Thank you, Chloe. I'd like to welcome everyone to Parker's fiscal year 2026 third quarter earnings release webcast.

As Chloe said, this is Todd Leombruno, Chief Financial Officer speaking, and with me today, as usual, is Jennifer Parmentier, our Chairman and Chief Executive Officer. Thank you all for your time and your interest in Parker.

We truly appreciate it. Let's begin the call on slide two and address our disclosures on forward-looking projections and non-GAAP financial measures.

Items listed here could cause our actual results to vary from our forecast. Our press release, this presentation, and reconciliations for any and all non-GAAP measures were released this morning and are available under the investor section on parker.com.

Today's agenda has Jenny reviewing our record third quarter performance, then she will highlight two of our largest market verticals, that is aerospace and defense and transportation. I'm going to follow with some details on our third quarter financial results, and then Jenny and I will provide an update to our FY26 outlook, including an update to market verticals and financial performance.

As usual, we will conclude with the Q&A session of the call, and we will try to address as many of the questions as we have as possible. With that, I ask you to draw your attention to slide three, and, Jenny, the floor is yours.

Thank you, Todd, and thank you to everyone for attending the call today. Q3 was a quarter of record performance enabled by the strength of our portfolio.

We achieved top quartile safety performance with a 12% reduction in our recordable incident rate. This was our safest quarter ever and puts us in line with our goal of being the safest industrial company in the world.

I did want to acknowledge the severe weather events that occurred in Texas earlier this week, where Parker team members live and work, some of whom may be listening to the call right now. We have a facility in Mineral Wells, Texas where we employ over 300 team members.

Their safety remains our top priority, and thankfully, those on-site at the time of the severe weather are safe. However, there was damage to our facility, which we are still assessing.

We are thankful to all our team members as well as the responders and service providers who are assisting at our site and in the broader community. With that, let's share results for the quarter.

Our team delivered record Q3 sales of $5.5 billion, organic growth of 6.5%, and 40 basis points of margin expansion, resulting in 26.7% adjusted segment operating margin. Adjusted earnings per share grew 18%, and year-to-date cash flow from operations was $2.6 billion.

Orders came in at 9% with a record backlog of $12.5 billion. We are continuing to make progress on the Filtration Group acquisition.

Integration planning is underway using our proven playbook. Moving to slide four, please.

Many of you on the call today have seen this slide before: Why We Win. First, The Win Strategy is our business system.

We have a decentralized operating structure, 85 divisions run by general managers with full P&L responsibility, acting like owners, close to their customers, and executing The Win Strategy every day. Next, we have innovative products to solve customer problems, 85% covered by intellectual property.

Our application engineers provide the expertise that allows us to have a competitive advantage with our interconnected technologies that provide efficient solutions for our customers. Finally, our distribution network is the best in the world.

It is truly an extension of our engineering teams, providing solutions to all those small-to-mid-sized OEMs that are participating in capital spending and investments. These partners are experts at applying our interconnected technologies.

Moving to slide five. We have a number one position in the $145 billion motion and control industry, a growing space where we continue to gain share.

As a reminder, these six market verticals represent greater than 90% of the company's revenue. We have a focused portfolio creating distinct value for our customers.

Our powerhouse of interconnected solutions cuts across these market verticals and gives us a clear competitive advantage. Two-thirds of our revenue comes from customers who buy four or more technologies, and our growth is focused on faster-growing, longer-cycle markets and secular trends.

As Todd mentioned, today I would like to talk about the aerospace and defense and transportation market verticals. Now on slide six, I'd like to highlight how we utilize our focused portfolio of core technologies to solve problems and create value for customers in aerospace and defense, our largest market vertical representing 35% of Parker sales.

We have been a trusted partner since the inception of the aerospace industry and today have products and technologies on every major aircraft program globally. Our portfolio is well-balanced with approximately two-thirds of our sales from commercial programs and one-third from defense programs.

We have proprietary designs across commercial transport, defense fixed-wing fighter, business jet, and helicopter platforms. With the Meggitt acquisition, we increased our global footprint and are now very well equipped to serve current and future demand from OEM and aftermarket customers in the Americas, EMEA, and Asia.

Demand remains robust. Orders continue to outpace shipments, and we are on track to finish our fourth consecutive year of double-digit organic growth.

Parker is better equipped than ever before with complementary technologies to help shape the future of flight and deliver a compelling value proposition for our customers today and on next-gen commercial and defense programs in the years ahead. Moving to slide seven, featuring our transportation market vertical, which represents 15% of Parker sales.

Our suite of differentiated and interconnected components and systems create value for customers across internal combustion, hybrid, and electric vehicles. We are truly energy agnostic and well positioned to meet changing customer needs.

