to that 30%?

Speaker #6: Thank you.

Speaker #1: Okay, well, I'll take the first half of that, and then I'll pass it over to Todd. So, first of all, for orders in Q4 in North America, obviously 16% on the 312 and 9% on the 1212 that we're talking about.

Jennifer Parmentier: Okay. Well, I'll take the first half of that, then I'll pass it over to Todd. First of all, for orders in Q4 in North America, obviously 16% on the T-12 and nine on the 1212 that we're talking about. Strength in aerospace and defense implants, I mentioned that we saw distribution orders much stronger in Q4. Construction, again, on infrastructure spending, heavy-duty truck and commercial HVAC. Really, we saw positive orders across all of the major market verticals. International, +24%. I did mention earlier that kind of that easy comp, still 10 on a 1212, it was really driven by electronics and implant. Double-digit growth for Asia Pacific and mid-single digit growth for EMEA. EMEA, we do see some strength in construction and mining and some implant. Again, positive orders across all of those verticals.

Jenny Parmentier: Okay. Well, I'll take the first half of that, then I'll pass it over to Todd. First of all, for orders in Q4 in North America, obviously 16% on the T-12 and nine on the 1212 that we're talking about. Strength in aerospace and defense implants, I mentioned that we saw distribution orders much stronger in Q4. Construction, again, on infrastructure spending, heavy-duty truck and commercial HVAC. Really, we saw positive orders across all of the major market verticals. International, +24%. I did mention earlier that kind of that easy comp, still 10 on a 1212, it was really driven by electronics and implant. Double-digit growth for Asia Pacific and mid-single digit growth for EMEA. EMEA, we do see some strength in construction and mining and some implant. Again, positive orders across all of those verticals.

Speaker #1: So strength in aerospace and defense, implant and I mentioned that we saw distribution orders much stronger in Q4. Construction, again, on infrastructure spending, and heavy-duty truck and commercial HVAC.

Speaker #1: So really, we saw positive orders across all of the major market verticals. International, plus 24%. I did mention earlier that kind of that easy comp, but still 10 on a 1212.

Speaker #1: And it was really driven by electronics and implant. Double-digit growth for Asia Pacific and mid-single-digit growth for EMEA. And EMEA, we do see some strength in construction and mining and some implant.

Speaker #1: But again, positive orders across all of those verticals. And with aerospace, listen, double-digit growth in both commercial OEM and aftermarket and strength in defense OEM.

Jennifer Parmentier: With aerospace, listen, double-digit growth in both commercial OEM and aftermarket and strength in defense OEM. Defense OEM was stronger than expected with double-digit order growth. Really, just a really nice quarter for orders.

Jenny Parmentier: With aerospace, listen, double-digit growth in both commercial OEM and aftermarket and strength in defense OEM. Defense OEM was stronger than expected with double-digit order growth. Really, just a really nice quarter for orders.

Speaker #1: So, defense OEM was stronger than expected with double-digit order growth—so, really, just a really nice quarter for orders.

Speaker #3: Yeah, Jamie, I can speak about the FY31 walk. The thing I love about these targets is that everyone has a part in these targets, just like the way we got to over 27%. Every single one of our businesses.

Todd Leombruno: Yeah, Jenny, I can speak about the FY31 walk. The thing I love about these targets is that everyone has a part in these targets, just like the way we got to over 27%. Every single one of our businesses has generated higher margins than they did when we started those targets. Everyone's got a new target, and that's what I love about the company. Aerospace has been outsized when it comes to margin expansion. Four years of double-digit organic growth, great aftermarket exposure and growth has really helped that. We expect every one of these businesses to be part of our walk to FY30, including aerospace. Our international teams have done an unbelievable job. They are constantly looking at growth opportunities, cost up opportunities, and that's no different than North America.

Todd Leombruno: Yeah, Jamie, I can speak about the FY31 walk. The thing I love about these targets is that everyone has a part in these targets, just like the way we got to over 27%. Every single one of our businesses has generated higher margins than they did when we started those targets. Everyone's got a new target, and that's what I love about the company. Aerospace has been outsized when it comes to margin expansion. Four years of double-digit organic growth, great aftermarket exposure and growth has really helped that. We expect every one of these businesses to be part of our walk to FY30, including aerospace. Our international teams have done an unbelievable job. They are constantly looking at growth opportunities, cost up opportunities, and that's no different than North America.

Speaker #3: They have generated higher margins than they did when we started those targets. So everyone's got a new target, and that's what I love about the company.

Speaker #3: Aerospace has been outsized when it comes to margin expansion. Four years of double-digit organic growth, great aftermarket exposure, and growth has really helped that.

Speaker #3: But we expect every one of these businesses to be part of our walk to FY30, including aerospace. Our international teams have done an unbelievable job.

Speaker #3: They are constantly looking at growth opportunities. Cost opportunities. And that's no different than North America. My gut feel here would say that North America or the industrial businesses will expand more than aerospace.

