Earnings Call Transcript - PH Q3 FY2026

Operator

Good morning, and welcome to Parker-Hannafin Corporation's Fiscal 2026 Third Quarter Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the prepared remarks, there will be a question and answer session. To ask a question during this period, you will need to press star 1 on your telephone keypad. If you want to remove yourself from the queue, please press star 2. Please be advised that today's conference is being recorded. If you should need operator assistance, please press star zero. I would now like to turn the call over to Todd Liambruno, Chief Financial Officer. Please go ahead.

Todd Leombruno, CFO

Todd Liambruno Thank you, Chloe. I'd like to welcome you to the Executive Officer of the non-GAAP for reviewing our record of our largest market rotation, including your attention to slide three.

Jennifer Parmentier, CEO

Todd Liambruno Thank you to everyone for attending the call today. Q3 was a quarter of record performance, enabled by the strength of our portfolio. We achieved top with a 12% reduction in our recordable incident rate. This was our safest course that's in line with our goal of being the safest industrial company in the world. I did want to acknowledge the severe weather events that occur. Parker team members live and work, some of whom may be listening to the call right now. We have a facility in Mineral Wealth, Texas, where we employ over 300 team members. Their safety remains our top priority, and thankfully, those on site, it's damage to our facility, all our team members, as well as assisting at our site and in the broader community. Our team delivered record Q3 organic growth and 40 basis points of margin expansion, resulting in 26.7% adjusted segment operating margin. Adjusted earnings per share grew 18%, and year-to-date cash flow from operations was $2.6 billion. Orders came in at 9%. We are continuing to make progress on the filtration group acquisition. Integration planning is underway using our proven strategy. We have seen this slide. This strategy is our business system. We have a decentralized operating structure, 85 divisions run by general managers with full P&L responsibility, acting like owners, close to their customers, and executing the win strategy every day. Next, we have innovative product. Our application engineers provide the expertise that allows us to have a competitive advantage with our interconnected technologies that provide efficient solutions for our contribution network is the best in the world is truly an extension of our engineering teams providing solutions to all those small to midsize OEMs that are participating in capital spending and investment these partners are experts at applying our interconnected number one position in the 145 billion dollar motion and control industry we continue to gain share let's represent greater than 90% of the company's revenue. We have a focused portfolio creating distinct value of interconnected solutions cuts across these market verticals and gives us a clear competitive advantage. Two-thirds of our revenue comes from customers who buy four or more technologies, and our growth is focused on faster-growing, longer-cycle markets and secular trends. As Todd mentioned, today I would like to talk about transportation market verticals technologies to solve problems and create value for customers in aerospace and representing 35 partners since the inception of the aerospace industry and today have products and technologies on every major aircraft program globally approximately two-thirds of our sales from commercial programs and one-third from different dietary designs across commercial transport defense fixed wing fighter business jet and helicopter platforms with the Megadac position we We increased our global footprint and are now very well equipped to serve current and future demand from OEM and aftermarket customers in the Americas, EMEA, and Asia. Demand remains robust, orders continue to outpace shipments, and we are on track to finish our fourth consecutive year of double-digit organic growth, equipped than ever before with complementary technologies to help shape the future of flight and deliver a compelling value proposition for our customers today and on next-gen commercial and defense programs in the years ahead. Moving to slide 7, featuring our transportation market vertical, which represents 15%. Our suite of differentiated and interconnected components and systems create value for customers across internal combustion, hybrid, and electric vehicles. We are truly energy agnostic and well-positioned to meet changing customer needs. Today, we win with a focused portfolio of innovative products and our application engineers who work closely with customers to specify Parker technologies that improve the safety, reliability, and fuel efficiency of their products. Filtration provides protection to the engine and fluid power supply, reliable power to end fittings, control the flow of safety, and our engineered materials provide critical sealing, shielding, and thermal management. In addition, our robust network of channel partners serve the aftermarket needs of end users around. Lastly, we are seeing an increase in OEM orders for heavy-duty truck, our largest platform within transportation, and as a result, our increasing fiscal year 26 sales guidance for

Todd Leombruno, CFO

I'll turn it back to Todd to review third portion of EBITDA, adjusted EBITDA was at 18% EPS growth. The $1.23 of additional EPS, that's the 18-cent favorable year-over-year comparison due to some favor focusing on a customer level of 12 nearly 3% looking at the international plus 11 in the practice in point two percent you saw last week