Today, we win with a focused portfolio of innovative products and our application engineers who work closely with customers to specify Parker technologies that improve the safety, reliability, and fuel efficiency of their equipment. Parker Filtration provides protection to the engine and fluid power systems.

Our power take-offs provide reliable power to work functions. Our valves, hose, and fittings control the flow of safety-critical systems, and our engineered materials provide critical sealing, shielding, and thermal management.

In addition, our robust network of channel partners serve the aftermarket needs of end users around the world. Lastly, we are seeing an increase in OEM orders for heavy-duty truck, our largest platform within transportation, and as a result are increasing fiscal year 2026 sales guidance for this market.

I'll turn it back to Todd to review third quarter highlights.

Thank you, Jenny. We are on slide nine, and I'm going to start with just the summary financial results.

As Jenny said, our team delivered another set of new records this quarter for sales, adjusted segment operating margin, EBITDA, net income, and adjusted EPS. Total sales were up nearly 11%.

Organic growth was 6.5%. Currency was favorable at 2.5%, and acquisitions added 1.5% to the total.

Adjusted segment operating margins were 26.7%, that is up 40 basis points from prior year, and adjusted EBITDA was up 20 basis points to reach 27.2%. We have achieved two new first-time ever milestones this quarter.

Adjusted net income surpassed $1 billion for the first time ever, and that is a 19.1% return on sales. In addition, the adjusted earnings per share of $8.17, that's the first time we've been above $8 for a single quarter ever.

As Jenny said, that is a growth of 18% versus prior year. Our teams around the globe did an excellent job this quarter.

Results again another quarter of strong performance, that organic growth, those records across the board, and that 18% EPS growth, we're really proud of everyone for their efforts. We're well positioned, and we remain confident in delivering another record year in 2026.

If we could move to slide 10, we'll just display the walk, the $1.23 of additional EPS, that's that 18% increase. Main driver continues to be increased segment operating income dollars.

That added 96 cents or 14% of the growth versus prior year. If you go to the next bar, income tax was favorable 18 cents.

There was a couple discrete items that occurred within the quarter to drive the 18-cent favorable year-over-year comparison. Share count was also favorable.

That drove 14% of improvement from prior year. That was really based on all the discretionary purchases that we've done over the last year or so.

Interest was just 2 cents unfavorable, and that was driven by just a slightly higher average debt balance that was slightly offset by lower rates. Corporate G&A and other were a little bit higher, just 3 cents, due to some favorable market-based benefits that really occurred in the prior year, not a FY26 issue, that was FY25.

The result is a record $8.17, it's just really driven by strong growth and our team continuing to work The Win Strategy. I really appreciate the team's effort on safety, Jenny mentioned this was our safest quarter ever, really focusing on our customers, achieving that growth, and just really strong operating results.

Thank you to all. If we can go to slide 11, let's look at the segment performance.

If you look at orders, we were 9 in total with positive order rates across all of our businesses. Backlog increased to a record level of $12.5 billion.

We generated record segment operating margins, that was 40 basis points of margin expansion, and overall just a great Q3. If we look at North America specifically, sales were $2.1 billion with organic growth of nearly 3%.

That was slightly better than our expectations. Strongest markets within North America were in-plant and industrial equipment, off-highway, and followed by energy.

Adjusted operating margins were up 10 basis points for a Q3 record of 25.3%, and orders remained robust at 7% compared to prior year. Looking at the international businesses, sales were a record $1.5 billion.

That was up 13% versus prior year with organic growth attributing for 3% of that. Asia-Pac had another strong quarter of organic growth at +10%.

EMEA was flat, and Latin America was down versus prior year. Moving to margins, margins were up 20 basis points on the international businesses, achieved a record of 25.3% for the quarter, and international orders continue to be +6% versus some really challenging comps of +11% in the prior year.

Aerospace, same story here, another fantastic quarter for the aerospace businesses. Sales of $1.8 billion, that's up 15.5% versus prior year.

Organic growth was 14.2% in aerospace. That is really driven on continued commercial strength in both the OE portions and also the aftermarket.

Margins are up 80 basis points and reached 29.5% for the quarter. We had double-digit OEM and aftermarket order growth.

That resulted in aerospace order rates of +14%, and backlog increased 15% in this segment and reached a record of $8.4 billion. We continue to see strength in the aerospace businesses.

Each of our aerospace market segments delivered positive sales growth for the quarter, just a great great quarter for aerospace. If I could draw your attention to slide 12, you'll see our year-to-date cash flow performance.

Year-to-date cash flow from operations was $2.6 billion or 16.7% of sales, that's up 14% versus prior year. Year-to-date free cash flow increased 17% and came in at $2.3 billion.

