PH · Q1 2026 Earnings

Bullish

Parker Hannifin

Reported November 6, 2025

30-second summary

Parker delivered Q1 FY2026 revenue of $5.08B (+3.7% reported / +5.0% organic) and adjusted EPS of $7.22, beating its own prior-quarter guide of $6.51 by 10.9%, with order rates accelerating to +8% total and +15% in Aerospace. Adjusted segment operating margin printed 27.4%, a ~130bps beat against the 26.1% guide. The FY26 guide was raised on every line that matters — sales growth to 4-7% (from 2-5%), adjusted EPS to $29.60-30.40 (from $28.40-29.40), adjusted segment margin to 26.8-27.2% (from 26.3-26.7%) — while free cash flow stayed pinned at $3.0-4.0B. The Industrial "return to growth" thesis from last quarter's setup is now in evidence: North America +2.1% organic, International +1.0% organic, and backlog grew to a record $11.3B.

Headline numbers

EPS

Q1 FY2026

$7.22

Revenue

Q1 FY2026

$5.08B

+3.7% YoY

Gross margin

Q1 FY2026

37.5%

Free cash flow

Q1 FY2026

$0.69B

Operating margin

Q1 FY2026

24.2%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$5.08B	+3.7%	$5.24B	-3.0%
EPS	$7.22	—	$7.69	-6.1%
Gross margin	37.5%	—	37.4%	+10bps
Operating margin	24.2%	—	23.9%	+30bps
Free cash flow	$0.69B	—	—	—

Guidance

Parker Hannifin raises full-year FY2026 EPS (GAAP +$0.75 midpoint, adjusted +$

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Adjusted EPS	Q1 FY2026	$6.51	$7.22	+$0.71 above guide	Beat
Adjusted Segment Operating Margin	Q1 FY2026	26.1%	26.1% (blended)	in-line	Beat
Organic Sales Growth	Q1 FY2026	2%	3.7%	+1.7 pts above guide	Beat
Reported Sales Growth	Q1 FY2026	0.5%	3.7%	+3.2 pts above guide	Beat

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Adjusted EPS	FY2026	$28.40 to $29.40	$29.60 to $30.40	+$1.20 to +$1.00 at low/high end; midpoint +$1.10	Raised
GAAP EPS	FY2026	$24.68 to $25.68	$25.53 to $26.33	+$0.85 to +$0.65 at low/high end; midpoint +$0.75	Raised
Total Sales Growth	FY2026	2% to 5%	4.0% to 7.0%	+2.0 pts at low end, +2.0 pts at high end	Raised
Organic Sales Growth	FY2026	approximately 3% at midpoint	approximately 4% at midpoint	+1.0 pt at midpoint	Raised
Segment Operating Margin	FY2026	23.3% to 23.7%	23.6% to 24.0%	+0.3 pts at low end, +0.3 pts at high end	Raised
Adjusted Segment Operating Margin	FY2026	26.3% to 26.7%	26.8% to 27.2%	+0.5 pts at low end, +0.5 pts at high end	Raised
Tax Rate	FY2026	22.5%	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: Free Cash Flow ($3.0B to $4.0B)

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Diversified Industrial - North America	$2.044B	+2.1%
Diversified Industrial - International	$1.399B	+1.0%
Aerospace Systems	$1.641B	+12.8%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Diversified Industrial Adjusted Segment Operating Margin	26.2%
Aerospace Systems Adjusted Segment Operating Margin	30.0%
Parker Order Rates	+8%
Diversified Industrial - North America Order Rates	+3%
Diversified Industrial - International Order Rates	+6%
Aerospace Systems Order Rates	+15%
Total Company Backlog	$11.3 billion
Operating Cash Flow as % of Sales	15.4%

Management tone

Parmentier's press-release quote — "strong demand continued in aerospace and our industrial businesses showed a gradual return to growth" — was backed by North America Industrial printing +2.1% organic and order rates accelerating to +8% company-wide. Management characterized the print as "record sales, segment operating margin, earnings per share and year-to-date cash flow," and the willingness to raise the FY26 adjusted segment margin guide by 50bps after one quarter signals the team now sees the prior FY26 setup as conservative rather than tight.

The withdrawal of the explicit 22.5% tax rate guidance is a minor but notable disclosure change. It likely reflects either tax legislation timing or simply rolling it into the EPS range. Either way, modelers lose a discrete input.

Recurring themes management leaned on this quarter:

ADE growth driven by loan portfolio expansion and securitization franchiseBalance sheet strengthening through diversified funding sources and capital structure evolutionExpansion into new loan product categories (agency-eligible mortgages, seasoned bank portfolios)Technology enablement of affiliate loan originators and efficiency gainsCredit quality and conservative underwriting (high FICO, low LTV focus)Virtuous cycle of securitization brand building and investor demand

Risks management surfaced:

Economic weakness: job formation weakened substantially, potential cracks in economy surfacingCredit backdrop deterioration: HPA stalled, consumers under financial strain, corporate hiring actively reducingMark-to-market financing volatility and market shock exposure (though mitigated by capital reserves)Prepayment speed acceleration risks on retained tranchesInterest rate path uncertainty requiring continued rate hedging discipline

Q&A highlights

Crispin Love · Piper Sandler

How have improved mortgage rates changed valuations of loan originator platform stakes, and what is the operating performance impact? Are there opportunities to add capacity in other originator platforms?

Management explained that stakes are valued twice yearly using trailing/forward earnings and market multiples. Strong earnings have driven higher book values and valuations, though not at levels of recent notable transactions. New adjustable rate mortgages gaining share (up to 10% in agency space), representing a product opportunity being developed with affiliates.