Jennifer Parmentier, CEO

the slide 14 so slide 14 shows our updated fiscal year 26 organic sales increasing our forecast from 11% to 12% organic growth as we continue to see as Todd said strengthen commercial OEM and aftermarket in plant industrial remains the same at a positive low single digit organic growth quoting activity remains strong customers are prioritizing spending on automation and productivity and I would say distributed inventories are stable and continuing to order to demand as I just mentioned in an earlier slide we are raising our outlook on transportation from mid single digit organic decline to low single digit organic decline. This is driven by stronger heavy truck orders. Demand challenges persist. It's the same at construction growth from capital and infrastructure investment, while ag remains under pressure. We are maintaining energy at positive low single-digit growth with strong power gen activity. We do see growth in midstream oil and gas, but it is offset by upstream, which remains soft. And we are maintaining HVAC refrigeration at positive mid-single-digit growth. We see strength in commercial HVAC, refrigeration, filtration, and aftermarket. As a result of these changes, we are increasing our organic sales growth

Todd Leombruno, CFO

growth is now expected, expecting to be 27.2 for the year. Adjusted EPS has been written at the midpoint, 0.2%. Some more details in the year. Engagement and ownership are the

Jennifer Parmentier, CEO

foundation of our culture. It's our people and living up to our purpose that drives TEP allows us to be great generators.

Operator

Absolutely. As a reminder to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 2. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. We'll take our first question from Meg Dobre with Baird. Your line is open.

Meg Dobre, Analyst — Baird

good morning and thanks for the for the question here maybe i'll start with uh kind of the topical items of late um you haven't really called out what's been going on in the middle east in any way uh that that was material so i'm i'm curious if you look at your business have there been any any disruption or anything that's different that we need to be aware of And also, you know, there's an updated tariff framework. I'm curious if there's any impact to be done about as far as you're concerned.

Jennifer Parmentier, CEO

Thank you for our team members. You know, direct revenue in the Middle East is very small, and there's really no manufacturing. It's primarily a sales organization. So our teams are doing a fantastic job managing the supply chain, handling logistics, and, you know, doing everything they can to minimize the disruption to our customers. So at this point, we're not seeing any material impact managing them to make sure that there's no impact to earnings. Management has been a core element of the WINT Strategy for us. This is a strong muscle for us for over 25 years, and we don't expect this to have any impact. When you're looking at changes in tariffs, again, I would say it's nothing that we're concerned about taking care of.

Todd Leombruno, CFO

We can there.

Meg Dobre, Analyst — Baird

And then my follow-up, just kind of sticking with your comments on price costs, I guess optically, even though this was a very good quarter, you guys put up optically the incrementals on the industrial side of the business were a little bit lower than what we have seen of late. And I'm kind of curious if there is any lag whatsoever that you're experiencing in terms of either dealing with these tarot dynamics or any other inflationary aspects within your business, you know, any delay relative to where you're able to implement price.

Jennifer Parmentier, CEO

No delays, no concerns there with it in North America and international. And in North America, this was really driven by stronger OEM growth, and notably this came from off-highway and transportation. Distribution did hold there yet. And while we aren't in the excuse-making business, as I tell the teams, the teams are always planning for various contingencies. This quarter we had to recover from more weather-related disruptions than normal, and that was mainly in North America. So we're very proud of the teams, as Todd mentioned, for responding and delivering to the customers. Two, three, record margin for North America. And, you know, we're going to finish the year strong.

Operator

We'll move next to Jamie Cook with Truist Securities. Your line is open.

Jamie Cook, Analyst — Truist Securities

Good morning and congrats on a nice quarter. I guess two questions just following Meg's question on the incremental margins. You know, for the full year, you're still expecting a 40% incremental margin, which is, you know, above a normalized range or what you laid out at the analyst day. So I guess as, you know, Todd, while you don't want to talk about 2027, as we think about the setup for next year over the longer term, is there any reason why we shouldn't believe incremental margins can be in the 40% range? or does mix, you know, on, like, the mobile side or whatever impact that or can incrementals be structurally, you know, better? And then I guess, you know, Jenny, my question to you, just because there's a lot of concerns, obviously, with the Middle East and macro, your orders in industrial still were very strong, in particular on international. Like you said, with the tough comps, Anything notable on sort of the cadence of orders throughout the quarter or into April or just confidence level, sort of like last quarter, has it waned at all, you know, relative to the last quarter when it felt like you've been pretty one of the first people to be more positive, I guess, on industrial short cycle?