That is almost 15% of sales, 14.9% of sales. Both the CFOA and the free cash flow dollars are all-time records at this point in the year.

We just have great confidence in our ability to generate cash, and we are committed to actively deploying that cash to create value. You saw last week our board approved an 11% increase to our quarterly dividend.

That quarterly dividend is now $2 per share, and that increase will extend our record of increasing annual dividends paid per share to an impressive 70 years, 70 years. In addition, in the quarter, we repurchased another $275 million of shares, which brings our year-to-date share repurchases to $825 million.

That is a wrap on Q3 performance. I'll ask you to draw your attention to slide 14, and, Jenny, I'll hand it back to you to talk about the market verticals.

Thank you, Todd. Slide 14 shows our updated fiscal year 2026 organic sales growth by key market vertical.

In aerospace, we are increasing our forecast from 11% to 12% organic growth as we continue to see, as Todd said, strength in commercial OEM and aftermarket. In-plant industrial remains the same at a positive low single-digit organic growth.

Quoting activity remains strong. Customers are prioritizing spending on automation and productivity, and I would say distributor inventories are stable and continuing to order to demand.

As I just mentioned in an earlier slide, we are raising our outlook on transportation from mid single-digit organic decline to low single-digit organic decline. This is driven by stronger heavy truck orders, while automotive demand challenges persist.

Off-highway remains the same at positive low single-digit organic growth. We see construction growth from capital and infrastructure investment, while ag remains under pressure.

We are maintaining energy at positive low single-digit growth with strong power gen activity. We do see growth in midstream oil and gas, but it is offset by upstream, which remains soft.

We are maintaining HVAC and refrigeration at positive mid single-digit growth. We see strength in commercial HVAC, refrigeration, filtration, and aftermarket.

As a result of these changes, we are increasing our organic sales growth guidance from 5% to 5.5% at the midpoint. I'll give it back to Todd for some more guidance details.

Thank you, Jenny. I'm on slide 15, this is just some more details.

We have one quarter left here in our fiscal year, I'm going to give you some midpoints, don't read anything into that other than the fact that there's one quarter left and the ranges look a little silly when you're just talking one quarter. For reported sales growth, the forecast has been increased to 7%.

Currency, based on March 31st spot rates, is expected to be favorable 1.5%. Acquisitions are 1, and divestitures are also 1.

For the full year, we're increasing organic growth to 5.5%, that's midpoint. Aerospace organic growth is increased to 12%, and industrial growth is now expected to be 2.5% for both North America and international.

Adjusted segment operating margins, we're expecting to be 27.2% for the year. That is a forecasted increase of 110 basis points versus prior year with margin expansion across all the businesses, and the forecast for incrementals for the full year is 40%.

Assumptions for corporate G&A, interest, and tax are all detailed out in the appendix, really no changes there. Full-year adjusted EPS has been raised by 50 cents to $31.20 at the midpoint.

That would be an increase of 14.2% versus prior. In addition, we're also raising our forecast for full-year free cash flow to $3.3 to $3.6 billion, that's $3 billion 450 million at the midpoint.

That would be 16.2% of sales with conversion at approximately 100%. In respect to Q4 specifically, we are guiding reported sales to be nearly $5.5 billion.

That is a 5.5% increase versus prior year. Organic growth will be approximately 4.

Adjusted segment operating margins will be 27.4%. The effective tax rate we are expecting is 22%, and for the second time ever, adjusted EPS would be above $8 to be at $8.16.

As usual, we've got some more details in the appendix, and with that, I will turn it back to you, Jenny, and ask everyone to turn to slide 16.

On our final slide, a reminder of what drives Parker. Safety, engagement, and ownership are the foundation of our culture.

It's our people and living up to our purpose that drives top quartile performance that allows us to be great generators and deployers of cash.

Chloe, we are ready to start the Q&A portion of the call.

Thank you. Good morning, and thanks for the question here.

Maybe I'll start with kind of the topical items of late. You haven't really called out what's been going on in the Middle East in any way that was material, I'm curious, as you look at your business, has there been any disruption or anything that's different that we need to be aware of?

Also, there's an updated tariff framework. I'm curious if there's any impact to be known about as far as you're concerned.

Hi, Mig. I would say our first concern with the Middle East is the safety of our team members.

We're very very happy that they're all safe. Direct revenue in the Middle East is very small, and there's really no manufacturing.

It's primarily a sales organization. Our teams are doing a fantastic job managing the supply chain, handling logistics, and doing everything they can to minimize the disruption to our customers.

At this point, we're not seeing any material impact to demand. Talking about tariffs and what's going on there, it continues to be very dynamic.

