Parker-Hannifin Lifts FY2027 Outlook After Record $6 Billion Quarter

Parker-Hannifin raised its fiscal 2027 adjusted earnings forecast to $36.85 per share, plus or minus $0.40, from a previous midpoint of $34.75 after posting an 18% sales increase to a record $6 billion for its first quarter. Organic sales (growth excluding acquisitions and currency effects) climbed 11.5% — the company's first quarter of double-digit organic growth in more than three years — while adjusted EPS rose 23% to $8.90.

Demand was broad-based, and the numbers back that up. CEO Jenny Parmentier said the rolling 12-month order rate rose 13% and backlog hit a record $13.7 billion, with aerospace, industrial businesses and the newly acquired Filtration Group all contributing.

What drove the beat?

CFO Todd Leombruno said organic growth exceeded the company's prior forecast of 8% for the quarter. Acquisitions added 7 percentage points to sales growth, mostly from Filtration Group, with a smaller contribution from Curtis.

Of the $2.10 increase in the adjusted EPS midpoint, $1.70 comes from higher expected segment operating income in Parker's existing businesses, Leombruno said. Filtration Group should add $0.50 per share over roughly 10.5 months of ownership, including $40 million in anticipated cost synergies (savings from combining operations). Higher corporate interest and other costs offset part of those gains.

For the full year, Parker now expects:

• Reported sales growth of 16% to 19%
• Organic growth of 7.5% to 10.5%, with the midpoint moving up to 9% from 7%
• Free cash flow of $3.5 billion to $4 billion, raised from prior guidance

Second-quarter guidance calls for sales of nearly $6.2 billion, organic growth of about 10%, and adjusted EPS of $8.82.

Where is growth concentrated?

North American industrial sales rose 20% to $2.4 billion, including 9.4% organic growth. Adjusted segment margin reached 27.6%, and rolling 12-month orders rose 11%.

International was the standout. Industrial sales climbed 22% to $1.7 billion, with organic growth of 11.6%. Asia-Pacific organic sales jumped 23.4%, helped by electronics and semiconductor demand. Europe, the Middle East and Africa grew 4%, while Latin America declined 1%. Parker raised its full-year international organic growth midpoint to 9.5% from 5.5%, and Parmentier said the company now expects mid-teens growth in Asia-Pacific versus its previous high-single-digit forecast.

Aerospace sales rose 14% to $1.9 billion — all organic — with adjusted operating margin expanding to 30.7%. Commercial aftermarket (spare parts and services for in-service aircraft) demand ran stronger than expected, Parmentier said, supported by an aging fleet and relatively few retirements. Parker lifted its commercial aftermarket growth outlook to high single digits.

The company also raised organic growth expectations for its three largest verticals: roughly 10% in aerospace and defense, high single digits in both in-plant industrial and transportation, and mid-single-digit growth in off-highway, energy, and HVAC and refrigeration.

On data centers, Parmentier said the business delivered double-digit growth and represented about 1.5% of sales in the prior fiscal year. Orders and backlog remain strong, but the unit isn't yet large enough to report as a separate market vertical.

How is the Filtration Group deal tracking?

Parker completed its acquisition of Filtration Group Corporation during the quarter, and integration has begun. The acquired business generated $285 million in first-quarter sales and performed as expected, Parmentier said. It's expected to contribute $1.85 billion in sales in fiscal 2027.

The deal creates an industrial filtration business with approximately $5 billion in annual revenue. Parker is targeting $220 million in cumulative cost synergies and an adjusted EBITDA margin (operating profit before depreciation, amortization and one-offs) above 30% for the unit.

There's near-term drag. Leombruno said Filtration Group's starting margins sit below Parker's existing operations, weighing on reported margins until synergies build. Acquisition-related borrowing also lifted expected interest expense for the fiscal year to $690 million, up from a previous forecast of $340 million. Net debt stands at 2.7 times adjusted EBITDA.

First-quarter operating cash flow came in at $752 million, with free cash flow of $643 million.

A record backlog, two raised guidance lines, and a $5 billion filtration platform — Parker's fiscal 2027 is off to an unusually strong start.