AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 31/10/2026
Moat56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Achieved aerospace program wins generate follow-on repair and replacement business, supporting customer integration beyond margins alone. Switching friction is inferred. Industrial customization and a diversified IP portfolio do not establish equivalent protection throughout Parker.
durability · 2/4 · Successive annual disclosures connect OEM programs with aftermarket business, and fiscal 2026 sales and backlog support continuing demand. Undisclosed contract lives and rapidly changing technology limit demonstrated durability.
customer dependency · 2/4 · Program-linked follow-on demand demonstrates repeat purchases. The passages do not establish exclusive customer dependence, costly supplier replacement or inability to substitute competing products.
erosion resilience · 2/4 · Aerospace volume and backlog growth and favorable industrial pricing support current resilience. The actual quarterly industrial margin decline shows incomplete insulation. Named competition and technological change identify erosion channels, rather than proving realized share losses.
Pricing power69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 3/4 · Fiscal 2025 industrial price increases, fiscal 2026 first-half price increases and favorable full-year pricing across both industrial regions demonstrate repeated practical pricing ability. Price magnitude and distinct aerospace realization are not quantified.
retention · 3/4 · Actual follow-on aerospace business, aftermarket volume growth and increasing backlog provide strong indirect evidence of repeat demand. Industrial organic demand grew alongside favorable pricing. These observations do not establish a retention rate or rule out customer losses following price increases.
margin resilience · 3/4 · Industrial annual margins improved in fiscal 2025 despite lower sales volume and in fiscal 2026 despite material-cost and other pressures, with pricing contributing. Mix, divestitures and restructuring also helped. The March quarter's decline despite favorable pricing limits the strength of the conclusion.
contractual freedom · 2/4 · Observed increases show some practical freedom to reprice. Disclosed fixed-price terms, cost-recovery delays and government modification or termination rights constrain that freedom. The affected share of revenue is unavailable.
Predictability92
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 7.60
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 1.73
- observedAnnualPeriods
- 5.00
Financial strength75
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 86.95
- netDebtEbitGrade
- 72.49
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 40.98
- Debt / FCF (x)
- 1.91
- Net debt / operating income (x)
- 1.38
- Interest coverage (x)
- 12.64
- Current ratio (x)
- 1.26
Capital allocation97
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 21.61
- 3-year average dilution (%)
- -0.54
- 3-year average SBC / revenue (%)
- 0.80
- cashConversionGrade
- 100.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Fiscal 2026 operating cash flow of $4.364 billion supported investment, acquisitions, distributions and net debt repayment. Higher inventory days and the subsequent $9.25 billion acquisition financed primarily through borrowings make allocation outcomes mixed. Acquisition returns and repurchase value creation are not established.
incentive alignment · 3/4 · Operating three-year LTIP arrangements use revenue, EPS and ROIC goals; actual vesting and a disclosed performance-linked payout corroborate implementation. Ownership-guideline compliance and an adopted clawback support alignment. Individual ownership amounts and full target rigor are absent, while change-in-control benefits weaken the overall package.
execution · 3/4 · Aerospace organic growth, industrial organic demand growth, improved annual industrial results and higher operating cash generation demonstrate execution. Attribution to management is indirect because end-market recovery and mix contribute. Quarterly margin pressure and higher inventory days temper the assessment.
governance · 2/4 · Annual elections, majority voting, independent committees, strong actual attendance, an independent Lead Director and the auditor's effective-control opinion support oversight. Combined chairman and CEO roles, excise-tax gross-ups and a voluntary resignation window qualifying for change-in-control benefits leave governance mixed.
Evidence
In the Aerospace Systems Segment, we have developed relationships with key customers based on our advanced technological and engineering capabilities, performance in quality, delivery, service, and price competitiveness.
Fiscal 2026 Form 10-K, Business, aerospace customer relationships · Filed 21/08/2026
This has enabled us to obtain significant original equipment business on new aircraft programs for our systems and components, as well as the follow-on repair and replacement business for these programs.