Todd Leombruno: My gut feel here would say that North America or the industrial businesses will expand more than aerospace, just with what aerospace has on its plate with next gen investments and OEM mix. They still will expand margins, I think the industrial businesses will expand at a greater clip as we walk to FY30.

Speaker #3: Just with what aerospace has on its plate, with next-gen investments and OEM mix, they still will expand margins. But I think the industrial businesses will expand at a greater clip.

Speaker #3: As we walk to FY30.

Speaker #6: Congrats again.

Jamie Cook: Congrats again.

Speaker #3: Thanks, Jenny.

Speaker #1: Thanks, Jamie.

Jennifer Parmentier: Thanks, Jamie.

Jenny Parmentier: Thanks, Jamie.

Todd Leombruno: Thanks, Jamie.

Speaker #4: We'll go next now to Tim Thine with Raymond James.

Operator: We'll go next now to Tim Thein with Raymond James.

Speaker #5: Thank you. Good morning. I had a longer-term question on aerospace within the context of your 2031 target, the organic growth target. I'm just curious.

Tim Thein: Thank you. Good morning. I had a longer-term question on aerospace within the context of your 2031 target, the organic growth target. I'm just curious. You're obviously coming off what has, as Todd pointed out, a really long stretch of growth. The demand backdrop for both commercial and defense seems to be getting a bit better. You obviously have a bit more visibility here given the backlog. How would you think about that kind of growth algorithm for aerospace looking out beyond 2027?

Speaker #5: I mean, they're obviously coming off what has Todd pointed out of really long stretch of growth. But the demand backdrop for both commercial and defense seems to be getting a bit better.

Speaker #5: So you obviously have a bit more visibility here given the backlog. So how would you think about that kind of growth algorithm for aerospace, looking out beyond '27?

Speaker #1: We've forecasted long-term growth drivers for each of the areas in aerospace. And we see aerospace as high single digits. Through that time period. So we feel like it's going to be it's going to continue at that rate until the time that we reach these targets.

Jennifer Parmentier: Well, we've forecasted long-term growth drivers for each of the areas in aerospace, and we see aerospace as high single digits through that time period. We feel like it's going to continue at that rate until the time that we reach these targets.

Jenny Parmentier: Well, we've forecasted long-term growth drivers for each of the areas in aerospace, and we see aerospace as high single digits through that time period. We feel like it's going to continue at that rate until the time that we reach these targets.

Speaker #3: Yeah, we'll also have a circular aerospace and defense business when that closes. That'll be another growth driver, obviously, from the equipment side. But once that becomes organic over the five-year period, that'll be another growth driver when it comes to aerospace.

Todd Leombruno: We'll also have the CIRCOR Aerospace & Defense business. When that closes, that'll be another growth driver, obviously from the equipment side. Once that becomes organic over the five-year period, that'll be another growth driver when it comes to aerospace. Again, I can't de-emphasize enough, 10% of the industrial business has aerospace and defense end market exposure.

Speaker #3: And again, I can't de-emphasize enough, 10% of the industrial business has aerospace and defense end market exposure.

Speaker #5: Yeah. I understand. And then just on more near-term, on pricing with respect to aerospace, just given some of the LTAs that I'm guessing were maybe been renegotiated coming out of COVID, may have provided a little bit of a bump.

Tim Thein: Yep. Understood. Just on more near term on pricing with respect to aerospace, just given some of the LTAs that I'm guessing may have been renegotiated coming out of COVID, which may have provided a little bit of a bump. Are we back to a setting where those are more, I guess, normal in terms of the spirit of the question is just the contribution to price. Not asking for quantification, but just directionally how that is trending in 2027.

Speaker #5: Are we kind of back to a setting where those are more I guess normal in terms of the I guess the spirit of the question is just the contribution to price, not asking for quantification, but just directionally, how that is trending in '27?

Speaker #1: Yeah. So on the industrial side of the business, we are back to what we would consider more of a normal pricing environment. And in aerospace, they're still pricing opportunity.

Jennifer Parmentier: Yeah. On the industrial side of the business, we are back to what we would consider more of a normal pricing environment. In aerospace, there's still pricing opportunity. There have been a lot of negotiations. There's some negotiations that are still in play. I would say that there's still some opportunity in aerospace.

Jenny Parmentier: Yeah. On the industrial side of the business, we are back to what we would consider more of a normal pricing environment. In aerospace, there's still pricing opportunity. There have been a lot of negotiations. There's some negotiations that are still in play. I would say that there's still some opportunity in aerospace.

Speaker #1: There have been a lot of negotiations. There's some negotiations that are still in play. So I would say that there's still some opportunity in aerospace.

Speaker #5: Very good. Thank you.

Tim Thein: Very good. Thank you.

Speaker #3: Thanks, Tim.

Todd Leombruno: Thanks, Tim.

Speaker #4: We'll go next now to Ahmed Mahrotra at UBS.

