• Parker Reports Fiscal 2024 Second Quarter Results

    Source: Nasdaq GlobeNewswire / 01 Feb 2024 06:30:02   America/Chicago

    • Sales increased 3% to $4.8 billion; organic sales increased 3%
    • Segment operating margin was 21.1%, or a record 24.5% adjusted, an increase of 300 basis points
    • EPS were $5.23, or a record $6.15 adjusted, an increase of 29%
    • Company increases outlook for segment operating margin and EPS

    CLEVELAND, Feb. 01, 2024 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2024 second quarter ended December 31, 2023. Sales were a record at $4.8 billion, an increase of 3%, compared with $4.7 billion in the second quarter of fiscal 2023. Net income was $681.9 million compared with $395.2 million in the prior year quarter. Adjusted net income was $802.4 million, an increase of 30% compared with $618.9 million in the second quarter of fiscal 2023. Earnings per share were $5.23 compared with $3.04 in the prior year quarter. Adjusted earnings per share increased 29% to $6.15 compared with $4.76 in the second quarter of fiscal 2023. Fiscal 2024 year-to-date cash flow from operations increased 26% to $1.4 billion, or 14.0% of sales, compared with $1.1 billion, or 12.1% of sales, in the prior year. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

    “We continue to produce exceptional results that reflect the strength of our portfolio and our ability to execute at a high level, underpinned by our business system, The Win Strategy™,” said Chairman and Chief Executive Officer, Jenny Parmentier. “Our adjusted operating margin increased by 300 basis points year-over-year, as we saw meaningful margin improvement in every segment. Strong aerospace and defense results, including synergies from the Meggitt acquisition, were a key driver of performance in the quarter. We continued to generate strong cash flow and direct it towards reducing debt. Our results are a testament to the dedication and persistence of our global teams.”

    Segment Results
    Diversified Industrial Segment: North American second quarter sales decreased 1% to $2.1 billion and operating income was $461.9 million compared with $419.9 million in the same period a year ago. On an adjusted basis, North American operating income was $510.4 million, or 24.2% of sales, a 240 basis point increase compared with the second quarter of fiscal 2023. International second quarter sales were flat at $1.4 billion and operating income was $290.5 million compared with $285.5 million in the same period a year ago. On an adjusted basis, International operating income was $323.4 million, or 23.0% of sales, a 110 basis point increase compared with the prior year quarter.

    Aerospace Systems Segment: Second quarter sales increased 15% to $1.3 billion and operating income was $263.1 million compared with $8.8 million in the same period a year ago. On an adjusted basis, operating income was $346.9 million, or 26.5% of sales, a 590 basis point increase compared with the prior year quarter.

    Orders
    The company reported the following orders for the quarter ending December 31, 2023, compared with the same quarter a year ago:

    • Orders increased 2% for total Parker
    • Orders decreased 4% in the Diversified Industrial North America businesses
    • Orders decreased 5% in the Diversified Industrial International businesses
    • Orders increased 21% in the Aerospace Systems Segment on a rolling 12-month average basis.

    Outlook
    Parker's outlook for the fiscal year ending June 30, 2024 has been updated. The company expects total sales growth in fiscal 2024 to be in the range of 3% to 5%; total segment operating margin in the range of 20.7% to 21.1%, or 24.1% to 24.5% on an adjusted basis; and earnings per share in the range of $20.00 to $20.60, or $23.90 to $24.50 on an adjusted basis. Reconciliations of forecasted segment operating margin to adjusted forecasted segment operating margin and forecasted earnings per share to adjusted forecasted earnings per share are included in the financial tables of this press release.

    Parmentier added, “We are increasing our outlook for fiscal 2024 and expect another year of record performance. We will continue to stay focused on executing the Win Strategy and leveraging the growth in aerospace markets. Our future looks very bright supported by favorable secular growth trends and further opportunities to improve our customer experience.”

    NOTICE OF WEBCAST: Parker Hannifin's webcast to discuss its fiscal 2024 second quarter results is available to all interested parties via live webcast today at 11:00 a.m. ET, at www.phstock.com. A replay of the webcast will be available on the site approximately one hour after the completion of the call and will remain available for one year. To register for e-mail notification of future events please visit www.phstock.com. 