Todd Leombruno, CFO

Jamie, thanks for the congrats. I'll start. Question, Jamie.

Jennifer Parmentier, CEO

You know, we saw, you know, I would say the industrial recovery continues. We saw more broad-based positivity on both short and long cycle than we did earlier this year. So, you know, we feel really good about the guidance. And as always, you know, we stay close with the customers. So we not only feel good about the guidance, but we're not seeing anything right now that concerns us.

Jamie Cook, Analyst — Truist Securities

Thank you. Congrats again.

Operator

We'll take our next question from Jeff Sprague with Vertical Research. Your line is open.

Jeffrey Sprague, Analyst — Vertical Research

Hey, thanks. Good morning, everyone. Jenny or Todd could you just maybe spend a little more time on aero you know the organic growth in Q4 I guess will be sort of the slowest of the year against the easiest comp of the year are you dialing in some you know aftermarket pressure or you know what maybe kind of what's underneath that outlook in the

Jennifer Parmentier, CEO

in the fourth quarter Jeff you know the aerospace Q4 forecast is approximately 9% and that was raised from our previous q4 guidance of stuff not baking in any any folks continue to be very strong and again as I mentioned earlier this is going to be our fourth year in a row of double-digit organic growth for aerospace but we're not we're not building in any slowdown here and there's

Jeffrey Sprague, Analyst — Vertical Research

no indication in orders or anything that there's a shift between oh you're aftermarket say that again I'm sorry yes um the complexion of OE versus aftermarket in arrow wonder if you can give a little

Jennifer Parmentier, CEO

more color there well if you look at how we performed in Q3 commercial OEM was up 22% aftermarket was up but again 51% OEM in Q3 and the teams are doing a really great job with the higher OEM mix and still being able to expand margin

Operator

backlog. Great. Thank you. I'll leave it there. We'll move next to Chris Snyder with Morgan Stanley.

Chris Snyder, Analyst — Morgan Stanley

Your line is open. Thank you. You know, I understand that as, you know, the industrial businesses turn to be more longer cycle exposure, that there's a lag between when, you know, the orders convert to revenue. But if we see industrial orders sustained here in this mid single digit even maybe high single digit range for several quarters in a row is there any structural reason why sales will not ultimately um you know get to that same level of growth

Jennifer Parmentier, CEO

thank you if there's any any structural reason but if you look at north america orders have been that these included long cycle multi-year and so again in q3 we saw orders that are due beyond this fiscal year including defense energy and even construction orders scheduled into fy27 which is you know usually shorter cycle so you know we're valuing three percent organic growth for q4 which would be the best performance so far for this year and you know as todd mentioned earlier you

Chris Snyder, Analyst — Morgan Stanley

know we like the way to set up thank you um and then when you look across all of the the various um industrial end markets that that the company serves um you know are you seeing um the improvement in sales and in orders driven by end demand going higher like what's being put out into the channel is being consumed or are there spots where you think distributors could be maybe building a little inventory in anticipation of a cycle you know maybe some concerns on supply chains or commodity inflation with the events in the middle east um and yeah just trying to see if there's any like end market differences on that thank you i wouldn't say we're seeing any of that yet i

Jennifer Parmentier, CEO

I think they're still ordering to demand, you know, for rather quick consumption. We're not, you know, seeing any real acceleration or any typical signs of restocking. Haven't heard of any supply chain fears, you know, within the channel or on the industrial side.

Chris Snyder, Analyst — Morgan Stanley

Thank you, Jenny.

Operator

We'll move next to Amit Mehrotra with UBS. Your line is open.

Amit Mehrotra, Analyst — UBS

Thanks, operator. Morning, everybody. I wanted to just follow up on that point around, I guess, distributors versus OE mix. And, Jen, I think you made a comment about, you know, stable distributor inventories, ordering to demand, you know, strong quoting. I'm just trying to triangulate those items to understand sort of the psychology around inventory stocking and kind of a more structural question. are the distributors maybe getting a little bit more sophisticated around inventory management and so maybe there's a mix more from growth towards oe which has margin consequences maybe

