Parker-Hannifin Corp at Bank of America Global Industrials Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Obin - BofA Global Research - Analyst : Okay. As I said, thanks so much. So maybe we will start with macro. Parker reported its first quarter was positive orders in Industrial North America in eight quarters. In fiscal second quarter -- I think half this audience probably is convinced that we're in a recession already. So at this stage, how are you feeling about the macro? What are you hearing from your distributors? Maybe we can start that.

Question: Andrew Obin - BofA Global Research - Analyst : Right. But all of that, you've stated that already.

Question: Andrew Obin - BofA Global Research - Analyst : Okay. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Obin - BofA Global Research - Analyst : But how much of -- and in terms of -- just a follow-up, I guess, and you have said some -- these are longer-term projects. You also said the longer-term projects will remain on this path. So how do we reconcile positive order growth with a lower fiscal-year '25 organic guide?

Question: Andrew Obin - BofA Global Research - Analyst : No, I saw the impact when I visited the facility, like the solenoid valves and how now they've been standardized.

Question: Andrew Obin - BofA Global Research - Analyst : And you can just automate the process. It's quite incredible to see that in action. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Obin - BofA Global Research - Analyst : And just sort of this 4%, 6% that you've mentioned, so will there be a catch up, right? Because given where we are in '25 in terms of the guidance, does that imply that sort of '26 should be above the trend just to catch up to be on target?

Question: Andrew Obin - BofA Global Research - Analyst : And this 4% to 6%, how much of it is predicated on sort of better CapEx cycle? And how much of it is predicated and you outgrowing the market in any of your key businesses? How much is outgrowth? And how much of it is good at market?

Question: Andrew Obin - BofA Global Research - Analyst : Yeah. And maybe just thinking about the tariffs. So how should I think about your exposure to -- let's just start -- what is your exposure to the key region that have been announced in terms of the tariffs?

Question: Andrew Obin - BofA Global Research - Analyst : And so from that perspective, does '25 guidance embed any impact related to the tariffs? Or is it just the idea is that whatever happens is just going to be a wash towards that?

Question: Andrew Obin - BofA Global Research - Analyst : And have you seen any prebuy ahead of the tariffs?

Question: Andrew Obin - BofA Global Research - Analyst : And then how fast would the pricing -- would those be surcharges? Have you already announced the surcharge -- what happens with the backlog? Maybe can you just describe the dynamic? Assuming nothing happens on April 2, what happens at 12:01 AM?

Question: Andrew Obin - BofA Global Research - Analyst : And do you have the ability to reprice the backlog?

Question: Andrew Obin - BofA Global Research - Analyst : Okay. And would it take a quarter to work it through or multiple quarters?

Question: Andrew Obin - BofA Global Research - Analyst : Okay. And in terms of sort of margin impact, is it margin neutral?

Question: Andrew Obin - BofA Global Research - Analyst : And I think you've done quite well on margins historically. I think the margin target, well, it is 27%. So I think for '25, the guide is 25.8%, so at the midpoint. So what's the main driver to get 27%? Is that simply just getting a little bit of volume?

Question: Andrew Obin - BofA Global Research - Analyst : Maybe moving to long cycle, Aerospace has scaled to be a third of the business. Is Aerospace different in terms -- as an end market? Does that require a different playbook or evolution of a different playbook relative to the rest of the company?

Question: Andrew Obin - BofA Global Research - Analyst : And you have the chart that shows the evolution of the portfolio, how much of it is early cycle, mid-cycle, late cycle. And over time, the company is just becoming more and more balanced, more and more late cycle. As this happens, how does increased visibility change the way you manage the business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Obin - BofA Global Research - Analyst : And I think Win Strategy has been with Parker for a long, long time. But for those in the audience that may be not as familiar with Parker, what are the key KPIs that you track as part of The Win Strategy? And yeah, maybe we can start there.

Question: Andrew Obin - BofA Global Research - Analyst : So maybe we can just talk about Simple by Design and specifically, New Product Blueprinting. So can you just talk about shifts in your R&D strategy? Well, A, let's just start with design and how does -- what does it do to R&D spending, what do you spend money on R&D. Just maybe expand on that because I think that's a big focus internally.