    About Parker Hannifin
    Parker Hannifin is a Fortune 250 global leader in motion and control technologies. For more than a century the company has been enabling engineering breakthroughs that lead to a better tomorrow. Parker has increased its annual dividend per share paid to shareholders for 67 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index. Learn more at www.parker.com or @parkerhannifin.

    Note on Orders
    Orders provide near-term perspective on the company's outlook, particularly when viewed in the context of prior and future quarterly order rates. However, orders are not in themselves an indication of future performance. All comparisons are at constant currency exchange rates, with the prior year restated to the current-year rates. Beginning in the third quarter of fiscal 2023, all comparisons include acquisitions in both the numerator and denominator and exclude divestitures. Diversified Industrial comparisons are on 3-month average computations and Aerospace Systems comparisons are on rolling 12-month average computations.

    Note on Net Income
    Net income referenced in this press release is equal to net income attributable to common shareholders.

    Note on Non-GAAP Financial Measures
    This press release contains references to non-GAAP financial information including (a) adjusted net income; (b) adjusted earnings per share; (c) adjusted segment operating margins; (d) adjusted segment operating income; and (e) organic sales growth. The adjusted net income, earnings per share, segment operating margin, segment operating income and organic sales measures are presented to allow investors and the company to meaningfully evaluate changes in net income, earnings per share and segment operating margins on a comparable basis from period to period. Comparable descriptions of record adjusted results in this release refer only to the period from the first quarter of FY2011 to the periods presented in this release. This period coincides with recast historical financial results provided in association with our FY2014 change in segment reporting. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

    Forward-Looking Statements
    Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. Often but not always, these statements may be identified from the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and similar expressions, and include all statements regarding future performance, earnings projections, events or developments. Neither Parker nor any of its respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. Parker cautions readers not to place undue reliance on these statements. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from past performance or current expectations.

    Among other factors which may affect future performance are: changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments; disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs and changes in product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions, including the integration of Meggitt PLC; the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities; ability to implement successfully business and operating initiatives, including the timing, price and execution of share repurchases and other capital initiatives; availability, cost increases of or other limitations on our access to raw materials, component products and/or commodities if associated costs cannot be recovered in product pricing; ability to manage costs related to insurance and employee retirement and health care benefits; legal and regulatory developments and changes; compliance costs associated with environmental laws and regulations; potential supply chain and labor disruptions, including as a result of labor shortages; threats associated with international conflicts and efforts to combat terrorism and cyber security risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; local and global political and competitive market conditions, including global reactions to U.S. trade policies, and resulting effects on sales and pricing; global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates (including fluctuations associated with any potential credit rating decline) and credit availability; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; changes in consumer habits and preferences; government actions, including the impact of changes in the tax laws in the United States and foreign jurisdictions and any judicial or regulatory interpretation thereof; large scale disasters, such as floods, earthquakes, hurricanes, industrial accidents and pandemics. Readers should consider these forward-looking statements in light of risk factors discussed in Parker’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and other periodic filings made with the SEC.

    PARKER HANNIFIN CORPORATION - DECEMBER 31, 2023    
    CONSOLIDATED STATEMENT OF INCOME       
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
    (Dollars in thousands, except per share amounts) 2023   2022   2023   2022 
    Net sales $4,820,947  $4,674,811  $9,668,435  $8,907,586 
    Cost of sales  3,101,962   3,236,812   6,199,311   6,032,268 
    Selling, general and administrative expenses 806,802   814,966   1,680,493   1,650,770 
    Interest expense  129,029   146,931   263,497   264,725 
    Other income, net  (85,011)  (40,641)  (163,466)  (60,265)
    Income before income taxes  868,165   516,743   1,688,600   1,020,088 
    Income taxes  186,108   121,282   355,471   236,590 
    Net income  682,057   395,461   1,333,129   783,498 
    Less: Noncontrolling interests  206   224   451   407 
    Net income attributable to common shareholders$681,851  $395,237  $1,332,678  $783,091 
             
     
             
    Earnings per share attributable to common shareholders:       
    Basic earnings per share $5.31  $3.08  $10.38  $6.10 
    Diluted earnings per share $5.23  $3.04  $10.23  $6.03 
             
    Average shares outstanding during period - Basic 128,426,247   128,313,322   128,449,398   128,369,162 
    Average shares outstanding during period - Diluted 130,367,351   130,045,013   130,314,326   129,961,696 
             
