Industrial machinery company Parker-Hannifin (NYSE: PH) announced better-than-expected revenue in Q4 CY2025, with sales up 9.1% year on year to $5.17 billion. Its non-GAAP profit of $7.65 per share was 6.8% above analysts’ consensus estimates.

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“This was another outstanding quarter that reflected the performance of our global team, the power of our business system The Win Strategy™, and the strength of our transformed portfolio,” said Jenny Parmentier, Chairman and Chief Executive Officer.

Company Overview

Founded in 1917, Parker Hannifin (NYSE: PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.

Revenue Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Parker-Hannifin’s sales grew at a decent 8.7% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Parker-Hannifin’s recent performance shows its demand has slowed as its annualized revenue growth of 1.6% over the last two years was below its five-year trend.

Parker-Hannifin also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Parker-Hannifin’s organic revenue averaged 2.6% year-on-year growth. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Parker-Hannifin reported year-on-year revenue growth of 9.1%, and its $5.17 billion of revenue exceeded Wall Street’s estimates by 2.1%.

Looking ahead, sell-side analysts expect revenue to grow 6% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector. At least the company is tracking well in other measures of financial health.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Parker-Hannifin has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.5%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Parker-Hannifin’s operating margin rose by 4.3 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Parker-Hannifin generated an operating margin profit margin of 21.1%, up 1.4 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Parker-Hannifin’s EPS grew at an astounding 19.7% compounded annual growth rate over the last five years, higher than its 8.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Parker-Hannifin’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Parker-Hannifin’s operating margin expanded by 4.3 percentage points over the last five years. On top of that, its share count shrank by 2.3%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Parker-Hannifin, its two-year annual EPS growth of 10.6% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q4, Parker-Hannifin reported adjusted EPS of $7.65, up from $6.53 in the same quarter last year. This print beat analysts’ estimates by 6.8%. Over the next 12 months, Wall Street expects Parker-Hannifin’s full-year EPS of $29.50 to grow 7.5%.

Key Takeaways from Parker-Hannifin’s Q4 Results

We enjoyed seeing Parker-Hannifin beat analysts’ organic revenue expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. On the other hand, its EBITDA slightly missed. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 3% to $944 immediately after reporting.

Sure, Parker-Hannifin had a solid quarter, but if we look at the bigger picture, is this stock a buy? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).