Fiscal 2026 Form 10-K, Business, aircraft-program wins and follow-on business · Filed 21/08/2026
This has enabled us to obtain significant original equipment business on new aircraft programs for our systems and components, as well as the follow-on repair and replacement business for these programs.
Fiscal 2025 Form 10-K, Business, aircraft-program wins and follow-on business · Filed 22/08/2025
24
Table of Contents
Aerospace Systems
For the years ended June 30,
2026
2025
Net sales
$
7,061
$
6,185
Segment operating income
$
1,833
$
1,441
Segment operating margin
26.0
%
23.3
%
Net Sales
The Aerospace Systems Segment operations experienced the following percentage changes in net sales:
2026
Reported sales growth
14.2
%
Less: currency
0.8
%
Organic sales growth
13.4
%
Aerospace Systems Segment sales increased compared to prior-year due to higher volume across all market segments, especially in the commercial OEM and aftermarket market segments.
Fiscal 2026 Form 10-K, MD&A, Aerospace Systems sales · Filed 21/08/2026
Backlog
June 30,
2026
2025
Backlog
$
8,498
$
7,389
Aerospace Systems Segment backlog increased in 2026 primarily due to orders exceeding shipments in all market segments, especially in the commercial OEM and aftermarket market segments.
Fiscal 2026 Form 10-K, MD&A, Aerospace Systems backlog · Filed 21/08/2026
Although we believe that we are one of the market leaders in most of the major markets for our most significant Aerospace Systems Segment products, primary global competitors for these products include Crane Co., Eaton Corporation plc, Honeywell Aerospace Inc., Moog Inc., RTX Corporation, Safran S.A., Senior plc, Triumph Group, Inc., and Woodward, Inc.
Fiscal 2026 Form 10-K, Business, named aerospace competitors · Filed 21/08/2026
The markets we serve are characterized by rapidly changing technologies and frequent introductions of new products and services.
Fiscal 2026 Form 10-K, Risk Factors, technological change · Filed 21/08/2026
Our operations are subject to competition from a wide variety of global, regional and local competitors, which could adversely affect our results of operations by creating downward pricing pressure and/or a decline in our margins or market shares.
Fiscal 2026 Form 10-K, Risk Factors, competitive pricing and market-share pressure · Filed 21/08/2026
Agreements relating to the sale of products to government entities may be subject to termination, reduction or modification, either at the convenience of the government or for our failure to perform, or other unsatisfactory performance under the applicable contract.
Fiscal 2026 Form 10-K, Risk Factors, government contract rights · Filed 21/08/2026
Within the North America businesses, segment operating margin increased by 110 basis points in 2026 compared to 2025, primarily driven by favorable pricing and benefits from prior year divestitures, partially offset by unfavorable product mix, increased material costs and higher intangible amortization.
Fiscal 2026 Form 10-K, MD&A, North America industrial margin and pricing · Filed 21/08/2026
Within the International businesses, segment operating margin increased by 90 basis points in 2026 compared to 2025, primarily driven by favorable mix and pricing, partially offset by higher business realignment charges.
Fiscal 2026 Form 10-K, MD&A, International industrial margin and pricing · Filed 21/08/2026
Operating Margin
Diversified Industrial Segment operating margin increased during the current-year quarter and first six months of fiscal 2026 in both the North America and International businesses primarily due to favorable product mix, price increases, and benefits from prior-year business realignment activities, partially offset by an increase in material costs.
December 2025 Form 10-Q, MD&A, first-half industrial price increases · Filed 30/01/2026
Operating Margin
Diversified Industrial Segment operating margin increased in 2025, in both the North America and International businesses, primarily due to benefits from favorable product mix, price increases and benefits related to prior-year restructuring activities as well as cost containment initiatives, partially offset by decreased sales volume.
Fiscal 2025 Form 10-K, MD&A, industrial pricing and lower sales volume · Filed 22/08/2025
Our efforts to manage these fluctuations by, among other things, passing along price increases to our customers, may be subject to a time delay between raw material prices increasing and our ability to increase the price of our products, or we may be unable to increase the prices of our products due to pricing pressure, contract terms (including fixed-price contracts) or other factors.