Operator: We'll go next now to Amit Mehrotra at UBS.

Speaker #6: Thanks, operator. Hi, everybody. Thanks for taking my questions. I guess the first one, just on the North American industrial inflection, the 16% growth of orders.

Amit Mehrotra: Thanks. Thanks, operator. Hi, everybody. Thanks for taking my questions. I guess the first one, just on the North American industrial inflection, the 16% growth of the orders. Any color you could talk about between sort of the distribution channel and the direct OEM channel? I know the distributor channel has been maybe a little bit more stubborn, and I think you've talked about it a little bit more positively, but any more color around the activity you're seeing and the confidence coming back in that specific channel?

Speaker #6: Any color you could talk about between sort of the distribution channel and the direct OEM channel? I know the distributor channel has been maybe a little bit more stubborn.

Speaker #6: And I think you talked about it a little bit more positively. But any more color around the activity you're seeing, and the confidence coming back in that specific channel?

Speaker #1: Yeah. Well, I've been saying for a lot of quarters here that distributors have been very positive. And the order growth, the strength that we saw in Q4 really supports that positive sentiment.

Jennifer Parmentier: Yeah. Well, I've been saying for a lot of quarters here that distributors have been very positive. The order growth, the strength that we saw in Q4 really supports that positive sentiment and what they've been telling us. We definitely feel like that is a broadening recovery instead of what we've just been saying as a gradual recovery. We feel good about that. Still not calling a restock, though. Some distributors are telling us that they are stacking for projects that they're working on for their customers or business that they see coming, but I wouldn't call the whole channel as an overall restock. On the OEM side, obviously we've seen production rates increase for heavy-duty truck. That's been very encouraging. We've seen construction and mining get stronger. We've also seen agriculture remain where it's been, pretty soft, and automotive pretty soft.

Jenny Parmentier: Yeah. Well, I've been saying for a lot of quarters here that distributors have been very positive. The order growth, the strength that we saw in Q4 really supports that positive sentiment and what they've been telling us. We definitely feel like that is a broadening recovery instead of what we've just been saying as a gradual recovery. We feel good about that. Still not calling a restock, though. Some distributors are telling us that they are stacking for projects that they're working on for their customers or business that they see coming, but I wouldn't call the whole channel as an overall restock. On the OEM side, obviously we've seen production rates increase for heavy-duty truck. That's been very encouraging. We've seen construction and mining get stronger. We've also seen agriculture remain where it's been, pretty soft, and automotive pretty soft.

Speaker #1: And what they've been telling us. So we definitely feel like that is a broadening recovery instead of what we've just been saying as a gradual recovery.

Speaker #1: So we feel good about that. Still not calling a restock, though. Some distributors are telling us that they are stocking. For projects that they're working on for their customers or business that they see coming.

Speaker #1: But I wouldn't call the whole channel an overall restock. On the OEM side, obviously, we've seen production rates increase for heavy-duty trucks. That's been very encouraging.

Speaker #1: We've seen construction and mining get stronger. But we've also seen agriculture remain where it's been pretty soft. And automotive pretty soft. But there's commercial HVAC and refrigeration that is growing.

Jennifer Parmentier: There's commercial HVAC and refrigeration that is growing. There's energy with power gen. There's been some strong OEM orders and strong OEM growth, along with what we see in distribution.

Jenny Parmentier: There's commercial HVAC and refrigeration that is growing. There's energy with power gen. There's been some strong OEM orders and strong OEM growth, along with what we see in distribution.

Speaker #1: There's energy with power gen. So there's been some strong OEM orders and strong OEM growth, along with what we've seen in distribution.

Speaker #6: Okay, thanks. And just the natural follow-up question to that is, obviously, the mixed dynamic, if there is one, between distributors versus OEMs. I know you've taken a lot of price in the distribution channel.

Amit Mehrotra: Okay. Thanks. Just the sort of natural follow-up question to that is obviously the mix dynamic, if there is one between distributors versus OEM. I know you've taken a lot of price in the distribution channel, and we're kind of waiting for the volume to recover. If I think about this guidance as a reflection in growth, organic growth in North American industrial, is it all the incremental? Is it all volume? Is there a little bit more price as maybe some of that distribution volume comes through? Just give us a little bit of a flavor specifically with North American industrial.

Speaker #6: And we're kind of waiting for the volume to recover. If I think about this guidance of inflection and growth, organic growth in North American industrial, is it all the incremental is it all volume?

Speaker #6: Is there a little bit more price? Is maybe some of that distribution volume comes through? Just give us a little bit of a flavor specifically with North American industrial.

Speaker #1: Yeah, we're back to a normal pricing environment here, and this is all volume.

Jennifer Parmentier: Yeah. We're back to a normal pricing environment here, and this is all volume.

Jenny Parmentier: Yeah. We're back to a normal pricing environment here, and this is all volume.

Speaker #6: Okay. Okay. Easy enough. Very good. Thank you. Congrats.

