Parker-Hannifin Corp at Barclays Industrial Select Conference Transcript

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

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Great. Thanks, Todd, for that. And maybe the demand environment seems quite uneven if we start with the short term. I think a number of companies at this conference have seen decent order growth recently but sluggish revenue, particularly in industrial applications. And I think Parker, that's a similar phenomenon. What do you think explains that? Do we see those orders -- are they more long dated into revenue? Is it just orders had easier comps? Is it real customer improvement?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Great. And when you think about the backlog on the industrial side, it's less of a concept historically. But your business mix has become longer cycle, not just in aerospace. Do you think that industrial backlog is sort of bottoming out now?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Perfect. And when you look across those various industrial verticals or geographies, where do you think we might see that improvement coming first, maybe industrial and implant versus the transport and off-highway side things?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : And your impression of inventories -- and again, it's a huge range of products and schemes and markets. But when you think about inventory levels of those distribution partners? (multiple speakers)

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Got it. And then you mentioned -- we saw the phenomenal margin expansion, and it's happened not just in aerospace with synergies and volume growth, but you've also had good industrial margin expansion with minimal help from volumes. When people look at that, sometimes they ask, is there a lot of pruning going on, deliberate exit reduction of SKUs, 80-20-type work, and sort of trying to understand the interplay of how much of the margin expansion is tied to low volume. So maybe just kind of any thoughts around that.

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : And so when we think about organic market share, I suppose your point is you're getting organic share in industrial. That's occurring alongside margin expansion as well. In that industrial side, I guess, do we think about all the technology platforms similarly? Because, I guess, from the outside, motion feels a bit --

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Got it. And when we're looking at the (technical difficulty) Industrial Implant, Aero, how are you trying to prioritize or focus investments from a vertical standpoint, whether it's inorganic or organic?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Perfect. Geographically, a lot of companies typically earn much higher margins in the domestic US market. Parker's industrial margins are very strong internationally. Help us understand why is that when the pipeline hasn't been there for some time? 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: Julian Mitchell - Barclays Capital, Inc - Analyst : Great. And when you're thinking about sort of different geographic regions and so forth, tariffs come up very frequently now. Help us understand competitively, does anything change with any of that and the comfort around being able to pass on these costs as needed?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : When we look at pricing, it often comes through, let's say, gross margin level and looking at the P&L. When you think about gross margin levels from here, aside from price, is there a lot of need for, say, further footprint consolidation? How should we look at that?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : And on the '29 targets, I think it's a 27% segment margin goal. This year, as you showed, just under 26%. So we can assume that the 27% you can get to without major portfolio changes. If you're thinking about the next step, conceptually, let's say a 30% segment margin, do you think that would require major portfolio shifts?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : And Aerospace I think you're close to that sort of 30-ish percent EBITDA margin that was talked about around the Meggitt deal. Mix has helped alongside synergy, so are you confident -- Aero, you can keep pushing up, let's say even if mix normalizes?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Great. And then on the acquisitions front, we had to get this sooner or later. Is it still the appetite if conditions allow us for sort of a larger-type transaction?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : And if we think sort of away from, say, financial criteria for a second, should we think Parker's trying to go more for sort of revenue growth models versus fixing up low margins?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Fantastic. Well, now we'll switch to the audience response survey questions, please. So the first one, do you currently own shares in Parker?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Yes. Secondly, what's your general bias to Parker right now?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : We'll see.

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : There we go.

Question: Julian Mitchell - Barclays Capital, Inc - Analyst :

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : There we go. The next question is around excess cash usage.

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Yes, so definitely M&A, a lot more popular than other names today. Fifth question is around the PE multiple. Where should Parker trade? 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: Julian Mitchell - Barclays Capital, Inc - Analyst : In line to premium to the S&P. And then the last question is, what's the main gating factor or hold-up stopping people owning more?

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Great. Well, with that, thanks so much, Todd.

Question: Julian Mitchell - Barclays Capital, Inc - Analyst : Thank you. 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 Transcripts 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 TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, 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 TRANSCRIPT. 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.