Question: Andrew Obin - BofA Global Research - Analyst : And for a company -- as I think about Parker, I sort of think about decentralized structure, right, 80-plus units. I think I was one of the units where the guy was making a decision whether or not he was going to serve coffee like cappuccinos to folks. And he was not going to put on his P&L.

Question: Andrew Obin - BofA Global Research - Analyst : Yeah, no, no cappuccino machine. But from that perspective, how do you run sort of a centralized R&D organization with a business that has 80-plus units? And maybe you can describe, just sort of global product platforms, how do they fall into the regional product platforms? And how does it translate sort of into country-specific offerings? Because there does seem to be -- there's the global matrix that overlays into regional -- it's quite integrate, but it seems to work actually.

Question: Andrew Obin - BofA Global Research - Analyst : So maybe we can sort of switch to industrial, and I just sort of maybe talk about mega projects. If you look at the industrial starts, right, they spiked a couple of years ago if you look at the manufacturing and construction activity in North America. I think it's an all-time peak right now. At the same time, you're sort of talking about CapEx being pushed out. How do I reconcile the manufacturing starts data with the manufacturing construction, with the fact that stuff is being pushed out to the right, right? Because I think there was a fear that some of these projects were just never -- the company would just put up REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Obin - BofA Global Research - Analyst : So maybe can you just sort of square the circle?

Question: Andrew Obin - BofA Global Research - Analyst : And is it supply chain? Is it labor? Can you attribute any of it to that, or is it just level of confidence?

Question: Andrew Obin - BofA Global Research - Analyst : And this is not -- just to make it clear, this is not a calendar Q1 commentary. This is more over the past 9 to 12 months. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Obin - BofA Global Research - Analyst : And specifically on semiconductor spending in North America, you have highlighted semiconductors, but it sounds like it's more of a global commentary. Because semiconductor spending is such a big part, and there is visibility there, actually.

Question: Andrew Obin - BofA Global Research - Analyst : How should we think about Parker's level of participation in these projects? Like, can you give us an example what would you do in a semiconductor facility?

Question: Andrew Obin - BofA Global Research - Analyst : That would be on the mobile side.

Question: Andrew Obin - BofA Global Research - Analyst : And if you look at your filings, right, you're going to actually tease out your workforce reduction. And I think the calculation we made showed that part of the answer to you magical incrementals is you guys being laser-focused on cost control. If you pull those out, decrementals look fairly normal. But the question we often get from investors -- so you've achieved fantastic decrementals. So what is that being on the way up, right? Are these cost take house -- are these structural? Or we basically have to go rehire people as if and when volumes come back, and that diminishes sort of your cyclical leverage -- operate, not cyclical -- you will get cycle leverage -- operational leverage to the cycle. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Obin - BofA Global Research - Analyst : And that's the P&L, right, because we've met with business units, and clearly folks are aware. But if you grow, right, our sense, if you grow, you get the resources, right? That is business unit by business unit. This is not a blunt instrument.

Question: Andrew Obin - BofA Global Research - Analyst : But generally, we should think that when the volumes come back, you will get your due -- incrementals should be healthy on the way up.

Question: Andrew Obin - BofA Global Research - Analyst : Okay. And maybe just a little bit more color on distributors. Maybe it sounds like inventory in the channel you're comfortable with?

Question: Andrew Obin - BofA Global Research - Analyst : But is there room to restock if demand grow --? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Obin - BofA Global Research - Analyst : And what are their primary concerns? You sort of stated that, generally, they continue to be fairly optimistic. But what's the key concern in the channel right now?

Question: Andrew Obin - BofA Global Research - Analyst : And sort of maybe talk about market share. You do have a market share -- maybe the way I want to ask, is there a big difference in your market share across your portfolio, like, maybe specifically on the -- I forget about it -- ex-Aerospace?

Question: Andrew Obin - BofA Global Research - Analyst : But to get to 20%, clearly, capital allocation is part of it.

