PH · Q2 2026 Earnings

Bullish

Parker Hannifin

Reported January 29, 2026

30-second summary

Parker delivered Q2 FY26 revenue of $5.17B (+9.1% YoY / +6.6% organic) and adjusted EPS of $7.65, with adjusted segment margin of 27.1% and order rates accelerating to +9%. Management raised FY26 guidance for the second consecutive quarter across organic growth (5% midpoint, +100bps), adjusted segment margin (27.2% midpoint, +20bps), adjusted EPS ($30.70 midpoint, +$0.70), and narrowed the FCF range to $3.2-3.6B from the prior $3.0-4.0B — low end raised $200M, high end trimmed $400M. The Industrial inflection thesis carried through: Europe turned positive (+2%), International organic accelerated to +4.6%, and total backlog hit a record $11.7B.

Headline numbers

EPS

Q2 FY2026

$7.65

Revenue

Q2 FY2026

$5.17B

+9.1% YoY

Gross margin

Q2 FY2026

37.3%

Operating margin

Q2 FY2026

23.9%

Key financials

Q2 FY2026

Metric	Q2 FY2026	YoY	Q1 FY2026	QoQ
Revenue	$5.17B	+9.1%	$5.08B	+1.8%
EPS	$7.65	—	$7.22	+6.0%
Gross margin	37.3%	—	37.5%	-20bps
Operating margin	23.9%	—	24.2%	-30bps

Guidance

Company raised full-year FY2026 guidance across all key metrics (adjusted EPS, reported/organic sales growth, adjusted segment margin) on Q2 outperformance and continued robust aerospace demand.

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

New guidance

Metric	Period	Guide	YoY
Free cash flow	FY2026	$3.2 to $3.6 billion	—
Revenue	Q3 FY2026	$5.4 billion	—
Adjusted EPS	Q3 FY2026	$7.75	—
Organic sales growth	Q3 FY2026	5%	—
Segment operating margin	Q3 FY2026	27%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Adjusted EPS	FY2026	$29.60 to $30.40	$30.40 to $31.00	+$0.80 at high end, +$0.60 at low end	Raised
Reported sales growth	FY2026	4.0% to 7.0%	5.5% to 7.5%	+150bp at low end, +50bp at high end	Raised
Organic sales growth	FY2026	approximately 4% at the midpoint	approximately 5% at the midpoint	+100bp at midpoint	Raised
Adjusted segment operating margin	FY2026	26.8% to 27.2%	27.0% to 27.4%	+20bp at low end, +20bp at high end	Raised

Segment KPIs

Q2 FY2026

Segment	Q2 FY2026	YoY
Diversified Industrial - North America	$1.986B	+3.0%
Diversified Industrial - International	$1.482B	+11.8%
Aerospace Systems	$1.706B	+14.5%

Other KPIs

Q2 FY2026

Segment	Q2 FY2026
Organic Sales Growth	6.6%
Adjusted Segment Operating Margin	27.1%
Order Rates	+9%
Total Backlog	$11.7 billion
Aerospace Systems Backlog	$8 billion
Diversified Industrial - North America Adjusted Segment Operating Margin	25.4%
Diversified Industrial - International Adjusted Segment Operating Margin	26.0%
Aerospace Systems Adjusted Segment Operating Margin	30.2%

Management tone

Q4 FY25 "poised for growth" setup → Q1 FY26 industrial inflection in evidence → Q2 FY26 record fiscal year confidence.

Three quarters ago Parker was defending margins through Industrial contraction; two quarters ago management characterized Industrial as showing "gradual return to growth"; this quarter the framing hardened to "record fiscal year 2026" confidence, with the FY guide raised on every line for the second straight quarter. Management's anchor on the call — "this was just another quarter in which our team delivered high single-digit sales growth, solid margin expansion, and all of that resulted in mid-teens EPS growth" — is doing real work: it frames the print as routine rather than exceptional, which is the language of a team that believes the trajectory is durable, not a peak.

Europe is the clearest tone shift. In Q4 FY25 EMEA was -3% organic and the regional holdout; in Q1 FY26 it was -2.6% and still negative; this quarter management explicitly flagged the inflection — "We were really glad to see Europe turn positive. We were glad for that team to see that finally make the turn." The +2% organic in Europe validates the FY26 International guide and removes the last regional drag from the bull case.