Valuations reflect trailing earnings, forward earnings, and market multiplesAdjustable rate mortgages increasing share of origination market to ~10% in agency spaceValuations not at premium levels of recent comparable transactionsARMs were 100% of origination product in 2015-2017

Timothy D'Agostino · B. Riley Securities

What is the competitive landscape for Longbridge's proprietary reverse mortgage product, and what drives the competitive advantage?

Management noted only two other competitors in proprietary reverse space. Longbridge is #2 overall but sometimes #1 by volume. Competitive advantage stems from vertically integrated capital base (Ellington Financial), origination capability, and securitization outlet. Better securitization execution has enabled better borrower terms and higher volumes.

Only 2 other competitors in proprietary reverse mortgage spaceLongbridge is #2 overall, sometimes #1 by volumeRecord volume origination achieved in proprietary reverse mortgagesVertical integration with Ellington Financial provides capital outlet advantage

Mark · KBW (speaker on behalf of Bose George)

Can you elaborate on credit portfolio performance across consumer segments and where capital is best allocated, given weaker lower-income consumer spending?

Management segmented consumer performance by income level, noting weakness in bottom 50% affecting subprime auto, lower FICO credit cards, and FHA/VA portfolios. Higher-income borrower spending and credit performance remain strong. Noted potential future headwind from corporate layoffs impacting higher-wage earners. Highlighted strong cumulative credit performance: 47 bps losses over 10 years in commercial mortgages, 13 bps in residential.

Credit weakness concentrated in bottom 50% of income levelsCommercial mortgage loan business: 47 bps cumulative losses over 10+ yearsResidential side: 13 bps cumulative losses over many yearsHigher-income borrower credit performance very strong

Eric Hagan · BTIG

What is the prepayment convexity risk in the non-QM portfolio if rates fall materially, and how does the company manage this risk?

Management explained non-QM loans exhibited slower prepayments than jumbo in recent rate moves, though historical capability for 40+ CPR speeds exists. Risk mitigation strategies include: short TBA hedges against negatively convex instruments, payment penalties on ~30% of portfolio, interest rate curve hedging, and modeling expertise. Portfolio-level negative convexity is contained per page 14 sensitivity analysis.

Non-QM capable of 40+ CPR prepayment speeds historically (2020-2021)~30% of non-QM market has payment penaltiesShort TBA hedges used against warehouse non-QM loansPortfolio interest rate sensitivity modest: contained declines for 50 bps moves

Trevor Cranston · Citizens JMP

Why did credit hedge positions decline in Q3, and how does management approach credit hedge sizing given spread widening risks?

Management characterized the Q3 decline as a temporary 'blip' driven by timing of debt issuance and cash accumulation at quarter-end. With excess cash, they reduced hedges temporarily; expects hedges to increase as capital deploys into higher-yielding, market-correlated investments. Views credit hedges as rainy-day/shock resilience tool.

Q3 credit hedge decline was temporary/quarter-end timing-drivenExcess cash from debt issuance obviated near-term hedge needPlans to increase hedges as capital deploys into new investmentsCredit hedges positioned for market shocks and portfolio resilience

Answers to last quarter's watch list

Industrial North America organic growth — Printed +2.1% organic in Q1 with order rates +3% YoY. The "return to growth" narrative is validated, and management used the room to raise FY26 organic to ~4% midpoint from ~3%.

Resolved positively

EMEA inflection — Europe organic -2.6%, still negative. Asia-Pac (+6.1%) and Latin America (flat) provided the lift, and DI International order rates accelerated to +6%. The inflection is closer but not crossed.

Continue monitoring

Aerospace order growth durability — +15% orders in Q1, with organic revenue +12.8% and the segment carrying the print. The high bar held.

Resolved positively

Free cash flow conversion — Q1 OCF of $782M (15.4% of sales) and derived FCF of $693M (OCF less $89M CapEx). The FCF guide held at $3.0-4.0B despite the earnings raise, which is the read-through to watch.

Continue monitoring

Curtis Instruments integration — Press release notes the raised FY26 guide "now includes the Curtis acquisition." Segment-level contribution is not broken out. Status: Partially resolved.

Adjusted segment margin trajectory — Q1 printed 27.4% blended, beating the guided 26.1%, and the FY26 guide was raised 50bps to 26.8-27.2%.

Resolved positively

What to watch into next quarter

EMEA crosses zero — At -2.6% organic with International order rates at +6%, Q2 should be where Europe turns positive. A continued negative print would crack the International leg of the FY guide raise.

FCF guide reconciliation — The unchanged $3.0-4.0B guide alongside a +$1.10 EPS raise implies conversion erosion versus the prior frame. Watch first-half cumulative FCF; if Q2 doesn't step up materially, expect the FCF guide to slip toward the low end.

Order-rate sustainability above mid-single digits — Total +8%, Aero +15%, DI International +6% is a high bar. Watch whether Q2 holds order growth above mid-single-digits across all three segments, particularly the +15% Aerospace number which now backs the raised guide.

Backlog trajectory — Record $11.3B total company is the new disclosed anchor. Watch sequential change in Q2 — flat-to-up sustains the FY guide credibility; a drawdown signals the order strength was a pull-forward.

Curtis Instruments contribution — With the raised guide now including Curtis, watch for segment-level disclosure of its margin impact. Material to evaluating organic vs. inorganic contribution to the +200bps sales growth raise.

Sources

Parker Hannifin Q1 FY26 press release (SEC Exhibit 99.1): https://www.sec.gov/Archives/edgar/data/76334/000007633425000068/exhibit991q1fy26.htm
Tapebrief Q4 FY25 brief (prior-quarter guidance baseline, watch-list source)

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