Amit Mehrotra: Okay. Easy enough. Very good. Thank you. Congrats.

Speaker #3: Thanks, Matt.

Todd Leombruno: Thanks, Amit.

Speaker #4: We'll go next now to Andrew Buscaglia at BNP Paribas.

Operator: We'll go next now to Andrew Buscaglia at BofA.

Operator: We'll go next now to Andrew Buscaglia at BNP Paribas.

Speaker #5: Hey, good morning, everyone.

Andrew Buscaglia: Hey, good morning, everyone.

Speaker #3: Morning.

Speaker #7: Morning.

Todd Leombruno: Morning.

Speaker #5: I know this is small, but can you comment on your data center exposure? I believe you have some interesting equipment, hoses, and connectors that play into the space.

Jennifer Parmentier: Morning.

Jenny Parmentier: Morning.

Andrew Buscaglia: I know this is small. Can you comment on your data center exposure? I believe you have some interesting equipment, hoses, and connectors that play into the space. I'm wondering if you're seeing interesting order activity there. Any comments you can make on are you seeing any specification activity related to liquid cooling as an interesting growth driver?

Speaker #5: And I'm wondering if you're seeing interesting order activity there. And then, any comments you can make on whether you are seeing any specification activity related to liquid cooling as an interesting growth driver?

Speaker #1: Yeah. So we do have really nice exposure. And it grew nicely last year. And we think it's going to continue to grow. It's about one and a half percent of our sales.

Jennifer Parmentier: Yeah. We do have really nice exposure, and it grew nicely last year and we think it is going to continue to grow. It is about 1.5% of our sales, and we have been previously saying 1%. It is growing, but it is not quite large enough yet to have its own market vertical. This is a great story for our interconnected technology because you mentioned a few of our products, but it is hoses, couplings, manifolds, fittings, engineered materials for thermal management. Really a good showcase of all of the Parker technologies. We are working with industry leaders. We are seeing good orders here. We provide liquid cooling systems and subsystem components. Our teams are doing a really fantastic job in this space. We have a very highly skilled, high-performance team serving these data center customers. As I mentioned, it is a nice growth area.

Jenny Parmentier: Yeah. We do have really nice exposure, and it grew nicely last year and we think it is going to continue to grow. It is about 1.5% of our sales, and we have been previously saying 1%. It is growing, but it is not quite large enough yet to have its own market vertical. This is a great story for our interconnected technology because you mentioned a few of our products, but it is hoses, couplings, manifolds, fittings, engineered materials for thermal management. Really a good showcase of all of the Parker technologies. We are working with industry leaders. We are seeing good orders here. We provide liquid cooling systems and subsystem components. Our teams are doing a really fantastic job in this space. We have a very highly skilled, high-performance team serving these data center customers. As I mentioned, it is a nice growth area.

Speaker #1: And we've been previously saying 1%. So, it is growing, but it's not quite large enough yet to have its own market vertical. This is a great story for our interconnected technologies because you mentioned a few of our products.

Speaker #1: But it's hoses, couplings, manifolds, fittings. Engineered materials for thermal management. So really, really a good showcase of all of the Parker technologies. And we are working with the industry leaders.

Speaker #1: We are seeing good orders here. We provide liquid cooling systems and subsystem components. So our teams are doing a really fantastic job in this space.

Speaker #1: We have a very highly skilled, high-performance team serving these data center customers. And as I mentioned, it's a nice growth area.

Speaker #5: Okay. Thank you. And maybe just on the longer-term outlook, couldn't help but margin expansion, 2027 and 2029. And the 300 basis point step up from 2029 to 2031.

Andrew Buscaglia: Okay. Thank you. Maybe just on the longer-term outlook, couldn't help but notice you call for about 200 basis point margin expansion in 2027 and 2029, and then 300 basis point step-up from 2029 to 2031. I think I got that right. What gives you that confidence that you see in it as sort of an acceleration in your margins? I wonder if it is pertaining to the recent acquisitions that you expect to close.

Speaker #5: I think I got that right. Why would you what gives you that confidence do you see in sort of an acceleration in your margins?

Speaker #5: And I wonder if it's pertaining to the recent acquisitions that you expect to close?

Speaker #3: Yeah. I could take that. Just to clarify, what we are calling out is we're calling out 300 basis points of improvement from 27.0 target that we just surpassed in FY26.

Todd Leombruno: Yeah, I could take that. Just to clarify, what we are calling out is we are calling out 300 basis points of improvement from a 27.0 target that we just surpassed in FY26. That was originally our FY29 target. We are restating that to FY31, and the new target is 30% adjusted operating margins. As far as what is going to get us there, we have included the Filtration Group Corporation acquisition and the CIRCOR Aerospace & Defense business in those margin targets. When you look at that, it is really coming from our existing business, just because of the size of the existing business is so much greater than those two great additions we are going to have, and it is going to be everything that got us to 27.3 this year, just more of it.

