$321.00
$1127.00
bear $321.00
base $668.00
bull $1127.00
margin of safety $350.00
market price* $963.34
Parker-Hannifin makes motion and control components: hydraulic, pneumatic and electromechanical parts, filtration, seals, and flight-control, fuel and hydraulic systems for aircraft. It reports two segments. Diversified Industrial (fiscal 2026 sales $14.4 billion, segment operating margin 23.8%) sells into factories, mobile machinery, electronics and semiconductor equipment and transportation, with international operations serving 41 countries. Aerospace Systems ($7.1 billion, 26.0% margin) sells to commercial and defense aircraft makers and to the aftermarket that maintains the planes already flying. Parker's fiscal year ends June 30. How we measured earnings. We start from operating cash flow, take out working-capital swings, stock compensation (a real cost) and the capital spending needed just to maintain the business (about $430 million in fiscal 2026). Owner earnings per share rose from $7.73 in fiscal 2017 to $24.65 in 2024, $25.61 in 2025 and $31.63 in 2026. Because we value the business before its lenders and subtract debt separately, we add back cash interest paid: on that basis the business produced $28.42, $28.56 and $34.63 per share in fiscal 2024, 2025 and 2026. Two accounting judgements matter. First, about $584 million a year of amortization of acquired intangibles is a non-cash charge and is added back; we do not treat the acquired franchises as wasting because the Meggitt-heavy aerospace business grew sales 13.4% organically in fiscal 2026 and its backlog rose, but the bear case lets earnings fade. Second, the currency hedges on the Meggitt purchase lost $1,015 million in fiscal 2022 and $390 million in fiscal 2023 and were settled for $1.4 billion as part of the purchase, so we treat them as acquisition cost, not operating earnings. Every year's figures tie exactly to the cash-flow statement. Starting point. Parker is a different company since it bought Meggitt in September 2022, so we measure the business from fiscal 2024, the first full year afterwards. The median of fiscal 2024-2026 is $28.56 per share, about $3.66 billion. The most recent year grew 21% per share. That growth was operating, not one-off: segment operating income rose 15.6% to $5.27 billion, organic sales grew 6.6%, and the $218 million of joint-venture income was matched by cash (the investment balance barely moved). The base case starts fiscal 2027 at 12% above the median, about $32 per share. That is below both the 21% just achieved and the fiscal 2026 level itself, and it is backed by order books at June 30, 2026: aerospace backlog of $8.5 billion (up from $7.4 billion) and industrial backlog of $4.3 billion (up from $3.7 billion). New debt and acquisitions. After the year ended, Parker paid $9.25 billion in cash for Filtration Group (FGC), a maker of filtration for life sciences, HVAC and industrial uses, on August 13, 2026. It funded the purchase mainly with $7.75 billion of new bank term loans, which mature 364 days and three years after closing, plus commercial paper. It has also signed a $2.55 billion cash deal for CIRCOR's aerospace business, expected to close in the second half of 2026. Debt was $8.52 billion at June 30, 2026. Adding both deals takes it to about $20.3 billion. Most of the existing bonds carry fixed coupons of 2.90% to 4.50% running out as far as 2049, which is cheaper than our 6% yardstick, so we count that debt as about $0.74 billion lighter. That leaves roughly $19.6 billion, or $153 per share. The tightest loan covenant caps debt at 65% of debt plus equity. Parker was at 36% in June, and on our rough pro forma it is about 57%: still compliant, but with much less room. The filings give no profit figures for FGC or CIRCOR Aerospace. The base case therefore values them at the price paid, which matches Parker's record of growing per-share cash earnings after Clarcor (fiscal 2017), Exotic Metals and Lord (2019) and Meggitt (2022). The bear case assumes Parker overpaid and the bull case assumes the deals work well. Base case ($668 per share). Business cash flow of about $4.10 billion in fiscal 2027 grows 4% the next year. It then falls 10% in one industrial downturn (in fiscal 2015-16 sales fell 14% and net income 22%), recovers, and grows about 3% a year to roughly $5.1 billion in year 10. That growth rests on pricing Parker has shown it can pass through, which helped fiscal 2026 margins, and on aircraft aftermarket demand from planes already in service. After year 10 it grows 2% for twenty years and then stays flat, because aftermarket demand and replacement parts for installed machinery keep the business earning. The business is worth about $93.4 billion, plus $11.8 billion for the two acquisitions, minus $19.6 billion of debt: $85.6 billion, or $668 per share. We did not count management's margin targets, further acquisitions or buybacks. Bear case ($321 per share). There is no step up from the $3.66 billion median. A deeper industrial and aerospace downturn than fiscal 2015-16 cuts cash flow to about $2.9 billion by fiscal 2029, 35% below fiscal 2026. Growth then stays near 2% and fades 1% a year after year 10. FGC and CIRCOR Aerospace turn out to be worth only 65% of their price, and the term loans are refinanced at about one point above 6% for five years. Even at 5% on all $20 billion of debt, the trough cash flow covers interest nearly three times, so the debt can be carried. The business is worth about $53.3 billion, plus $7.7 billion for the acquisitions, minus $19.9 billion owed: $41.1 billion, or $321 per share. Bull case ($1,127 per share). Cash flow starts at the fiscal 2026 level plus 4% (about $4.6 billion). It grows 7% a year for four years as the aerospace backlog converts and pricing holds, then 5% to year 10 and 3% for twenty more years. The two acquisitions are worth 125% of their price, consistent with how aerospace has performed since Meggitt joined (26.0% segment margin in fiscal 2026). The business is worth about $149.2 billion, plus $14.75 billion for the acquisitions, minus $19.6 billion: $144.4 billion, or $1,127 per share. Changes since our last review. Our August estimates were $185 / $446 / $735 per share. They are now $321 / $668 / $1,127. All three rose for four reasons, not one. First, we now discount every case at a single 6% rate and price risk through the gap between the cases; before, we used higher rates that differed by case. Second, fiscal 2026 results, in the annual report filed August 21, 2026, showed 21% growth in business cash flow per share. Third, we now charge only maintenance capital spending, not all of it. Fourth, the base case now includes a full industrial downturn. Working the other way, the $11.8 billion of new acquisition debt is now subtracted, and the bear case now carries both overpayment on the deals and refinancing risk. What would make this wrong. The base case would be too high if the industrial downturn were deeper or longer than in fiscal 2015-16. It would also be too high if commercial aerospace stalled while Parker carries about $20 billion of debt, or if FGC were worth much less than its $9.25 billion price. Its integration is just beginning, and management expects about $90 million of restructuring and $25 million of integration charges in fiscal 2027. Margin-of-safety price. The margin-of-safety price is $350. From that price, if the shares reach our base value within three years, the base case implies about 25% a year including dividends. Within four years, close to 20%. The bear case, $321, is only about 8% below the margin-of-safety price. The range of outcomes is wide, from $321 to $1,127, because of the cycle and the new debt. That is why the margin-of-safety price sits at a deep discount to the base value rather than near it.