Fiscal 2026 Form 10-K, Risk Factors, pass-through delays and fixed-price contracts · Filed 21/08/2026
During the current-year quarter, operating margin decreased in both the North America and International businesses primarily due to unfavorable product mix, higher business realignment charges, higher amortization expense of acquired intangibles, as well as increased material costs offset by favorable pricing.
March 2026 Form 10-Q, MD&A, quarterly industrial margin decline despite favorable pricing · Filed 01/05/2026
Organic sales growth relating to our North American businesses in 2026 increased by 3.1%, or $252 million, from 2025, driven by demand within the in-plant and industrial equipment, aerospace and defense, and off-highway markets, partially offset by lower demand within the transportation market.
Fiscal 2026 Form 10-K, MD&A, North America industrial organic growth · Filed 21/08/2026
Organic sales growth within our international businesses in 2026 increased by 3.9%, or $218 million, from prior-year levels primarily due to higher sales in the Asia Pacific region, where we experienced higher demand within the electronics and semiconductor and in-plant and industrial equipment markets, partially offset by lower demand within the transportation market.
Fiscal 2026 Form 10-K, MD&A, International industrial organic growth · Filed 21/08/2026
Diversified Industrial Segment products include standard products, as well as custom products which are engineered and produced to OEM specifications for application to particular end products.
Fiscal 2026 Form 10-K, Business, standard and OEM-specific industrial products · Filed 21/08/2026
We do not depend on any single patent, trademark, copyright, trade secret or license or group of patents, trademarks, copyrights, trade secrets or licenses to any material extent.
Fiscal 2026 Form 10-K, Business, intellectual-property dependence · Filed 21/08/2026
Twelve Months Ended
(Unaudited)
June 30,
(Dollars in millions)
2026
2025
Cash flows from operating activities
Net income
$
3,649
$
3,532
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
353
354
Amortization
584
553
Stock-based compensation expense
179
159
Deferred income taxes
(4)
(304)
Pensions and other postretirement benefits, net
(68)
(152)
Gain on sale of businesses
(9)
(253)
Other, net
(24)
40
Changes in assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable, net
(114)
6
Inventories
(272)
(94)
Other assets
(71)
15
Accounts payable, trade
290
119
Other liabilities
10
(134)
Income taxes
(139)
(65)
Net cash provided by operating activities
4,364
3,776
Cash flows from investing activities
Acquisitions, net of cash acquired
(1,014)
—
Capital expenditures
(459)
(435)
Proceeds from sale of property, plant and equipment
40
32
Proceeds from sale of businesses
16
623
Other, net
27
4
Net cash (used in) provided by investing activities
(1,390)
224
Cash flows from financing activities
Payments for common shares
(1,262)
(1,766)
Proceeds from (payments for) notes payable, net
(736)
(364)
Proceeds from long-term borrowings
23
751
Payments for long-term borrowings
(24)
(1,741)
Dividends paid
(936)
(861)
Other, net
1
4
Net cash used in financing activities
(2,934)
(3,977)
Effect of exchange rate changes on cash
(6)
22
Net increase (decrease) in cash and cash equivalents
34
45
Fiscal 2026 earnings exhibit, unaudited annual cash-flow statement · Filed 06/08/2026
Note 20. Subsequent Event
On August 13, 2026, the Company completed the FGC acquisition.
Fiscal 2026 Form 10-K, Note 20, acquisition completed August 13, 2026 · Filed 21/08/2026
The cash purchase price of $9.25 billion was funded with cash primarily through borrowings under the Credit Facilities and the commercial paper program.
Fiscal 2026 Form 10-K, Note 20, acquisition purchase price and financing · Filed 21/08/2026
•Days supply of inventory on hand was 86 days in 2026 and 82 days in 2025.
Fiscal 2026 Form 10-K, MD&A, inventory days · Filed 21/08/2026
The Company's Long Term Incentive Plans ("LTIP") provide for the issuance of unrestricted stock to certain officers and key employees based on the attainment of certain goals relating to our revenue growth, earnings per share growth and return on invested capital during a three-year performance period.