Speaker #3: That was originally our FY29 target. We're restating that to FY31, and the new target is 30% adjusted segment operating margins. So as far as what's going to get us there, we have included the Filtration Group Corporation acquisition and the Sercor Aerospace and Defense business in those margin targets.

Speaker #3: But when you look at that, it's really coming from our existing business, just because the size of the existing business is so much greater.

Speaker #3: Then those two great additions we're going to have, and it's going to be everything that got us to $27.3 this year, just more of it.

Speaker #3: So we feel really confident about the walk to get there. And it should be spread pretty equally across those years each of the five years.

Todd Leombruno: We feel really confident about the walk to get there, and it should be spread pretty equally across those years, each of the five years.

Speaker #4: Got it. Thanks, Todd.

Andrew Buscaglia: Got it. Thanks, Todd.

Speaker #3: Good. Thank you.

Todd Leombruno: Thank you.

Speaker #4: We'll go next now to Nicole DeBlaise with Deutsche Bank.

Operator: We'll go next now to Nicole DeBlase with Deutsche Bank.

Speaker #8: Yeah. Thanks. Good morning, guys.

Nicole DeBlase: Yeah. Thanks. Good morning, guys.

Speaker #3: Good morning.

Speaker #1: Good morning.

Jennifer Parmentier: Good morning.

Jenny Parmentier: Good morning.

Speaker #8: Echoing my congrats on a really great quarter. I guess maybe first, Jenny, if we could touch on how the orders progressed throughout the quarter and if you've observed continued strength in July.

Nicole DeBlase: Echoing my congrats on a really great quarter. I guess maybe first, Jenny, if we could touch on how the orders progressed throughout the quarter, and if you've observed continued strength in July? I would assume so, based on what you guys expect for 2027, but would love to hear any perspective on that.

Speaker #8: I would assume so based on what you guys expect for 27, but would love to hear any perspective on that.

Speaker #1: I would say that there's nothing that's happened that concerns me that would not support the guide that we put out.

Jennifer Parmentier: I would say that there's nothing that's happened that concerns me that would not support the guide that we put out.

Jenny Parmentier: I would say that there's nothing that's happened that concerns me that would not support the guide that we put out.

Speaker #8: Okay, understood. Thank you. And then with the electronics strength and international, was that due to other big, lumpy orders that are coming through in the quarter?

Nicole DeBlase: Okay. Understood. Thank you. Then with the electronic strength in international, are there big lumpy orders that are coming through in the quarter? What I'm trying to get at is that electronic strength sustainable, or do you think that was kind of like a Q4 dynamic that might not last into 2027?

Speaker #8: What I'm trying to get at is, is that electronic strength sustainable? Or do you think that was kind of like a 4Q dynamic that might not last into 2027?

Speaker #1: I think it's going to remain strong. I mean, obviously, it came in much stronger than we were expecting. I think we had about a 10% infra Asia-Pacific.

Jennifer Parmentier: I think it's going to remain strong. Obviously, it came in much stronger than we were expecting. I think we had about a 10% in for Asia-Pacific, it came in much stronger. I would say the guide reflects what we expect out of international, this is a strong area for us.

Jenny Parmentier: I think it's going to remain strong. Obviously, it came in much stronger than we were expecting. I think we had about a 10% in for Asia-Pacific, it came in much stronger. I would say the guide reflects what we expect out of international, this is a strong area for us.

Speaker #1: And it came in much stronger. So I would say the guide reflects what we expect out of international. But this is a strong area for us.

Speaker #8: Thank you. I'll pass it on.

Nicole DeBlase: Thank you. I'll pass it on.

Speaker #3: Thanks, Nicole.

Todd Leombruno: Thanks, Nicole.

Speaker #4: We'll go next now to Nathan Jones with Staples.

Operator: We'll go next now to Nathan Jones with Stifel.

Speaker #5: Good morning, everyone.

Nathan Jones: Good morning, everyone.

Speaker #3: Good morning, Nathan.

Todd Leombruno: Good morning, Nathan.

Speaker #5: I guess I'll follow up a little bit on some of the international order strength here, kind of indicating that there's a good chance that continues.

Nathan Jones: I guess I'll follow up a little bit on some of the international order strength here, kind of alerting that there's a good chance that that continues. If it does, would that maybe improve the outlook for the second half of fiscal 2027? In the guidance that you've given out today, do you assume that some of this order strength in international and in North America continues, or that it moderates a little bit from here?

Speaker #5: If it does, would that maybe improve the outlook for '27? And in the guidance that you've given out today, do you assume that some of this order strength in international and in North America continues?

Speaker #5: Or did it moderate a little bit from here?

Speaker #1: What we have in the guide right now is what we see with the order progression that's out there. So obviously, we did have a very strong Q4.

Jennifer Parmentier: What we have in the guide right now is what we see with the order progression that's out there. Obviously, we did have a very strong Q4. We believe that we have the orders to support what we have in for Q1 and for the rest of the year. I would tell you that obviously as the year goes on, we hope that we can raise those, but this is the best picture we have right now.