As always, our teams are doing a great job managing them to make sure that there's no impact to earnings. As price cost management has been a core element of The Win Strategy for us.

This is a strong muscle for us for over 25 years, and we don't expect this to have any impact. When you're looking at changes in tariffs, again, I would say we are very close to it.

We analyze it on a regular basis, and it's nothing that we're concerned about taking care of.

Hey, Mig, I would just add, this is Todd. Jenny mentioned it's a complex process.

We're obviously doing everything we can there. We will not recognize any income on those tariffs until we receive them, we're treating that as a contingency gain.

You won't see us forecast or recognize any income until we actually receive any of refunds.

Understood. Then my follow-up just kind of sticking with your comments on price cost.

I guess optically, even though this was a very good quarter that you guys put up, optically, the incrementals on the industrial side of the business were a little bit lower than what we have seen of late, and I'm kind of curious if there is any lag whatsoever that you're experiencing in terms of either dealing with these tariff dynamics or any other inflationary aspects within your business, any delay relative to where you're able to implement pricings to offset that? Thank you.

I'll take that, Mig. No, no, no delays, no concerns there with price cost management whatsoever.

We were below what we had forecasted in North America and international. In North America, this was really driven by stronger OEM growth, and notably this came from off-highway and transportation.

Distribution did hold steady, but no real acceleration there yet. While we aren't in the excuse-making business, as I tell the teams, the teams are always planning for various contingencies.

This quarter, we had to recover from more weather-related disruptions than normal, and that was mainly in North America. We're very proud of the teams, as Todd mentioned, for responding and delivering to the customers.

We did have a Q3 record margin for North America, and we're going to finish the year strong.

Super. Thank you so much.

Thanks, Mig.

Good morning, and congrats on a nice quarter. I guess two questions just following Mig's question on the incremental margins.

For the full year, you're still expecting a 40% incremental margin, which is above a normalized range or what you laid out at the Analyst Day. I guess, Todd, while you don't want to talk about 2027, as we think about the setup for next year or over the longer term, is there any reason why we shouldn't believe incremental margins couldn't be in the 40% range?

Or does mix on the mobile side or whatever impact that or can incrementals be structurally better? Then I guess, Jenny, my question to you, just because there's a lot of concerns obviously with the Middle East and macro, your orders in industrial still were very strong, in particular on international, like you said, with the tough comps.

Anything notable on sort of the cadence of orders throughout the quarter into April or just confidence level sort of like last quarter, has it waned at all relative to last quarter when it felt like you've been one of the first people to be more positive, I guess, on industrial short-cycle? Thank you.

Jamie, thanks for the congrats. I'll start.

We've been trained here to finish strong, and we're focused on finishing FY26 strong, our focus right now is on Q4. I'd tell you what, we like the setup for FY27.

You're going to see us continue to do everything that we do here. You've seen our orders.

You've seen our margin expansion over time. We are very much focused on creating great incrementals.

We hold the team to a target of 30% to 35%, and obviously that varies on where your business is. Really what we're focused on is growing those segment operating income dollars and compounding EPS, right?

That's been very successful for us, and that is a factor of that. I think if you do the math, you're going to get incrementals somewhere where you're thinking.

We'll talk to you more about that in a couple weeks.

For your second question, Jamie, orders were strong throughout the quarter. I would say the industrial recovery continues.

We saw more broad-based positivity on both short and long cycle than we did earlier this year. We feel really good about the guidance.

As always, we stay close with the customers, we not only feel good about the guidance, but we're not seeing anything right now that concerns us.

Thank you. Congrats again.

Thank you, Jamie.

Hey, thanks. Good morning, everyone.

Jenny or Todd, could you just maybe spend a little more time on aero, the organic growth in Q4, I guess, will be sort of the slowest of the year against the easiest comp of the year. Are you dialing in some aftermarket pressure or kind of what's underneath that outlook in the fourth quarter?

I would say, Jeffrey, the aerospace Q4 forecast is approximately 9%, and that was raised from our previous Q4 guidance of 7.5%. We're not baking in any slowdown here.

Orders and backlog continue to be very strong, record backlog here in this long-cycle business. Again, as I mentioned earlier, this is going to be our fourth year in a row of double-digit organic growth for aerospace, but we're not building in any slowdown here.

There's no indication in orders or anything that there's a shift between OE or aftermarket?

Say that again, I'm sorry?

Just the complexion of OE versus aftermarket in aero, I wonder if you could give a little more color there.

If you look at how we performed in Q3, commercial OEM was up 22%, aftermarket was up 14%. Again, strong orders in both areas.

We feel really good about the mix and the forecast. We were at 51% OEM in Q3 and 49% aftermarket.