             
    CASH DIVIDENDS PER COMMON SHARE       
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
    (Amounts in dollars)  2023   2022   2023   2022 
    Cash dividends per common share$1.48  $1.33  $2.96  $2.66 
             


    RECONCILIATION OF ORGANIC GROWTH       
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
      2023  2022  2023  2022 
    Sales growth - as reported 3.1% 22.2% 8.5% 17.4%
    Adjustments:       
    Acquisitions —% 16.5% 5.6% 10.2%
    Divestitures (0.3)% (0.5)% (0.4)% (0.3)%
    Currency0.5% (4.1)% 0.7% (4.7)%
    Organic sales growth 2.9% 10.3% 2.6% 12.2%


    PARKER HANNIFIN CORPORATION - DECEMBER 31, 2023      
    RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
    (Dollars in thousands)  2023   2022   2023   2022 
    Net income attributable to common shareholders$681,851  $395,237  $1,332,678  $783,091 
    Adjustments:       
    Acquired intangible asset amortization expense 142,027   142,256   297,547   229,270 
    Business realignment charges 14,354   5,378   27,446   9,239 
    Integration costs to achieve  10,014   33,418   16,420   45,409 
    Acquisition-related expenses —   1,983   —   162,241 
    Loss on deal-contingent forward contracts —   —   —   389,992 
    Net gain on divestitures (12,391)  —   (25,651)  (372,930)
    Amortization of inventory step-up to fair value —   111,973   —   130,331 
    Tax effect of adjustments1  (33,476)  (71,391)  (69,624)  (142,246)
    Adjusted net income attributable to common shareholders$802,379  $618,854  $1,578,816  $1,234,397 
             


    RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
    (Amounts in dollars)  2023   2022   2023   2022 
    Earnings per diluted share$5.23  $3.04  $10.23  $6.03 
    Adjustments:       
    Acquired intangible asset amortization expense 1.09   1.09   2.28   1.76 
    Business realignment charges 0.11   0.04   0.21   0.07 
    Integration costs to achieve 0.08   0.26   0.13   0.35 
    Acquisition-related expenses —   0.02   —   1.26 
    Loss on deal-contingent forward contracts —   —   —   3.00 
    Net gain on divestitures (0.10)  —   (0.20)  (2.87)
    Amortization of inventory step-up to fair value —   0.86   —   1.00 
    Tax effect of adjustments1  (0.26)  (0.55)  (0.53)  (1.09)
    Adjusted earnings per diluted share$6.15  $4.76  $12.12  $9.51 
             
    1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment.


    PARKER HANNIFIN CORPORATION - DECEMBER 31, 2023      
    BUSINESS SEGMENT INFORMATION       
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
    (Dollars in thousands)  2023   2022  2023   2022
    Net sales        
    Diversified Industrial:        
    North America $2,110,203  $2,140,685 $4,340,109  $4,272,445
    International  1,404,270   1,397,699  2,792,892   2,752,712
    Aerospace Systems  1,306,474   1,136,427  2,535,434   1,882,429
    Total net sales $4,820,947  $4,674,811 $9,668,435  $8,907,586
    Segment operating income        
    Diversified Industrial:        
    North America $461,850  $419,921 $967,903  $872,907
    International  290,484   285,520  591,185   579,460
    Aerospace Systems  263,112   8,793  489,372   100,944
    Total segment operating income 1,015,446   714,234  2,048,460   1,553,311
    Corporate general and administrative expenses 49,902   48,901  105,558   100,561
    Income before interest expense and other expense 965,544   665,333  1,942,902   1,452,750
    Interest expense  129,029   146,931  263,497   264,725
    Other (income) expense, net  (31,650)  1,659  (9,195)  167,937
    Income before income taxes $868,165  $516,743 $1,688,600  $1,020,088
             


    RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
    (Dollars in thousands)  2023   2022   2023   2022 
    Diversified Industrial North America sales $2,110,203  $2,140,685  $4,340,109  $4,272,445 
             
    Diversified Industrial North America operating income $461,850  $419,921  $967,903  $872,907 
    Adjustments:        
    Acquired intangible asset amortization  44,699   44,358   89,382   90,632 
    Business realignment charges  3,250   1,338   5,834   1,471 
    Integration costs to achieve  562   1,270   1,507   1,317 
    Adjusted Diversified Industrial North America operating income $510,361  $466,887  $1,064,626  $966,327 
             