Jenny Parmentier: What we have in the guide right now is what we see with the order progression that's out there. Obviously, we did have a very strong Q4. We believe that we have the orders to support what we have in for Q1 and for the rest of the year. I would tell you that obviously as the year goes on, we hope that we can raise those, but this is the best picture we have right now.

Speaker #1: We believe that we have the orders to support what we have in for Q1 and for the rest of the year. So, I would tell you that, obviously, as the year goes on, we hope that we can raise those.

Speaker #1: But this is the best picture we have right now.

Speaker #3: Yeah, Nathan, very well. Our 48/52 split somehow works out every year, year after year. That's what we are guiding for here. I think it's more of a comp issue.

Todd Leombruno: Yeah, Nathan.

Nathan Jones: Go ahead, go ahead.

Todd Leombruno: Nathan, our 48/52 split somehow works out every year after year. That's what we are guiding for here. I think it's more of a comp issue. Just the H2 of FY26 was so good, the comps get a little bit tougher. If you look at the dollars, the dollars are weighted like they normally are, much heavier in the H2.

Speaker #3: Just the second half of FY26 was so good that comps get a little bit tougher. But if you look at the dollars, the dollars are weighted like they normally are—much heavier in the second half.

Speaker #5: Thanks. Follow-up question on the Sercor aerospace business. Can you just talk a little bit more about what the strategy is with that? I think it already has extremely high margins after it got rid of all the build-to-print work several years ago.

Nathan Jones: Thanks. Follow-up question on that CIRCOR Aerospace business. Can you just talk a little bit more about what the strategy is with that? I think it already has extremely high margins after it got rid of all the build-to-print work several years ago. Is this a revenue synergy play? It doesn't seem like it would be a cost synergy play given the margins are already high. Just any comments you could make around the strategy for that acquisition, please? Thanks for taking the question.

Speaker #5: So is this a revenue synergy play? It doesn't seem like it would be a cost synergy play, given the margins are already high. But just any comments you could make around the strategy for that acquisition, please.

Speaker #5: Thanks for taking the question.

Speaker #1: Sure. Sure. So, it is the highest-growth, highest-margin acquisition to date. What we love about SERCOR is that it brings complementary, flight-critical motion and flow control capabilities to our portfolio.

Jennifer Parmentier: Sure. It is the highest growth, highest margin acquisition to date. What we love about CIRCOR is it brings complementary flight-critical motion and flow control capabilities to our portfolio. As I mentioned before, these are proprietary technologies. This is what we like to bring into our suite of projects. This is an 80% OEM business and 50/50 sales split across commercial and defense. We have not modeled any revenue synergies. We have said 10% synergies. That's approximately $26 million. Their estimate for calendar year 2026 is $270 million, with more than 40% adjusted EBITDA margins. That's before synergies. This is going to be a really nice addition to our portfolio. Like I said earlier, we'll get this hopefully closed before the end of this calendar year.

Jenny Parmentier: Sure. It is the highest growth, highest margin acquisition to date. What we love about CIRCOR is it brings complementary flight-critical motion and flow control capabilities to our portfolio. As I mentioned before, these are proprietary technologies. This is what we like to bring into our suite of projects. This is an 80% OEM business and 50/50 sales split across commercial and defense. We have not modeled any revenue synergies. We have said 10% synergies. That's approximately $26 million. Their estimate for calendar year 2026 is $270 million, with more than 40% adjusted EBITDA margins. That's before synergies. This is going to be a really nice addition to our portfolio. Like I said earlier, we'll get this hopefully closed before the end of this calendar year.

Speaker #1: And as I mentioned, before, these are proprietary technologies. This is what we like to bring into our suite of projects. This is an 80% OEM business and 50/50 sales split across commercial and defense.

Speaker #1: We have not modeled any revenue synergies. We have said 10% synergies—that's approximately $26 million. They ended calendar year '26. Their estimate for calendar year '26 is $270 million, with more than 40% adjusted EBITDA margins.

Speaker #1: And that's before synergy. So this is going to be a really nice addition to our portfolio. And like I said earlier, we'll get this hopefully closed before the end of this calendar year.

Speaker #4: We'll go next now to Jill Giordano with TD Cowan.

Operator: We'll go next now to Joseph Giordano with TD Cowen.

Operator: We'll go next now to Joe Giordano with TD Cowen.

Speaker #6: Hey, guys. I mean, the growth good, good. The growth by end market that you guys have for next year, how consistent is that with where order rates were for you by those end markets for 26?

Joseph Giordano: Hey, guys.

Joe Giordano: Hey, guys.

Todd Leombruno: Hey, Joe. How are you?

Joseph Giordano: Good. The growth by end market that you guys have for next year, how consistent is that with where order rates were for you by those end markets for 2026?