The teams are doing a really great job with the higher OEM mix and still being able to expand margins.

Jeff, I would just add, aerospace specifically, the backlog increased 5% sequentially, $8.4 billion is the total backlog, that's all-time record.

Great. Thank you.

I'll leave it there.

Thanks, Jeff.

Thank you. I understand that as the industrial businesses turn to be more longer-cycle exposure, that there's a lag between when the orders convert to revenue.

If we see industrial orders sustained here in this mid single-digit, even maybe high single-digit range for several quarters in a row, is there any structural reason why sales would not ultimately get to that same level of growth? Thank you.

Thanks for the question, Chris. I wouldn't say that there's any structural reason, but if you look at North America, orders have been +7% for the past two quarters.

We noted in Q2 that these included long-cycle, multi-year defense orders. Again in Q3, we saw orders that are due beyond this fiscal year, including defense, energy, and even construction orders scheduled into FY27, which is usually shorter cycle.

We're guiding 3% organic growth for Q4, which would be the best performance so far for this year. As Todd mentioned earlier, we like the way the setup's looking for fiscal year 2027.

Thank you. Then when you look across all of the various industrial end markets that the company serves, are you seeing the improvement in sales and in orders driven by end demand going higher, like what's being put out into the channel is being consumed, or are there spots where you think distributors could be maybe building a little inventory in anticipation of a cycle, maybe some concerns on supply chains or commodity inflation with the events in the Middle East?

Just trying to see if there's any end-market differences on that. Thank you.

No, I wouldn't say we're seeing any of that yet. I think they're still ordering to demand for rather quick consumption.

We're not seeing any real acceleration or any typical signs of restocking. Haven't heard of any supply chain fears within the channel or on the industrial side of the business.

Thank you, Jenny.

You bet.

Thanks, operator. Morning, everybody.

I wanted to just follow up on that point around, I guess, distributors versus OE mix, and Jenny, I think you made a comment about stable distributor inventories, ordering to demand, strong quoting. I'm just trying to triangulate those items to understand sort of the psychology around inventory stocking and kind of a more structural question, are the distributors maybe getting a little bit more sophisticated around inventory management, and so maybe there's a mix more from growth towards OE, which has margin consequences?

Maybe you could talk about that.

What I would say is that over the last several years, I think our distributors have become very sophisticated when it comes to inventory management. Even coming out of COVID, managing cash and really putting all of the processes in place to order what they need and use it and sell it for consumption.

I think that is definitely something that has happened over the last several years. When we talk about ordering to demand, we're not seeing the increase that would tell us that there is a restocking going on.

They've been telling us for quite some time that quoting activity is strong, their sentiment has been positive for quite some time, but again, they will tell us that their customers are being selective with capital investments and really focused on those that provide automation and productivity. We're not signaling anything changing.

It's just not accelerating right now. We are seeing an increase in OEM with the raise to transportation outlook and off-highway with construction.

We are seeing increased OE, which is classically 10 to 15 points below distribution.

Great. Then you also mentioned historically of last few quarters you talked about the order strength really being centered on longer-cycle specific verticals.

I think you kind of broaded it out a little bit this quarter. Maybe just talk a little bit more about that true short-cycle piece and what your observations have been over the last few months.

When you look at long cycle, it continues to pull strong. We've been talking about that.

That's why we raised our aerospace and defense guidance. Power gen long-cycle business, it's robust, lots of activity in midstream oil and gas, and electronics is also growing nicely.

On the short side, as I mentioned before, the industrial recovery continues, and we've been talking about a slow, gradual industrial recovery for some time now, and that's what we're seeing. The orders that we saw were more broad-based and positive on both short and long cycle on the industrial side of the business than we've seen really all of this fiscal year.

Construction continues to improve, heavy-duty truck improvement, in-plant and distribution, which we just talked about. We're continuing to see this positive low single-digit growth, and again, we'll say we're set up for a good fiscal year 2027.

Thank you very much. Appreciate it.

Good morning, everyone.

Morning, Andy.

Morning.

Jenny, could you talk about what you're seeing in the aerospace supply chain? As one of your peers continues to have some issues there, but you've continued to execute well, seem to be absorbing a little bit more difficult margin mix while still growing.

As we start to transition to FY27, is there any reason why you couldn't continue to grow margin even if mix is running a bit more against you?

I remained confident in our ability to expand margins, and committed to that as well, I don't have any change there. The aerospace supply chain, I would say, it's obviously in much better shape than it has been, and we've seen the big airframers be able to increase their rates, which we're obviously participating in.

I would tell you that we have over the last several years invested quite a bit in our supply chain, and that has proved to be very beneficial for us. I don't really have any concerns here.

