The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Stephen Volkmann - Jefferies - Analyst
: Great. All right. So let's kick off Q&A then. If anybody has a question, you can just raise your hand and we'll work that in. I'll just start
off. I think, Todd, one of the most striking things that's happened at Parker since I started covering you guys, I remember I remember
an IR guy that looked a little like you.
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Question: Stephen Volkmann - Jefferies - Analyst
: So 20 years ago but --
Question: Stephen Volkmann - Jefferies - Analyst
: One of the most striking things is that we've heard a lot at this conference about a bit of a soft patch in short-cycle industrial. That
used to be what drove Parker-Hannifin, doesn't seem to be driving in any longer. You just gave guidance for FY25 that was ahead
of what the Street was expecting. Talk about how that's changed and how much visibility you have and what gives you confidence
of setting that higher guidance for FY25?
Question: Stephen Volkmann - Jefferies - Analyst
: Okay. And you guys don't talk in a lot of detail around pricing, but any broad comments you can give us in terms of what you can --
Question: Stephen Volkmann - Jefferies - Analyst
: But is it fair to say that price cost has been a tailwind? I mean, you guys have grown margin a lot over the last 10 years.
Question: Stephen Volkmann - Jefferies - Analyst
: Okay. Let's look at orders a little bit. I think historically, for you guys a cycle is five or six quarters of negative orders. Where are we in
that?
Question: Stephen Volkmann - Jefferies - Analyst
: And you guys, I think, have worked some new processes around AI and forecasting, does that give you longer visibility now than
you used to have?
Question: Stephen Volkmann - Jefferies - Analyst
: So are these higher levels of backlog what the new normal should look like or do they continue to moderate?
Question: Stephen Volkmann - Jefferies - Analyst
: All right. We'll come up for air. Any questions from -- can I get one in the back?
Unidentified Participant
Just on the M&A side, if you don't mind, are you guys thinking more aerospace or the industrial businesses? Aerospace -- it seems
like there's a lot of folks out there looking for assets, almost every aerospace company here is looking for assets. Can you just talk
about how -- why you would win?
Question: Stephen Volkmann - Jefferies - Analyst
: Do you have any views on like if aerospace is 50% of the company? Is that fine, if it's the right asset?
Question: Stephen Volkmann - Jefferies - Analyst
: And you mentioned this earlier, I was going to get to it, but you've recharged the balance sheet, you're where your normal debt to
assets or EBITDA coverage should be -- how much are you willing to flex up if the right deal came on?
Question: Stephen Volkmann - Jefferies - Analyst
: And one thing that struck me recently is that you actually announced a reasonably chunky divestiture, which hasn't really been part
of the track record.
Question: Stephen Volkmann - Jefferies - Analyst
: Great. Maybe the final one on M&A. The Meggitt process was a little more drawn out. That's exactly what the reaction I was looking
for. So the question is, would you do something like that again? I mean there's a lot of approvals in the divestures and --
Question: Stephen Volkmann - Jefferies - Analyst
: And a lot of companies have come at this at a different angle from you, which is to do it more in small chunk, but more of them, is
that also on the table?
Question: Stephen Volkmann - Jefferies - Analyst
: Anyone else?
Unidentified Participant
Just on the guidance for this year and longer term. You got the aerospace business, which is round numbers, 30% of your portfolio
probably growing at 12%. So you're almost hitting the bottom end of your midterm guidance -- near-term guidance just with
aerospace. So it sounds like -- and there's no M&A in there. So it sounds like you're assuming that the industrial businesses don't
really pick up the orders seem like they've inflected.
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Question: Stephen Volkmann - Jefferies - Analyst
: With that, I'm afraid we're out of time. I'm sorry. We want to keep on schedule time. Thank you.
Question: Stephen Volkmann - Jefferies - Analyst
: Really appreciate it.
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