Joe Giordano: Good. The growth by end market that you guys have for next year, how consistent is that with where order rates were for you by those end markets for 2026?

Speaker #3: So I think it's pretty consistent. We finished the year pretty strong on an order exit rate. We called out the longer-cycle nature of some of those things.

Todd Leombruno: Joseph Giordano, I think it's pretty consistent. We finished the year pretty strong on an ordered exit rate. We called out the longer cycle nature of some of those things, but what we're guiding for, to give you an example for Q1, is a slight increase from where we exited Q4. Like Jennifer Parmentier said, I think we're giving you the best look that we can right now with the visibility that we have. We feel pretty confident. This is the highest organic growth guide that we've had in modern history.

Todd Leombruno: Joe, I think it's pretty consistent. We finished the year pretty strong on an ordered exit rate. We called out the longer cycle nature of some of those things, but what we're guiding for, to give you an example for Q1, is a slight increase from where we exited Q4. Like Jennifer Parmentier said, I think we're giving you the best look that we can right now with the visibility that we have. We feel pretty confident. This is the highest organic growth guide that we've had in modern history.

Speaker #3: But what we're guiding for, to give you an example for Q1, is a slight increase from where we exited Q4. So, like Jenny said, I think we're giving you the best look that we can right now with the visibility that we have.

Speaker #3: And we feel pretty positive this is the highest organic growth guide that we've had in modern history.

Speaker #6: And that's consistent on an end-market basis as well?

Joseph Giordano: That's consistent on an end market basis as well? Like there's not a build up of backlog anywhere in any of those particular end markets or-

Joe Giordano: That's consistent on an end market basis as well? Like there's not a build up of backlog anywhere in any of those particular end markets or?

Speaker #3: Yeah. It's not.

Speaker #6: Is there a buildup of backlog anywhere in any of those particular end markets, or?

Speaker #3: No. I mean, there might be a little bit more strength and heavy-duty truck. But everything else is pretty consistent. That's why they're all mixing with digital growth.

Todd Leombruno: No, there might be a little bit more strength in heavy duty truck, but everything else is pretty consistent. That's why they're all mid-single-digit growth forecast.

Speaker #3: Forecast.

Speaker #6: Yeah. And you don't feel like there's any pull-forward or anything into the fourth quarter from anything that would have been Q1 orders?

Joseph Giordano: Yeah. You don't feel like there's any pull forward or anything into the Q4 from anything that would've been Q1 orders?

Joe Giordano: Yeah. You don't feel like there's any pull forward or anything into the Q4 from anything that would've been Q1 orders?

Speaker #3: No, we never really experienced that. I think our focus for years has been on delivering to customers when they need it. And we've been active on price and making sure that there's no slippage in when orders were placed.

Todd Leombruno: No. We've never really experienced that. I think our focus for years has been on delivering to customers when they're needed. We've been active on price and making sure that there's no slippage in when orders are placed.

Speaker #3: So.

Speaker #1: Yeah. One of the things that we've worked really hard on the last several years is demand and capacity planning with our customers and with our suppliers.

Jennifer Parmentier: One of the things that we've worked really hard on the last several years is demanding capacity planning with our customers and with our suppliers. That's something that's given us the ability to be much more efficient in our operations and make sure that the customers know that they can get the product from Parker in a stated lead time.

Jenny Parmentier: One of the things that we've worked really hard on the last several years is demanding capacity planning with our customers and with our suppliers. That's something that's given us the ability to be much more efficient in our operations and make sure that the customers know that they can get the product from Parker in a stated lead time.

Speaker #1: So that's something that's given us the ability to be much more efficient in our operations and make sure that the customers know that they can get the product from Parker in a stated lead time.

Speaker #6: Okay.

Speaker #3: Thanks, Jill. Hey, Beau. I think we might have time for one more if we have anyone left in the queue.

Joseph Giordano: Thanks.

Joe Giordano: Thanks.

Todd Leombruno: Thanks, Joe. Hey, Bo, I think we might have time for one more if we have anyone left in the queue.

Speaker #4: We do. We'll take our final question today from Chigusa Katoku with J.P. Morgan.

Operator: We do. We'll take our final question today from Chigusa Katoku with JPMorgan.

Speaker #7: Good morning. Thanks for taking my question. I just want to touch briefly on energy. I think it's a tale of two worlds: power is strong, and oil and gas are softer.

Chigusa Katoku: Good morning. Thanks for taking my question. Just want to touch briefly on energy. I think it's a tale of two worlds, power strong and oil and gas softer. I think last quarter you expected 2026 was about low single digits for this vertical, and you're expecting mid-single digits this year. Just curious, is this more driven by power being stronger and oil and gas kind of unchanged? Just any color there would be great.

Speaker #7: I think last quarter you expected 2026 was about low single digits for this vertical, and you're expecting single digits this year. I'm just curious—is this more driven by power being stronger and oil and gas kind of unchanged?

Speaker #7: Does any code there would be great?