Then,

Jenny, continued strong performance in Asia-Pac, that +10 is impressive, maybe talk about the durability of that growth. EMEA flat, it's kind of bouncing along there at kind of those rates.

I think last quarter was up a little bit, do you see sort of improvement there, is it just kind of bouncing along at flat in that region?

Primarily as we said earlier, the growth is coming from Asia-Pacific. The total backlog coverage in industrial did increase to the high 20s, and international orders were +6% for the third quarter in a row, but again, driven by electronics and some defense booking.

EMEA slightly negative on a tough comp when it comes to orders, but strength in aerospace and defense, some mining, some in-plant industrial, but Asia orders are strong coming from electronics, data center in there, and in-plant energy.

Appreciate the color. You bet.

Thanks, Andy.

Hi, good morning. Maybe, Jenny, just wanted if you could flesh out the subsegment sort of assumptions on aerospace, just kind of what you're expecting in the fourth quarter for the major pieces kind of year on year and how they did in Q3.

I think you gave the commercial bits for Q3, but not military.

Let me give you a Q3 rundown, and then I'll go to what we have for Q4 guidance. As Todd mentioned, aerospace organic growth was 14.2%.

Commercial OEM was 22%, and obviously this was really driven by production rate increases in both narrow and wide-body. Commercial aftermarket was 14%, and even though we were starting to see global air traffic growth begin to normalize, we still saw some nice growth in Q3 and strong spares and repair shipments.

Defense OEM was a positive 13%, we see demand for the legacy programs continuing, and then defense aftermarket was positive 8%, fleet upgrades and service extensions are contributing to that. I mentioned earlier aftermarket mix at 49% and OE at 51.

When we look at Q4 guidance, again, we're increasing full year to 12%, and we're raising commercial OEM to be the low 20s growth, we previously had that at 20%, approximately 20%. We are raising commercial MRO of low teens growth, that was previously low double digit.

We expect defense OEM to be mid single-digit growth, that's the same as before, and defense MRO low single-digit growth, also the same as our last guidance.

That's very helpful. Thank you.

Then just to try and circle back again to that point on industrial kind of orders and sales, and and the fact you've had several quarters of orders in in both industrial segments outstripping the revenue growth pace. Maybe just another way to look at, I wanted to confirm that that industrial, the diversified industrial overall backlog, it looks like was that just over $4 billion at the end of March, you had a decent sort of year-on-year and sequential increase.

I guess I'm just trying to say it it looks as if that orders outpacing of sales isn't just a sort of comp phenomenon or something, like you you there should be some recoupling of the sales to those orders even though from the outside we can't see the kind of dollars dollars of orders you've been booking.

Julian, you're absolutely right. Both the industrial and the aerospace backlogs improved, and we obviously see that as a good sign.

Yeah.

Got it. Thank you.

Thanks, Julian.

Hi guys, good morning.

Morning, Andrew.

Just to check my math on industrials. I guess organically does imply that Q4 at the midpoint will be a tad slower than Q3 industrials Americas.

Is that okay? Is that correct?

No, we've got it pretty much the same.

Fine. Maybe a question on pricing in in the quarter.

We've been hearing about sort of industry talking about rebates, pushback. Now, all of this has been before S232, and I know maybe not a, direct impact for you guys.

Has conversation on pricing changed given that the industry now does have to deal with S232? Maybe just you can just talk about pricing trends in Q1 and what pricing looks for the remainder, well, I guess the calendar year fiscal year, but any commentary on pricing would be great.

I would say that conversations haven't changed. Obviously, when it comes to the tariffs, as I mentioned earlier, it's dynamic and it requires a lot of analysis and coordination, and teams are doing a great job of that.

On the industrial side of the business, as we've mentioned in the past, especially with distribution, we're back to a normal pricing environment, we'll do that as we have in the past. With aerospace, there's still some opportunity for pricing, and the teams are executing on that.

We've been doing this for a long time, and I think we've done a great job of covering inflation and making sure that the tariffs haven't impacted our earnings, and we'll continue to do that.

Maybe just sneak one in on defense aftermarket. Why not raise the guide given what's happening in the Middle East?

I would imagine a lot of wear and tear on key platforms that you're on, sorry.

This is long lead time product, right, even in defense, you're looking anywhere from 9 to 15 months, we have the guide out there based on the deliveries that our customers want, and that's what's really driving that number. Yeah.

Terrific. Thank you.

Thanks, Andrew.

Great, thank you. Good morning.

First question is just on the mix dynamic within the industrial businesses in '26. See if you can help kind of summarize in terms of distribution's growth and what you're expecting this year relative to the total.

More forward thinking, I'm just trying to think if that business begins presumably to pick up, does that potentially portend a mixed tailwind in '27? Any help on that?