Fiscal 2026 Form 10-K, stock compensation, three-year LTIP performance measures · Filed 21/08/2026
A summary of the status and changes of shares subject to RSU and LTIP awards for employees and the related average price per share follows: RSU LTIP Awards (Shares in thousands) Number of Shares Weighted-Average Grant Date Fair Value Number of Shares Weighted-Average Grant Date Fair Value Nonvested June 30, 2025 146 $ 449.11 275 $ 438.35 Granted(1) 53 $ 748.78 143 $ 540.23 Vested (77) $ 404.16 (215) $ 309.58 Canceled (5) $ 599.71 (7) $ 622.75 Nonvested June 30, 2026 117 $ 607.65 196 $ 647.72 (1) LTIP awards granted includes an adjustment for actual performance achieved.
Fiscal 2026 Form 10-K, stock compensation, actual grants and vesting · Filed 21/08/2026
•Robust stock ownership guidelines for our Directors and executive officers (all of whom are compliant with such guidelines)
2026 proxy statement, stock ownership guideline compliance · Filed 18/09/2026
Our results for revenue growth were at top quartile, and our results for earnings per share growth and growth in average return on invested capital were between the median and top quartile performance levels, resulting in a payout at 167.36% of target.
2026 proxy statement, achieved relative performance and LTIP payout · Filed 18/09/2026
Shareholder Rights •Annual election of all Directors •Majority voting and resignation policy for uncontested Director elections •Proxy access permitted for eligible shareholders Board Independence •Board Committees are 100% comprised of independent Directors.
2026 proxy statement, shareholder rights and independent committees · Filed 18/09/2026
•Average Director attendance at all of our Board of Directors and Committee meetings was over 96% and each of our Directors attended at least 75% of his or her meetings of our Board of Directors and his or her Committee meetings during fiscal year 2026.
2026 proxy statement, actual fiscal 2026 board and committee attendance · Filed 18/09/2026
Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Fiscal 2026 Form 10-K, auditor opinion on internal control · Filed 21/08/2026
Ms. Parmentier has been Chairman of the Board since January 2024 and Chief Executive Officer since January 2023.
Fiscal 2026 Form 10-K, combined chairman and CEO positions · Filed 21/08/2026
•for Ms. Parmentier and Messrs. Ross and Leonti, a “gross-up” payment to offset the effect, if any, of the excise tax imposed by Section 4999 of the Internal Revenue Code.
2026 proxy statement, change-in-control excise-tax gross-up provisions · Filed 18/09/2026
“Good Reason” for termination of employment by the Named Executive Officer includes diminution in duties, reduction in compensation or benefits, relocation, or resignation from employment by the executive for any or no reason during the 180-day period beginning on the 91st day after the Change in Control.
2026 proxy statement, Good Reason includes a post-change-in-control voluntary resignation window · Filed 18/09/2026
Clawback Provisions
Our Board of Directors adopted a Section 16 officer clawback policy effective as of December 1, 2023, which complies with the required standards of the New York Stock Exchange and the SEC (the “NYSE Clawback Policy”).
2026 proxy statement, adopted officer clawback policy · Filed 18/09/2026
While our primary global competitors include Bosch Rexroth AG, Copeland, Danaher Corporation, Danfoss A/S, Donaldson Company, Inc., Emerson/ASCO, Festo SE & Co., Freudenberg-NOK, Gates Corporation, IMI/Norgren, SMC Corporation, Swagelok Company, and Trelleborg AB, none of these businesses compete with every group or product in our Diversified Industrial Segment.
Fiscal 2026 Form 10-K, Business, named industrial competitors and product coverage · Filed 21/08/2026
Oversight of Risk •Our Chairman of the Board and independent Lead Director ensure the entire Board of Directors maintains regular oversight of key risk areas, such as corporate strategy, management succession planning, cybersecurity, enterprise risk management, and sustainability matters.
2026 proxy statement, independent Lead Director and risk oversight · Filed 18/09/2026