Aerospace went from "structural growth engine" framing in Q4 FY25 to record absolute performance this quarter: 30.2% adjusted segment margin, +14.5% revenue growth, and a record $8.0B backlog. Management raised commercial OEM A&D from mid-teens to ~20% growth and commercial aftermarket from high-single to low-double-digit — both above prior Q1 framings. The segment is no longer being underwritten as cyclical recovery; it's being underwritten as the operating model.

The off-highway raise is small but symbolic. Q4 FY25 guided low-single-digit decline; Q1 was neutral; this quarter is positive low-single-digit, with construction and mining pulling the trend even as ag remains under pressure. The progressive language — "neutral → positive low single-digit" — mirrors the Industrial recovery cadence and reinforces the multi-quarter inflection.

The hedging is concentrated almost entirely on Filtration Group integration ("six to 12 months from our November announcement date," "subject to approximately $220 million in cost synergies"). On the underlying business, the qualifiers have largely disappeared.

Recurring themes management leaned on this quarter:

Record financial performance across metrics (sales, margins, EPS, backlog)Sustained margin expansion through operational excellence and productivityAerospace segment exceptional strength and sustained demandFiltration Group acquisition as strategic portfolio transformationInternational recovery and geographic diversificationInterconnected technologies creating competitive advantage across verticals

Risks management surfaced:

Transportation segment remains challenged with mid single-digit organic decline forecastAgriculture within off-highway remains under pressureUpstream oil and gas remains soft despite energy segment strengthCustomer CapEx spending remains selective in plant and industrialAcquisition integration execution risk (Filtration Group closure contingent on 6-12 month integration)

Q&A highlights

Jamie Cook · Truist Securities

Asking whether positive organic growth across all three technology platforms (diversified industrial motion systems, flow processing control, filtration) is Parker-specific or cycle-driven, and whether filtration group acquisition timing indicates buying at cyclical bottom with potential for the acquired business to also see positive organic growth.

Management attributes growth to combination of short-cycle business improvement (off-highway, aerospace) and distribution strength. Confirmed filtration group historically achieves mid-single-digit CAGR pre-COVID to now, higher than Parker's filtration group, and expects their growth will increase similarly due to complementary technologies, same markets, and similar decentralized structure.

Filtration group historically mid-single-digit CAGRParker filtration group now seeing positive growth for first time since June 2023Distribution had low single-digit organic growth in quarterAerospace performing very well within industrial businesses

Andy Kapowitz · Citigroup

Requesting regional performance breakdown and color on durability of European improvement; asking about incremental margins exceeding 40% guidance and what drives the performance (pricing vs. execution vs. cost).

North America organic growth increased to 2.5% from 2%, international to 2% from 1%, APAC to mid-single-digit from low single-digit. Aerospace and defense very strong; gradual in-plant recovery; transportation challenged. Incremental margins of 40% full-year guided with 35% in second half; attributed to operational execution, pricing discipline, cost management, and record-high margins across all businesses.

North America organic growth guidance increased to 2.5% (from 2%)International organic growth guidance increased to 2% (from 1%)APAC organic growth guidance increased to mid-single-digit (from low single-digit)Full-year incremental margin guidance 40%, second half 35%

Amit Mehrotra · UBS

Questioning why Q2 outperformance (80 bps margin expansion, 52% incrementals) isn't being assumed into second-half guidance; asking about North American margin decline; and broader question on Parker's historical low organic growth (~2% company average, 1.5% North American industrial) and whether decade of price increases masks volume declines.

North American margin not declining; Q2 had unfavorable mix vs. Q1, but Q3 and second-half margins are increasing (26% and 26.5% respectively, all-time records). Management attributes low historical growth to portfolio transformation (more engineered materials, filtration, aerospace/defense) and recent industrial choppiness; states company targeting 4-6% organic growth long-term and guiding that range for FY26, with record margins achieved despite modest current organic growth.

Q2 incremental margins 52%, Q3 margin guidance 26%, second-half 26.5%North America second-half margin 26.5% is all-time recordFull-year North America margin up 80 bpsLong-term organic growth target 4-6%, guiding 4-6% for FY26

Julian Mitchell · Barclays

Seeking color on end market growth rate changes from full-year guidance through Q4, and specifically on aerospace and defense outlook for FY26 across OEM and aftermarket segments.

Off-highway showing most improvement, moved from negative low single-digit to positive low single-digit. Commercial OEM A&D increased from mid-teens to ~20% growth; commercial aftermarket increased from high single-digit to low double-digit; defense OEM unchanged at mid-single-digit; defense aftermarket reduced from mid-single-digit to low single-digit but still solid.