    Diversified Industrial North America operating margin  21.9%  19.6%  22.3%  20.4%
    Adjusted Diversified Industrial North America operating margin  24.2%  21.8%  24.5%  22.6%
           
           
           
    PARKER HANNIFIN CORPORATION - DECEMBER 31, 2023      
    RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
    (Dollars in thousands)  2023   2022   2023   2022 
    Diversified Industrial International sales $1,404,270  $1,397,699  $2,792,892  $2,752,712 
             
    Diversified Industrial International operating income $290,484  $285,520  $591,185  $579,460 
    Adjustments:        
    Acquired intangible asset amortization  22,610   16,819   45,878   33,624 
    Business realignment charges  10,035   3,039   20,090   4,918 
    Integration costs to achieve  309   425   503   564 
    Adjusted Diversified Industrial International operating income $323,438  $305,803  $657,656  $618,566 
             
    Diversified Industrial International operating margin  20.7%  20.4%  21.2%  21.1%
    Adjusted Diversified Industrial International operating margin  23.0%  21.9%  23.5%  22.5%
             
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
    (Dollars in thousands)  2023   2022   2023   2022 
    Aerospace Systems sales $1,306,474  $1,136,427  $2,535,434  $1,882,429 
             
    Aerospace Systems operating income $263,112  $8,793  $489,372  $100,944 
    Adjustments:        
    Acquired intangible asset amortization  74,718   81,079   162,287   105,014 
    Business realignment charges  (123)  1,001   330   2,850 
    Integration costs to achieve  9,143   31,723   14,410   43,528 
    Amortization of inventory step-up to fair value  —   111,973   —   130,331 
    Adjusted Aerospace Systems operating income $346,850  $234,569  $666,399  $382,667 
             
    Aerospace Systems operating margin  20.1%  0.8%  19.3%  5.4%
    Adjusted Aerospace Systems operating margin  26.5%  20.6%  26.3%  20.3%
             
    (Unaudited) Three Months Ended December 31, Six Months Ended December 31,
    (Dollars in thousands)  2023   2022   2023   2022 
    Total net sales $4,820,947  $4,674,811  $9,668,435  $8,907,586 
             
    Total segment operating income $1,015,446  $714,234  $2,048,460  $1,553,311 
    Adjustments:        
    Acquired intangible asset amortization  142,027   142,256   297,547   229,270 
    Business realignment charges  13,162   5,378   26,254   9,239 
    Integration costs to achieve  10,014   33,418   16,420   45,409 
    Amortization of inventory step-up to fair value  —   111,973   —   130,331 
    Adjusted total segment operating income $1,180,649  $1,007,259  $2,388,681  $1,967,560 
             
    Total segment operating margin  21.1%  15.3%  21.2%  17.4%
    Adjusted total segment operating margin  24.5%  21.5%  24.7%  22.1%


    PARKER HANNIFIN CORPORATION - DECEMBER 31, 2023    
    CONSOLIDATED BALANCE SHEET     
    (Unaudited) December 31, June 30, December 31,
    (Dollars in thousands)  2023  2023  2022
    Assets      
    Current assets:      
    Cash and cash equivalents $382,815 $475,182 $756,055
    Marketable securities and other investments  11,053  8,390  21,611
    Trade accounts receivable, net  2,611,404  2,827,297  2,578,045
    Non-trade and notes receivable  321,680  309,167  371,474
    Inventories  3,092,923  2,907,879  3,095,722
    Prepaid expenses and other  309,985  306,314  462,093
    Total current assets  6,729,860  6,834,229  7,285,000
    Property, plant and equipment, net  2,905,744  2,865,030  2,839,524
    Deferred income taxes  77,256  81,429  133,348
    Investments and other assets  1,156,710  1,104,576  1,206,194
    Intangible assets, net  8,153,468  8,450,614  8,387,917
    Goodwill  10,671,897  10,628,594  10,668,904
    Total assets $29,694,935 $29,964,472 $30,520,887
           
