I'd like to welcome everyone to Parker's fiscal year 2025 fourth quarter and full year earnings release webcast. The agenda for today has Jenny starting out with the highlights of our record fiscal year 2025 performance. She'll provide some color on our recently announced acquisition of Curtis Instruments. We did release our initial FY 2026 guidance this morning, and we will discuss the assumptions and provide some color on what we expect to be another record year for Parker.
The Win Strategy and our culture of high performance delivered another record year. We had a 17% reduction in recordable incident rate, once again achieving top quartile safety performance and record engagement survey results. We generated record cash flow from operations of $3.8 billion and delivered 7% adjusted EPS growth. We finished the year with a record $11 billion in backlog, and we remain committed to a disciplined, active, and balanced capital deployment strategy.
Another year of outstanding performance from aerospace with record sales of $6.2 billion. That's 13% organic growth and 190 basis points of adjusted segment operating margin expansion. Orders continued to outpace sales growth as we finished the year at a record backlog of $7.4 billion. Sales are approximately two and a half times higher, and we are on track to expand adjusted segment operating margin by 940 basis points from fiscal year 2019 through our fiscal year 2026 guide.
| Metric | Period | Current guidance |
|---|---|---|
| Reported sales growth | FY2026 | 2%-5% (3.5% midpoint), ~$20.6 billion (Initiated) |
| Organic sales growth | FY2026 | 1.5%-4.5% (3% midpoint) (Initiated) |
| Adjusted segment operating margin | FY2026 | 26.5% midpoint (+40 bps) |
| Adjusted EPS | FY2026 | $28.90 midpoint (+/- $0.50), up 6% (Initiated) |
| Free cash flow | FY2026 | $3 billion-$4 billion, ~100% conversion (Initiated) |
| Aerospace organic growth | FY2026 | ~8% (high single digit) (Initiated) |
| Tax rate | FY2026 | 22.5% (Initiated) |
| Adjusted EPS | Q1 2026 | $6.51 (Initiated) |
| Incremental margins | FY2026 | ~35% for the full year (Initiated) |
| Metric | YoY | Note |
|---|---|---|
| Q4 adjusted EPS | +14% to $7.69 | 60% from strong operating execution (segment income up $96 million), plus favorable income tax discretes, lower interest expense, and share repurchases. |
| Q4 aerospace sales | +10% to record $1.7 billion | 9% organic growth driven by strong aftermarket channel strength, with margins up 190 bps to a record 29%. |
| Q4 North America organic growth | -1% | Sequential improvement that beat expectations, with margins up 170 bps to 26.7% on operating execution, cost controls, and favorable mix in engineered materials and filtration. |
| Q4 international sales | +4% to $1.5 billion | Positive 1% organic growth (Asia-Pac +6%, Latin America +4%) while EMEA remained -3%. |
| Q4 international orders | Flat | Tough comps as significant long-cycle Q3 orders did not repeat, though order dollars were flat sequentially to Q3. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Aerospace momentum | Three years of double-digit organic growth; record backlog building | Forecast ~8% organic growth in 2026 on MRO strength and gradual OEM recovery, with every quarter expected to be a record | Strong but moderating growth rate |
| Industrial recovery | Negative organic growth environment | Poised for return to growth with ~1% organic guided, gradual recovery assumed and positive distributor sentiment | Improving |
| Margin expansion / Win Strategy | Consistent through-cycle margin expansion | Continued expansion guided (40 bps) even with modest top-line growth, supported by slightly higher restructuring | Improving |
| Portfolio transformation | Two-thirds longer cycle, secular, and aftermarket | Targeting 85% longer cycle, secular, and aftermarket by FY2029, aided by Curtis acquisition | Advancing |
| Tariffs | Not a big deal last quarter | Managed with no impact to EPS via pricing, local-for-local footprint, and dual sourcing | Stable / contained |
| Capital deployment | Disciplined and balanced | $1.6 billion repurchased in FY2025, leverage at 1.7x, capacity for further M&A of all sizes | Active |