Tim, this is Todd. You look at our industrial business, it is exactly 50% OEM, 50% aftermarket.

As these things rise and fall depending on what market they're in, there really is a nice diversified balance across there. When we see something pop like last quarter, I think we mentioned slightly there was a little bit of a mix issue, but these things are small in comparison to the total.

What we look at as positive, we're looking at those orders. We've had positive orders in the industrial business now for six quarters in a row, and again, what that does is that helps us compound dollars and that leads to EPS growth.

Distribution primarily sits in our in-plant industrial market vertical, and our forecast remains the same for that for the rest of the fiscal year. It's positive low single-digit growth.

Okay. All right, understood.

Then again, this is a little bit out of left field, but there was one of your big European-based competitors, they recently flagged some concern that had seen more competition from some of the competitors in Asia starting to make more inroads into their markets. I'm just curious, it's a broader question just in terms of the competitive dynamics as you think about that globally.

Your results wouldn't suggest it, but I'm just curious what you would say to that in terms of any changes that you've seen globally on that competitive front.

I wouldn't say that I've seen any changes, but I would say that our teams are very focused on taking any and all competition very seriously. We have a lot of pride in the products that we have and the value that they bring to the customers, the quality.

We manufacture in many regions of the world that allows us to be very competitive locally. While competition is always something we have to keep an eye on, our performance is what ensures that not only that we keep what we have, but that we gain share.

All righty, thank you.

Hi, good morning. Thanks for taking my questions.

Can you give a little bit more color on what you're seeing in industrial international? We've seen very steady mid single-digit order growth.

You touched on the tough comp in Q3, I think kind of pick any stack period you want looked pretty good in the third quarter. Europe, Asia, kind of what you're seeing, any verticals you would call out there?

Sure. We are increasing full-year organic growth to 2.5% for international versus our prior guide of approximately 2%.

In EMEA, we're maintaining a slightly positive low single digit. We're seeing gradual improvement in-plant and in transportation, primarily heavy-duty truck.

We have seen continued strength in mining and energy, both oil and gas and power gen. In Asia-Pacific, increasing full year to positive high single digit versus positive mid single digit we had in our prior guide, and this is continued strength in electronics and semicon demand.

In-plant orders and shipments progress, but remain a little bit mixed. Mining is strong, and there've been improvements in energy.

It's really kind of a mixed between EMEA and Asia-Pacific, but we're going to end this year at 2.5%.

That's helpful. Then just on Filtration Group, I think initially talking about a 6- to 12-month window.

I think it seems like some deals have taken a little bit longer to work through regulatory processes. I'm not sure if the way you're thinking about it maybe favors the 12-month side of that versus 6.

Then just any color, recognizing really good margin business, what you're working on in preparation for that as the highest priorities post close.

Sure. We still anticipate that we're going to close within the 12 months of announcement date.

Just as you said, the closing remains subject to the customary closing conditions, receipt of our pending regulatory clearances. Progress is happening there.

It's ongoing. I would tell you that the integration planning is underway.

Teams on both sides have been formed, those teams are working together. We'll put our integration playbook into place as soon as we do close and get The Win Strategy into the organization as soon as possible.

We did announce $220 million in synergies by the end of year three, that is 11%. The majority of those synergies are going to come from the tools in The Win Strategy that you hear us talk about, lean, supply chain, and simplification.

We're not providing at this time any information on the phasing of those synergies, but we're very very confident in our ability to achieve those. Announcement was last November, and we still anticipate that it'll be within the 12 months.

Joe, I would just add on the funding side of it, we have our funding plan in place. There is no pre-funding that's required for this transaction, you won't see any interest before we close that transaction.

You're going to see us do exactly what we've done on the past transaction. A little over half of this will be serviceable debt, the rest will be short- to medium-term notes, and we do not expect leverage to surpass 3 when we close.

Our delevering plan will be in place that we can get back to around 2 faster than we ever have before.

That's great. Thank you.

Thanks.

Hey, good morning, everyone.

Morning. I'm

just looking across broader coverage group and broader industrials, looking at what life is like if energy prices persist above 100 bucks going forward. I would think Parker would stand to benefit.

I'm wondering, you haven't probably gotten this question a while, but obviously, you have that direct energy exposure where maybe there's a nice benefit, but I would think there'd be a ripple effect, some animal spirits brewing in some other areas, maybe off-highway, in-plant. What is the net impact for you guys if we still see energy prices sitting here six months from now?

I think it's probably too hard to forecast right now, but with where we're at today and what we have in our guide, I think that's representative of the impact today and how it impacts overall Parker Hannifin. We'll have to see how this plays out, but I don't have any forecast to share with you today.