Speaker #1: Yeah. We definitely see power gen growth. And we think that's going to continue to be strong and a little bit stronger. Oil and gas, we think it's going to be flat.

Jennifer Parmentier: Yeah, we definitely see power gen growth and we think that's going to continue to be strong and a little bit stronger. Oil and gas, we think it's going to be flat. We don't have any signs of that yet. This is flat oil and gas and stronger power gen growth.

Jenny Parmentier: Yeah, we definitely see power gen growth and we think that's going to continue to be strong and a little bit stronger. Oil and gas, we think it's going to be flat. We don't have any signs of that yet. This is flat oil and gas and stronger power gen growth.

Speaker #1: There could be an upcycle coming, but we don't have any signs of that yet. This is flat oil and gas, and stronger power gen growth.

Speaker #7: Okay, great, thanks. And then just trying to put a finer point on the orders acceleration in North America Industrial—it really accelerated nicely. It sounded like it was broad-based.

Chigusa Katoku: Okay, great. Thanks. Just trying to put a finer point on the orders acceleration in North America Industrial, it really accelerated nicely. It sounded like it was broad based. I didn't hear you call out power or data center, but what were kind of the trends there? Just if you could put any finer point on what really led to this acceleration versus the Q3, that would be helpful.

Speaker #7: But you didn't—I didn't hear you call out power or data center, but what were kind of the trends there? Just, if you could put any finer point on what really led to this acceleration versus the third quarter, that would be helpful.

Speaker #1: Yeah. I mean, it was across many market verticals. We saw strong aerospace and defense in the industrial businesses, in plant and industrial demand. Higher distribution, we saw transportation improvement with heavy truck.

Jennifer Parmentier: Yeah, it was across many market verticals. We saw strong aerospace and defense in the industrial businesses, in plant and industrial demand, higher distribution. We saw transportation improvement with heavy truck. We saw construction growth. We saw power gen growth, and commercial HVAC. We just saw really, really nice growth across all the market verticals.

Jenny Parmentier: Yeah, it was across many market verticals. We saw strong aerospace and defense in the industrial businesses, in plant and industrial demand, higher distribution. We saw transportation improvement with heavy truck. We saw construction growth. We saw power gen growth, and commercial HVAC. We just saw really, really nice growth across all the market verticals.

Speaker #1: We saw construction growth, we saw power gen growth, and commercial HVAC. So, we just saw really, really nice growth across all the market verticals.

Speaker #7: Okay. Great. Thanks. Thanks.

Chigusa Katoku: Okay, great. Thanks.

Speaker #3: Thank you. Okay. I think that is all we have from a time standpoint. We appreciate everyone joining today. We appreciate your attention. FY26 was just a great year for Parker Hannifin.

Todd Leombruno: Thank you. Okay, I think that is all we have from a time standpoint. We appreciate everyone joining today. We appreciate your attention. FY26 was just a great year for Parker-Hannifin. It was our safest year ever. It was another year of operational excellence, and obviously, as Jenny said, a very active year when it comes to capital deployment. We are looking forward to an even better FY27. We are confident in that path to our new 30% segment operating margin target by FY31. Really, none of this can be possible without a sincere thank you to our global team members around the world, and to our investors for your interest in Parker-Hannifin. Thank you all very much. Jeff and Jenna will be available today if there's any follow-ups that are needed. Thanks again for joining us and have a great day, everyone.

Speaker #3: It was our safest year ever. It was another year of operational excellence. And obviously, as Jennifer said, a very active year when it comes to capital deployment.

Speaker #3: We are looking forward to an even better FY27. We are confident in that path through our new 30% segment operating margin target by FY31.

Speaker #3: And really, none of this could be possible without a sincere thank you to our global team members around the world. And to our investors for your interest in Parker Hannifin.

Speaker #3: So, thank you all very much. Jeff and Jenna will be available today if there are any follow-ups needed. Thanks again for joining us.

Speaker #3: And have a great day, everyone.

Speaker #4: Thank you very much, Mr. Liam Bruneau. And thank you, Ms. Parmentier. Again, ladies and gentlemen, this will conclude today's Parker-Hannifin Corporation fiscal 2026 fourth quarter and full-year earnings conference call and webcast.

Operator: Thank you very much, Mr. Leombruno, and thank you, Ms. Parmentier. Again, ladies and gentlemen, this will conclude today's Parker-Hannifin Corporation's fiscal 2026 Q4 and full year earnings conference call and webcast. Again, thanks so much for joining us, everyone, and we wish you all a great afternoon. Goodbye.

Operator: Thank you very much, Mr. Leombruno, and thank you, Ms. Parmentier. Again, ladies and gentlemen, this will conclude today's Parker Hannifin Corporation's fiscal 2026 Q4 and full year earnings conference call and webcast. Again, thanks so much for joining us, everyone, and we wish you all a great afternoon. Goodbye.

Q4 2026 Parker-Hannifin Corp Earnings Call

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