Jennifer Parmentier, CEO

you could talk about that yeah what i would say is that over the last several years i think our our distributors have become very sophisticated when it comes to inventory management you know even coming out of COVID, managing cash, and, you know, really putting all of, you know, to order what they need and use it and sell it for consumption. So I think that is definitely something that has happened over the last time. And when we talk about, you know, the increase that's been going on. So they've been telling us for quite some time that quoting activity is strong. Their sentiment has been positive. Again, they will tell us that their customers are being, you know, selective with capital investments and really focused on those that, you know, provide automation and productivity. So we're not, you know, signaling anything, you know, changing. It's just not accelerating right now. And we are seeing an increase in OEM, you know, with the raise to transportation outlook, you know, off highway with construction we are seeing increased oe which is you know below distribution

Amit Mehrotra, Analyst — UBS

right and and then you also mentioned um historically over the last few quarters you talked about the order strength really being centered on longer cycle specific verticals i think you kind of broadened it out a little bit this quarter maybe just talk a little bit more about that true short cycle piece and what your observations have been over the last few months

Jennifer Parmentier, CEO

Yeah, so, you know, when you look at long cycle, it continues to pull strong. We've been talking about that. You know, that's why we raised our, you know, lots of activity in midstream oil and gas. On the short side, as I mentioned before, you know, the industrial recovery continues. And we've been talking about a slow, gradual industrial recovery for some time now, and that's what we're seeing. The orders that we saw were more broad-based and positive on both short and long cycle than we've seen, you know, really all of this fiscal year. So construction continues to improve, heavy-duty truck improvement, in-plant and distribution, which we just talked about. We're continuing to see this positive low single-digit growth, and again, you know, we'll say we're set up for a good fiscal year 27.

Amit Mehrotra, Analyst — UBS

Okay, thank you very much. Appreciate it.

Operator

We'll take our next question from Andy Kapowitz with Citigroup. Your line is open. Good morning, everyone.

Andy Kaplowitz, Analyst — Citigroup

Jenny, could you talk about what you're seeing in the aerospace supply chain? As you know, one of your peers continues to have some issues there, but you've continued to execute well, seem to be absorbing like a little bit more difficult margin mix while still growing. So as we start to transition to FY27, is there any reason why you couldn't continue to grow margin even if mix is running a bit more against you?

Jennifer Parmentier, CEO

Well, you know, I remained confident in our ability to expand margins and committed to that as well. so I don't have any change there. You know, the aerospace supply chain, I would say, you know, it's obviously in much better shape than it has been, and we've seen, you know, the big air framers being able to increase their rates, which we're obviously participating in. And I would tell you that, you know, we have, over the last several years, invested quite a bit in our supply chain, and that has, you know, proved to be very beneficial for us. So I don't really have any concerns here.

Andy Kaplowitz, Analyst — Citigroup

And then, Jenny, continued strong performance in Asia-Pac, that plus 10 is impressive. So maybe talk about the durability of that growth. And EMEA flat, you know, it's kind of bouncing along there at kind of those rates. You know, I think last quarter is up a little bit. So do you see sort of improvement there, or is it just kind of bouncing along at flat in that region?

Jennifer Parmentier, CEO

Well, you know, this is, you know, primarily, as we said earlier, you know, from Asia-Pacific. You know, the total in industrial did increase to the high 20s, And then international orders and some slightly negative on a tough strength in aerospace and plant and industrial, but data center in there and in plant and energy.

Andy Kaplowitz, Analyst — Citigroup

Appreciate the color.

Operator

We'll take our next question from Julian Mitchell with Barclays. Your line is open.

Julian Mitchell, Analyst — Barclays

Hi, good morning. Maybe, Jenny, just wondered if you could flesh out the sub-segment sort of assumptions on aerospace, Just kind of what you're expecting in the fourth quarter for the major pieces kind of year on year and how they did in Q3. I think you have the commercial bits for Q3, but not military.

Jennifer Parmentier, CEO

Yeah, let me give you a Q3 rundown, and then I'll go to what we have for Q4 guidance. So, base organic growth was 14.2%. Commercial OAN production rate increases in both narrow and wide body. Commercial aftermarket was 14%, and even though we're starting to see global air traffic growth begin to normalize, we still have 13%. We see demand for the legacy programs continuing, and then defense aftermarket was and service extensions are contributing to that. And I mentioned market mix at 451. When we look at Q4 guidance, we had that at 20%, approximately 20%. We are raising commercial MRO digits. We've been single-digit growth. That's the same as before, and defense single-digit growth.