Andrew, I would just add, the diversification of the portfolio is really one of the strengths of the company, and we often say we're agnostic when it comes to the power source. You look at the market verticals that we call out, there'll be some pluses and some minuses across those, but I think overall the company will be able to capitalize on any opportunities that come from changes in energy prices.

That's fair enough. Then your free cash flow nudged that up a little bit.

I'm just wondering in light of the Filtration Group deal closing, are you still evaluating M&A into year-end, would you rather preserve some capital, just to get through the deal and then see where you're at?

We've been very active. We've been very direct with our commitment to do that.

You saw us increase the dividend. You saw us do $825 million of share repurchases.

You look at our leverage, it's very, very manageable where it sits today. I just mentioned even at full funding of the Filtration Group, we might get near 3, but we're not going to cross 3.

That pipeline is always active. It's always being worked on.

It's always being measured. I would tell you the capacity that the company has, you mentioned it, we're raising our free cash flow.

If you look at CFOA, we're going to be close to $4 billion of cash generation this fiscal year. It gives us a lot of options, and we're going to be very, very diligent when it comes to deploying that optionality.

I don't think I could have said that

any better.

Great, well,

Thanks. Good morning, guys.

Morning.

Morning, Joe.

Todd, maybe a longer-term question on margins within the industrial business. Absent volumes, obviously you guys have done a great job expanding margins in both of those businesses.

As you kind of think about the opportunity from here, where do you see is the biggest levers, absent volumes to continue to expand margins in the industrial segment?

Really, it is our commitment to lean and continuous improvement, Kaizen across the organization. We were just at some of our aerospace facilities, and you look at the margins that those aerospace businesses are putting up, but you listen to our team members and you walk the shop floor and you see the Kaizen activity that's happening and the efficiency that it's driving, it is so energizing to see that.

We've said this before, we are very confident, Jenny said it multiple times today, that we're very confident in our ability to continue to expand margins. That's what you're going to see Parker Hannifin do over the long term.

Our team members have a mindset of we're never done. In some of those visits that Todd was just talking about, you're seeing fantastic improvements that they've made, and in the next breath, they're telling you what comes next.

Again, just to reiterate our confidence in the teams, our confidence in our tools in The Win Strategy, and our ability to really create shareholder value there.

That's good to hear. Look, I know we'll get a guide in early August when you report, but I guess as you kind of see your end markets right now, Jenny, you sound pretty sanguine on what's happening in the industrial end markets.

Is it fair to say just given where we sit today that the expectation for next year would be at least a couple points better than what you're seeing in '26?

That's a question to try and get a guide, I think. Listen, it's a fair question.

We've purposely transformed Parker into a less cyclical, faster-growing, and more resilient company. Many of our industrial markets turned positive during this fiscal year, and orders are strong.

As we were just talking about, The Win Strategy is clearly working. It's going to continue to drive growth, margins, and earnings even higher.

We're going to welcome the Filtration Group into this fiscal year, I'm confident that we're going to be able to guide fiscal year 2027 to another record year.

Great question.

Had to try, Jenny. Thank you.

It's okay.

Chloe, this is Todd. I think we have time for one more question before we hit the top of the hour.

Great, thanks. Thanks for fitting me in here.

The pressure of the last question.

Okay.

Lots of questions on orders. Todd, maybe just what was the industrial backlog?

I'm getting $4 $4.1 billion, is that the right number?

Your math is correct.

Your math is good. That's right.

That's why I get paid the big bucks, I guess.

That's right. Then

just a quick one on the Texas facility. Obviously, really bad news, but just wondering the scale of that facility and any disruption you're factoring in for 4Q?

Listen, we're still assessing what the impact is, but we don't expect this to have any material impact to overall Parker.

That's great news. Then just one quick one, the data center business, I know it's small, but it's growing like a weed, I'm assuming it's moving the needle on growth rates, just any update on the size and growth profile of data center?

It's still approximately 1% of our sales, but we have great exposure here. It's growing nicely.

It's just not large enough to have its own vertical right now, but this is just a great example of how our interconnected technologies come together to really provide great value to the customers. Listen, we're working with all the industry leaders, you're right, very fast growing.

We can provide liquid cooling systems, subsystem components, and with the increase in data centers, there's a secondary benefit there around power gen and automation and construction, this is a great overall impact for Parker.

Yep. Great, thanks, Jenny.

Cheers, bye.

Thanks, Nigel. This concludes our FY26 Q3 earnings release webcast.

We appreciate your time and attention and thank everyone for joining us today. As usual, our Investor Relations team of Jeff Miller and Yanis Touki will be available for any follow-ups or clarifications that anyone may have.

Thank you all, and have a wonderful day.