Parker-Hannifin (NYSE:PH) executives highlighted what they described as record second-quarter fiscal 2026 performance, driven by broad-based organic growth, margin expansion, and continued strength in aerospace, while also outlining progress on the planned acquisition of Filtration Group Corporation.
Record quarter: sales growth, expanding margins, and strong cash generation
Chairman and CEO Jenny Parmentier said fiscal 2026 second quarter results reflected the company’s ability to “compound performance,” pointing to an 8% reduction in recordable incident rate and “top quartile” safety performance. Financially, she said the company delivered record Q2 sales of $5.2 billion, organic growth of 6.6%, and 150 basis points of margin expansion, resulting in adjusted segment operating margin of 27.1%.
On profitability, Leombruno said adjusted EBITDA margin was 27.7%, up 90 basis points from the prior year, while net income was $980 million, representing return on sales of 18.9%. Adjusted EPS was $7.65, up 17% year over year, which he called a record.
Cash flow was also a focus. Management reported cash flow from operations of $1.6 billion in the quarter and free cash flow of $1.5 billion in the first half, noting that first-half results included a “slight drag from working capital and the timing of some tax payments.” Leombruno reiterated that free cash flow is “second-half weighted” and said the company remained committed to free cash flow conversion of greater than 100% for the year.
Orders, backlog, and segment performance
Leombruno said companywide orders were up 9% versus the prior year, with positive order rates in all reported businesses. Backlog rose to a record $11.7 billion.
By segment and geography, management described strength in multiple areas:
- North America: Sales were about $2.0 billion with organic growth of 2.5%, which Leombruno said came in “slightly better” than expectations due to strength in off-highway and aerospace and defense verticals. Adjusted operating margin reached a record 25.4%, up 80 basis points year over year, with incrementals of 52%. North America orders increased 7%, helped by “a few multi-year aerospace and defense orders.”
- International: Sales were a record $1.5 billion, up 12% year over year, with organic growth of 4.6%. Asia-Pacific posted 9% organic growth, Europe turned positive at 2%, and Latin America was down 3%. Adjusted operating margin was a record 26%, up 190 basis points, which management attributed to productivity improvements and operational execution. Orders increased 6% with positive orders in Europe and Asia-Pacific.
- Aerospace Systems: Sales were a record $1.7 billion, up 14.5% year over year, with organic growth of 13.5% driven by strength in commercial OEM and aftermarket. Adjusted segment operating margin improved 200 basis points to 30.2%. Orders were up 14%, and aerospace backlog rose 14% to a record $8.0 billion, which Leombruno said was the first time in company history the aerospace backlog reached that level.
Market verticals: off-highway improving; transportation still challenged
Parmentier emphasized that Parker’s “interconnected technologies” span six market verticals representing more than 90% of revenue, and she highlighted the off-highway market—construction, agriculture, and mining—as an area where the company’s interconnected offerings and embedded OEM engineering relationships support differentiated solutions.
In updated fiscal 2026 outlook by vertical, Parmentier said the company raised the aerospace organic growth forecast to 9.5%-11% (up from the prior outlook), citing ongoing strength in commercial OEM and aftermarket. She said in-plant and industrial expectations remained positive low-single-digit growth, with a continued recovery but “selective” customer capital spending. Transportation was unchanged at a mid-single-digit organic decline, with demand challenges in truck and auto partially offset by aftermarket strength.
She said off-highway was raised from neutral to positive low-single-digit growth based on construction and mining growth, while agriculture “remains under pressure.” Energy was maintained at positive low-single-digit growth, with robust power generation activity offset by soft upstream oil and gas. HVAC and refrigeration remained positive mid-single-digit growth, supported by commercial HVAC, refrigeration, filtration, and aftermarket.
Filtration Group acquisition: timeline, synergies, and strategic rationale
Parmentier said integration planning for the Filtration Group acquisition is underway using the company’s “proven integration playbook,” and the company expects to close in 6-12 months from the November announcement date, subject to regulatory processes. She said Filtration Group adds complementary and proprietary technologies and expands Parker’s presence in life sciences, HVAC and refrigeration, and in-plant industrial verticals.
She also said combining Parker Filtration and Filtration Group would create “one of the largest global industrial filtration businesses” and increase Parker Filtration aftermarket sales by 500 basis points. Management expects approximately $220 million in cost synergies and said the deal is expected to meet its acquisition criteria, including being accretive to organic growth, “synergized EBITDA margin,” adjusted EPS, and cash flow. In Q&A, Parmentier said the company did not model revenue synergies but sees opportunities to leverage customer relationships for upside.
Guidance raised across the board; Q3 outlook updated
Leombruno said the company raised full-year guidance “across the board” based on first-half performance and strong orders. The company now expects reported sales growth of 5.5% to 7.5% (6.5% at the midpoint), with currency expected to be a 1.5% tailwind using December 31 spot rates. Organic growth guidance increased to 4% to 6% (5% midpoint). Management also raised full-year adjusted segment operating margin guidance by 20 basis points to 27.2% and expects full-year incrementals of 40%.
The company raised adjusted EPS guidance to $30.70 at the midpoint (±$0.30), which management said would be up 12.3% versus the prior year. It also raised full-year free cash flow guidance to $3.2 billion to $3.6 billion (about $3.5 billion midpoint), with conversion greater than 100%.
For fiscal Q3, management forecast reported sales of nearly $5.4 billion (about 8.5% higher), organic growth of 5%, segment operating margins of 27%, and adjusted EPS of $7.75.
About Parker-Hannifin (NYSE:PH)
Parker-Hannifin Corporation (NYSE: PH) is a global manufacturer and provider of motion and control technologies and systems. The company designs, manufactures and services a broad range of engineered components and systems used to control the movement and flow of liquids, gases and hydraulic power. Its product portfolio is applied across demanding environments and includes solutions for industrial manufacturing, aerospace, mobile equipment and other engineered applications.
Parker-Hannifin’s product and service offerings span hydraulic and pneumatic components, fittings and fluid connectors, valves, pumps and motors, electromechanical actuators and motion-control systems, filtration and separation products, and seals and sealing systems.