Julian Mitchell, Analyst — Barclays

That's very helpful. And then just to try and circle back again to that point on industrial kind of orders in sales and the fact you've had several quarters of orders in both industrial segments outstripping the revenue growth pace. Maybe just another way to look at it, I wanted to confirm that that industrial, the diversified industrial overall backlog, it looks like was that just over $4 billion at the end of March. So you had a decent sort of year-on-year and sequential increase. So I guess I'm just trying to say it looks as if that orders outpacing of sales isn't just a sort of comp phenomenon or something. There should be some recoupling of the sales to those orders, even though from the outside we can't see the kind of dollars of orders you've

Todd Leombruno, CFO

been booking. Both the industrial and... Thank you. We'll move next to Andrew Obin with Bank of

Andrew Obin, Analyst — Bank of America

America your line is open I guess good morning I just to check my math on on industrials III guess organically does imply that Q4 will be at the midpoint will be a tad slower than Q3 industrials America's is that okay is that correct and maybe question on pricing in in the quarter you know we've been hearing about sort of industry talking about rebates pushback now all All of this has been before S232, and I know maybe not a direct impact for you guys, but has conversation on pricing changed, given that the industry now does have to deal with S232, and maybe you can just talk about pricing trends in Q1 and what pricing looks for the remainder, well, I guess of your fiscal year, but any commenter on pricing would be great.

Jennifer Parmentier, CEO

conversations haven't changed obviously you know when it comes to you know the tariffs as I mentioned earlier it's dynamic and it requires a lot in coordination and teams are doing a great job of that you know on the industrial side of the business as we've mentioned in the past you know we're solution we're back to a normal pricing environment so we'll do that as we pricing and the teams are are executing on that but you know we we've been doing this for a long time. And, you know, I think we've done a great job in making sure that the tariffs have impacted our earnings, and we'll continue to do that. And maybe just sneak one

Andrew Obin, Analyst — Bank of America

in on defense aftermarket. Why not raise the guide given what's happening in the Middle East? I would imagine a lot of wear and tear on the key platforms that you're on. Sorry. This is even in defense.

Jennifer Parmentier, CEO

If you're looking anywhere from, you know, 9 to 15 months, customers want, and that's what's really driving that number.

Operator

We'll move next to Tim Thien with Raymond James. Your line is open.

Tim Thien, Analyst — Raymond James

Great. Thank you. First question is just on the mix dynamics within the industrial businesses in 26. I'm just trying to see if you can help kind of summarize in terms of what distributions growth and what you're expecting next year relative to the total. And, you know, more forward thinking, I'm just trying to think if that business begins presumably to pick up, does that potentially portend a mixed tailwind in 27? Can you help on that?

Todd Leombruno, CFO

In the industrial business, and that leads to EPS growth.

Jennifer Parmentier, CEO

Yeah, and, you know, distribution, you know, primarily sits in our in-plant industrial market vertical, and, you know, our forecast remains the same for that for the rest of the fiscal year. Positive low single-digit growth.

Tim Thien, Analyst — Raymond James

And then, again, this is a little bit out of left field, but there was one of your big European-based competitors, They recently flagged some – had seen more competition from some of the competitors in Asia starting to make some more inroads into their markets. I'm just curious, and it's a broader question just in terms of the competitive dynamics as you think about that globally. Have you – I mean, your results wouldn't suggest it, but I'm just curious what you would say to that in terms of any changes that you've seen globally on that.

Jennifer Parmentier, CEO

I wouldn't say that I've seen any changes, but I would say that, you know, our teams are taking any and all competition very seriously. You know, we have a lot of products that we have. You know, we manage locally and we keep what we have.

Operator

We'll take our next question from Joe O'Day with Wells Fargo. Your line is open.

Joe O’day, Analyst — Wells Fargo

Hi, good morning. Thanks for taking my questions. Can you give a little bit more color on what you're seeing in industrial international? We've seen very steady mid-single-digit order growth. You touched on the tough comp in Q3, so I think kind of pick any stack period you want. Looked pretty good in the third quarter. And so Europe, Asia, kind of what you're seeing, any verticals you would call out there?

Jennifer Parmentier, CEO

Increasing full-year organic growth to 2.5% for international versus our prior guide of approximately 2%. So maintaining a slightly positive low single digit, you know, we're seeing gradual improvement in plant and in transportation, primarily heavy-duty truck. And we have seen continued strength in mining and energy, both oil and gas and power gen. In Asia Pacific, increasing full year to positive high single digit versus mid-single digit we had in our prior guide. And this has continued strength in electronics and Semicon demand. Implant orders and shipments progress but remain a little bit mixed, and there have been improvements in energy. It's really kind of a mix between EMEA and Asia Pacific. That's helpful.