    Liabilities and equity      
    Current liabilities:      
    Notes payable and long-term debt payable within one year $3,681,167 $3,763,175 $1,994,333
    Accounts payable, trade  1,971,943  2,050,934  1,966,757
    Accrued payrolls and other compensation  472,243  651,319  453,037
    Accrued domestic and foreign taxes  302,113  374,571  236,227
    Other accrued liabilities  1,069,607  895,371  1,053,049
    Total current liabilities  7,497,073  7,735,370  5,703,403
    Long-term debt  8,108,696  8,796,284  12,025,860
    Pensions and other postretirement benefits  482,752  551,510  807,124
    Deferred income taxes  1,579,197  1,649,674  1,751,321
    Other liabilities  714,838  893,355  898,703
    Shareholders' equity  11,302,578  10,326,888  9,322,380
    Noncontrolling interests  9,801  11,391  12,096
    Total liabilities and equity $29,694,935 $29,964,472 $30,520,887
           


    PARKER HANNIFIN CORPORATION - DECEMBER 31, 2023  
    CONSOLIDATED STATEMENT OF CASH FLOWS    
    (Unaudited) Six Months Ended December 31,
    (Dollars in thousands)  2023   2022 
    Cash flows from operating activities:    
    Net income $1,333,129  $783,498 
    Depreciation and amortization  468,165   383,725 
    Stock incentive plan compensation  108,061   89,709 
    Gain on sale of businesses  (25,964)  (377,251)
    Loss (gain) on disposal of property, plant and equipment  5,097   (2,551)
    Gain on marketable securities  (96)  (1,354)
    Gain on investments  (1,384)  (2,929)
    Net change in receivables, inventories and trade payables  (42,804)  112,216 
    Net change in other assets and liabilities  (407,366)  (112,066)
    Other, net  (84,851)  203,137 
    Net cash provided by operating activities  1,351,987   1,076,134 
    Cash flows from investing activities:    
    Acquisitions (net of cash of $89,704 in 2022)  —   (7,146,110)
    Capital expenditures  (204,117)  (185,704)
    Proceeds from sale of property, plant and equipment  1,360   11,632 
    Proceeds from sale of businesses  74,595   447,300 
    Purchases of marketable securities and other investments  (9,396)  (25,198)
    Maturities and sales of marketable securities and other investments  6,880   30,594 
    Payments of deal-contingent forward contracts  —   (1,405,418)
    Other  (438)  251,174 
    Net cash used in investing activities  (131,116)  (8,021,730)
    Cash flows from financing activities:    
    Net payments for common stock activity  (136,394)  (119,944)
    Acquisition of noncontrolling interests  (2,883)  — 
    Net (payments for) proceeds from debt  (784,847)  1,536,211 
    Financing fees paid  —   (8,911)
    Dividends paid  (381,115)  (342,360)
    Net cash (used in) provided by financing activities  (1,305,239)  1,064,996 
    Effect of exchange rate changes on cash  (7,999)  (11,221)
    Net decrease in cash, cash equivalents and restricted cash  (92,367)  (5,891,821)
    Cash, cash equivalents and restricted cash at beginning of year  475,182   6,647,876 
    Cash and cash equivalents at end of period $382,815  $756,055 
         



       
    PARKER HANNIFIN CORPORATION - DECEMBER 31, 2023 
    RECONCILIATION OF FORECASTED SEGMENT OPERATING MARGIN TO ADJUSTED FORECASTED SEGMENT OPERATING MARGIN
       
    (Unaudited)  
    (Amounts in percentages) Fiscal Year 2024
    Forecasted segment operating margin20.7% to 21.1%
    Adjustments: 
    Business realignment charges0.3% 
    Costs to achieve 0.2% 
    Acquisition-related intangible asset amortization expense 2.9% 
    Adjusted forecasted segment operating margin24.1% to 24.5%
     


    RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE
       
    (Unaudited)  
    (Amounts in dollars) Fiscal Year 2024
    Forecasted earnings per diluted share$20.00 to $20.60
    Adjustments: 
    Business realignment charges0.54 
    Costs to achieve 0.27 
    Acquisition-related intangible asset amortization expense 4.45 
    Net gain on divestitures (0.20) 
    Tax effect of adjustments1 (1.16) 
    Adjusted forecasted earnings per diluted share$23.90 to $24.50
       
    1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment.


    Contact:Media - 
     Aidan Gormley - Director, Global Communications and Branding216-896-3258
     aidan.gormley@parker.com 
       
     Financial Analysts - 
     Jeff Miller - Vice President, Investor Relations216-896-2708
     jeffrey.miller@parker.com 
       
    Stock Symbol:PH - NYSE 

     

     


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