Question: Andrew Obin - BofA Global Research - Analyst : And you haven't told us how much is organic, how much is -- we don't know from the outside, right, to get the 6 percentage points of share, right?

Question: Andrew Obin - BofA Global Research - Analyst : Maybe on Aerospace and specifically, I think aftermarket in Aerospace has been such a great story, both military and commercial. What's driving the outgrowth on both military aftermarket and commercial aftermarket, and how sustainable is it?

Question: Andrew Obin - BofA Global Research - Analyst : And on the defense side, clearly, European defense, big, big focus. What should we think about within your defense? What's your direct exposure to European defense?

Question: Andrew Obin - BofA Global Research - Analyst : But you have not -- I don't think you've disclosed the specific European defense --

Question: Andrew Obin - BofA Global Research - Analyst : Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Obin - BofA Global Research - Analyst : Right. Well, I guess, the question people always ask, right, Meggitt is UK -- it was a UK-based company. But Meggitt actually had a lot more DoD business than they had MoD business.

Question: Andrew Obin - BofA Global Research - Analyst : So that's what people are trying to get at.

Question: Andrew Obin - BofA Global Research - Analyst : And how long would it take for you to start seeing if --?

Question: Andrew Obin - BofA Global Research - Analyst : And maybe going to airframers, from your perspective, are there inventory issues at Boeing still? Your commercial OE grew 5.5% in second-quarter '25, accelerating from 3.5%. Is supply chain improving, right? Big debate what's happening just from your perspective?

Question: Andrew Obin - BofA Global Research - Analyst : Excellent. And maybe this is a global conference, so I've been asked to ask a question. What are you seeing in Europe general? What are you seeing in China?

Question: Andrew Obin - BofA Global Research - Analyst : [Not] Aerospace as a business.

Question: Andrew Obin - BofA Global Research - Analyst : Okay. And a commenter out of Asia is very semicon specific. It's not a China recovery comment.

Question: Andrew Obin - BofA Global Research - Analyst : Okay. Maybe -- look, I mean, I know that sort of -- I left it to the end because I don't expect to say much. But portfolio and M&A, what's the latest message on M&A? Should we be thinking bolt-ons? Should we be thinking larger acquisitions? Clearly, you've been one of the best capital allocators in the industry for a decade now. So you clearly have a very strong record. But it's such a key part, I think, value creation for you. Just what's the latest color that you're willing to share?

Question: Andrew Obin - BofA Global Research - Analyst : So high interest rates was supposed to help strategics because it was supposed to sort of flush out private equity. I think it's like 1.5 years later, and it's still supposed to help strategics and flush out private equity. But we haven't seen much. What's just the general M&A environment? What's available -- what has -- from your perspective, how has the market evolved over the past 12 months -- 12 to 18 months?

Question: Andrew Obin - BofA Global Research - Analyst : And -- but is it fair to say that -- it sounds actually -- you do sound more constructive about ability to do something versus 12 months ago. Is that a fair statement?

Question: Andrew Obin - BofA Global Research - Analyst : And just to go back -- and we sort of talked about the evolution of Parker -- how you sort of cultivate deals, what it takes for a deal to move through. So I appreciate that. But today, you're a $75 billion market cap company. And I think literally, I think 10 years ago, you were like more like $15 billion market cap? What's different about doing deals that move the needle at $75 billion versus $15 billion? Just maybe talk about that a little bit.

Question: Andrew Obin - BofA Global Research - Analyst : Do you think it's easier to do it at $75 billion?

Question: Andrew Obin - BofA Global Research - Analyst : Terrific. Thanks so much. DISCLAIMER Refinitiv reserves the right to make changes to documents, content, or other information on this web site without obligation to notify any person of such changes. In the conference calls upon which Event Briefs are based, companies may make projections or other forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks, which are more specifically identified in the companies' most recent SEC filings. Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized. THE INFORMATION CONTAINED IN EVENT BRIEFS REFLECTS REFINITIV'S SUBJECTIVE CONDENSED PARAPHRASE OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES REFINITIV OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT BRIEF. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.