Joe O’day, Analyst — Wells Fargo

And then just on filtration group, I think initially talking about a 6- to 12-month window, I think it seems like some deals have taken a little bit longer to work through regulatory processes. I'm not sure if, you know, the way you're thinking about it maybe favors the 12-month side of that versus six. And then just any color, you know, recognizing, you know, really good margin business, what you're working on, you know, in preparation for that as the highest priorities post-close.

Jennifer Parmentier, CEO

We still anticipate that we're going to close within the 12 months of announcement date. And just as you said, you know, the closing remains subject to the customary closing conditions receipt of our pending regulatory clearances so happening there it's the integration planning is underway teams is on both sides have been formed so those teams are working together and we'll put our integration playbook into into place as soon as we do close and get the win strategy into the organization as soon as possible you know we did announce 220 million in synergies by the end. The majority of those synergies are going to come from the tools and the wind strategy that you hear us talk about, simplification, time, any information on the phasing of those synergies, but we're very, very confident in our ability to achieve those. So, you know, announcement was last note, and it'll be within the 12 months.

Todd Leombruno, CFO

Thank you. We'll move next to Andrew Biscaglia

Operator

with BNP Paribas. Your line is open.

Andrew Buscaglia, Analyst — BNP Paribas

Hey, good morning, everyone. yeah i'm just looking across um you know broader coverage group and broader industrials looking at what what life is like if energy prices persist above 100 bucks going forward um and i would think parker would stand to benefit i'm wondering you haven't probably gotten this question in a while but where do you obviously have that direct energy exposure or maybe there's a nice benefit but i would think there'd be a ripple effect some animal spirits brewing in some other areas maybe off-highway implant. But what is the net impact for you guys if we still see energy prices sitting

Jennifer Parmentier, CEO

here six rooms for now? It's probably too hard to, you know, to forecast right now, but representative

Todd Leombruno, CFO

of, you know, we'll have to see how this plays out. But you look at the... Okay, that's fair enough.

Andrew Buscaglia, Analyst — BNP Paribas

Yeah, and then, you know, your free cash flow, you know, nudged that up a little bit. I'm just wondering, in light of the filtration group deal closing, are you still evaluating M&A into year end um you'd rather preserve some capital um you know just to get through the deal and then see

Todd Leombruno, CFO

where you're at we're raising our free four billion dollars we'll move next to joe ritchie

Joe Ritchie, Analyst — Goldman Sachs

with goldman sachs your line is open thanks good morning guys morning uh todd maybe maybe maybe a longer term question on margins within the industrial business so so absent volumes obviously you guys have done a great job um expanding margins in both of those businesses but you kind of think about the the opportunity from here um where do you see is like the biggest levers you know absent volumes to continue to expand margins in the industrial segment

Jennifer Parmentier, CEO

talking about you know you're seeing you know fantastic improvements that they've made and and the next breath they're telling you what comes next you know again just to reiterate our confidence in the team strategy and um you know our ability to to really create shareholder value that's good

Joe Ritchie, Analyst — Goldman Sachs

to hear and look i know we'll um we'll get a guide in early august um when you report but i guess as you kind of see your end markets right now jenny it's you sound pretty sanguine on what's happening in the industrial end markets i mean is it fair to say just given where we sit today that the expectation for next year would be at least a couple points better than than what you're seeing

Jennifer Parmentier, CEO

in 26? We've purposely transformed Parker into a less cyclical, faster growing and more resilient company. And many of our industrial markets turn positive during this fiscal year and orders are strong. As you were just talking about, the wind strategy is clearly working. It's going to continue to drive growth margins and earnings even higher. So I'm confident that we're going to be able to guide fiscal year 27 to another record year you try Jenny thank you absolutely

Operator

we'll take our last question from Nigel Cowie with wolf research your line is

Nigel Cowie, Analyst — Wolfe Research

open great thanks thanks for being here the pressure of the last question okay lots of questions on orders I told maybe just bad news but just wondering the

Jennifer Parmentier, CEO

scale of that facility and any disruption you're factoring in for 4q they have any

Nigel Cowie, Analyst — Wolfe Research

And then just one quick one, the DC business, data center business, I know it's any updates on the size.

Jennifer Parmentier, CEO

It's still approximately 1% or large enough to have its own vertical right now, but this is just a technology's come to origin.

Operator

Thank you. This concludes today's call. We appreciate your time and participation. You may now disconnect.