Off-highway: negative low single-digit → neutral → positive low single-digitCommercial OEM A&D: mid-teens → ~20% for FY26Commercial aftermarket A&D: high single-digit → low double-digit for FY26Q1 commercial aftermarket A&D: 13%, Q2: 17%

Jeff Spray · Vertical Research Partners

Observing orders have outpaced sales for eight consecutive quarters (unprecedented); asking if this is sustainable or whether they will reconnect during an up cycle, and whether industrial backlog is inflecting higher.

Management attributes orders-sales gap to structural increase in long-cycle business (aerospace/defense, industrial with multi-year contracts). Gap provides better visibility and enables level-loaded operations; reflects portfolio transformation to longer-cycle businesses. Industrial backlog went up in Q2 (remains mid-20s), improving from Q1, reflecting orders-sales gap and up vs. prior year.

Orders outpaced sales for 8 consecutive quartersIndustrial backlog up Q1 to Q2, remains in mid-20sIndustrial backlog up vs. prior yearRecord total backlog

Answers to last quarter's watch list

EMEA crosses zero — Europe printed +2% organic in Q2, crossing positive for the first time in the trend window. International organic accelerated to +4.6% and DI International revenue grew 11.8% reported.

Resolved positively

FCF guide reconciliation — Management narrowed the FCF range from $3.0-4.0B to $3.2-3.6B, characterizing the new midpoint as ~$3.5B (arithmetic midpoint is $3.4B). The low end moved up $200M while the high end moved down $400M — a tightening of the distribution rather than a clean raise or cut. Status: Mixed.

Order-rate sustainability above mid-single digits — Total order rates accelerated to +9% (from Q1 +8%), with segment-level disclosure intact: NA +7, International +6, Aerospace +14. Aerospace backlog reached a record $8.0B.

Resolved positively

Backlog trajectory — Record $11.7B total backlog vs. $11.3B in Q1, up sequentially. Industrial backlog was confirmed up Q1 to Q2 and up vs. prior year.

Resolved positively

Curtis Instruments contribution — Reported sales growth of +9.1% with organic at +6.6% implies ~250bps of inorganic contribution, broadly consistent with Curtis. No discrete segment-level margin impact was disclosed.

Continue monitoring

What to watch into next quarter

Q3 actuals vs. the new explicit guide — Management put $5.4B revenue and $7.75 adjusted EPS in writing for Q3. The new practice of explicit dollar quarterly guidance creates a new beat/miss bar. Watch whether Parker beats Q3 by the ~10% margin Q1 set ($7.22 actual vs. $6.51 guide), or whether the more visible guide pulls the beat distribution tighter.

H2 margin cadence — Management explicitly guided H2 below H1's blended print, citing mix, with H2 North America ~26.5% as an all-time record for that segment. Watch whether Q3 actually prints below Q2's 27.1% total-company adjusted segment margin or whether Parker repeats the pattern of guiding conservative and printing above — the latter would set up a third consecutive FY guide raise.

Filtration Group close and synergy disclosure — November announcement, expected close in 6-12 months with $220M cost synergies. Watch for regulatory milestones and the first segment-level framing of how Filtration Group lands in the reported Filtration segment, given Cook's exchange flagged the acquired business has higher historical growth than Parker's existing filtration arm.

FCF conversion in H1 cumulative — The narrowed $3.2-3.6B guide tightens the distribution with the high end trimmed $400M. Watch whether H1 cumulative cash flow tracks the run-rate needed to hit the ~$3.5B midpoint management cited, or whether a further FCF revision lands at Q3.

Europe sustainability — One quarter at +2% organic is an inflection, not a trend. Watch whether Q3 holds or accelerates European organic and whether order rates in DI International remain at or above this quarter's +6%.

Defense aftermarket deceleration — Mitchell's exchange surfaced a quiet reduction in defense aftermarket from mid-single to low-single growth. Watch whether this is one-quarter noise or the start of a normalization that offsets commercial OEM strength.

Sources

Parker Hannifin Q2 FY26 press release (SEC Exhibit 99.1): https://www.sec.gov/Archives/edgar/data/76334/000007633426000005/exhibit991q2fy26.htm
Parker Hannifin Q2 FY26 earnings call Q&A transcript (Truist, Citigroup, UBS, Barclays, Vertical Research Partners)
Tapebrief Q1 FY26 brief (prior guidance baseline, watch-list source)
Tapebrief Q4 FY25 brief (multi-quarter trajectory baseline)

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