PARKER CORPORATION FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥52.98B
• Operating Income: ¥4.81B
• Net Income: ¥3.81B
• EPS: ¥144.65

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Verdict: FY2026 Q3 was a solid quarter — revenue growth was modest but profitability expanded materially. Net sales rose 4.1% YoY to ¥52,984 million, driven by volume/pricing mix improvements, while operating income jumped 38.9% YoY to ¥4,812 million. Ordinary income increased 52.5% YoY to ¥5,366 million and net income attributable to owners rose 49.5% YoY to ¥3,620 million, reflecting strong operating leverage and favorable non-operating items. Gross profit margin improved to 27.4% (¥14,495 million gross profit on ¥52,984 million revenue), and operating margin widened to 9.1% (EBIT margin per DuPont 5-factor) — a clear margin recovery vs prior period. Non-operating items contributed positively: interest income ¥153 million and dividend income ¥144 million offset FX losses (net FX loss headline but smaller than operating gain components), leaving non-operating income of ¥652 million against non-operating expenses of ¥98 million. Effective tax rate was ~29.4%, producing a tax burden (NI/EBT) of 0.670 consistent with reported effective rate. Balance sheet remains conservative: total assets ¥75,150 million, equity ¥51,509 million and interest-bearing debt low at ¥2,956 million, giving financial leverage 1.46x and calculated ROE ~7.0%. Liquidity is strong on a current ratio basis (270.2%) with cash & deposits ¥23,431 million representing 31.2% of assets — ample liquidity relative to reported short-term loans. Working capital shows healthy absolute surplus (working capital ¥32,348 million). Key improvements YoY include revenue +¥2,679 million and operating income +¥1,648 million versus prior period. Management reaffirmed a full-year forecast implying FY operating income ¥5,500 million and net income ¥3,900 million, signalling expectation of continued margin maintenance into H2. Dividend policy appears progressive: the company has paid a mid-year and intends a year-end to make annual DPS ¥25.0 (¥12.5 mid + ¥12.5 year-end per disclosed), and reported payout ratio calculated ~18.5% — comfortably covered by expected earnings. Earnings quality signals are mixed: interest coverage is very high at 75x (low interest burden), but QoE metrics tied to operating cash flow are not available in the disclosed data. On the manufacturing side, inventories grew but remain moderate (inventories ¥5,930 million, inventory days elevated vs benchmarks given DSO concerns), PPE remains significant (PP&E ¥14,891 million) with land a large component (¥7,309 million). Notable balance-sheet movements: goodwill declined materially (–75.7% YoY) and long-term loans dropped ~52.7% — both reflect bookkeeping adjustments and liability structure change; these should be monitored for recurring impacts. Two quality alerts require explicit attention: refinancing risk flagged by a high short-term debt ratio (93.3%) and very high receivable days (DSO 107 days) — the former increases rollover risk despite large cash balances, and the latter compresses cash conversion and could raise bad-debt/working-capital tension if not addressed. Forward-looking implications: management’s forecast is achievable if operating margin is sustained and receivables collection improves; downside risks are concentrated in receivable collections and short-term funding profile even though net leverage is low. Overall, the quarter demonstrates operational improvement and conservative net debt but attention is needed on receivables management and the company’s reliance on short-term borrowing lines despite strong cash reserves. Investors should watch H2 cash conversion, maintenance of gross-to-operating margin conversion, and whether balance-sheet changes (goodwill reduction, loan maturities) are one-offs or secular. Given current metrics, the company sits in a defensible financial position with improving profitability but some liquidity & working-capital execution risks to resolve before raising confidence materially.

Profitability Analysis

dupont_3_factor:

• net_profit_margin: 6.8% (Net income ¥3,620m / Revenue ¥52,984m)
• asset_turnover: 0.705x (Revenue ¥52,984m / Total assets ¥75,150m)
• financial_leverage: 1.46x (Total assets ¥75,150m / Equity ¥51,509m)
• calculated_ROE: ≈7.0% (6.8% × 0.705 × 1.46) which_component_changed_most: Net profit margin and asset turnover jointly explain the ROE move; the largest positive swing YoY is operating margin expansion (operating income +38.9% on revenue +4.1%), so margin improvement is the dominant driver. business_reason_for_change: Operating leverage: modest top-line growth combined with contained SG&A (SG&A ¥9,682m) and favorable gross margin expansion (27.4%) increased operating profit disproportionately. Non-operating income (interest/dividend/other) also contributed to ordinary income growth. sustainability_assessment: Margin expansion appears partly sustainable if cost discipline continues and sales mix remains favorable, but sustainability is conditional on resolving receivable collection issues and avoiding FX volatility. Non-operating gains (dividend and interest income) are smaller contributors and not primary drivers of operating performance. concerning_trends: Receivable-days and high short-term leverage ratio (quality flags) may negate margin gains if working capital costs rise. No SG&A line-item detail is disclosed, but SG&A growth appears controlled vs revenue growth; monitor if SG&A accelerates faster than revenue going forward.

Growth Assessment

revenue_sustainability: Revenue growth is modest (+4.1% YoY) and the full-year forecast implies stabilization (~¥70,000m FY). Growth is therefore moderate and appears driven by existing product/market operations rather than aggressive expansion. profit_quality: Operating profit growth is high (38.9% YoY), supported by improved gross margin and low interest expense. However, cash-based quality metrics (OCF/NI, accruals) are not disclosed, so ability to convert accounting profit into cash is unverified. outlook: Management projects FY operating income ¥5,500m and net income ¥3,900m — modest increases from current run-rate. If receivables collection improves and margins hold, forecast is attainable. FX movements and potential one-offs (goodwill adjustments previously recorded) are downside risks.

Financial Health

liquidity:

• current_ratio: 270.2% (Current assets ¥51,358m / Current liabilities ¥19,010m) — healthy on a coverage basis.
• quick_ratio: 239.0% — also healthy.
• cash_position: Cash & deposits ¥23,431m (~31.2% of assets) — robust cash buffer. solvency:
• interest_bearing_debt: ¥2,956m (very low absolute debt).
• debt_to_equity: 0.46x — conservative capital structure.
• debt_to_capital: 5.4% — low leverage. maturity_mismatch_and_refinancing_risk: Short-term debt ratio is high at 93.3% (quality alert). Although total interest-bearing debt is small, the concentration in short-term borrowings raises rollover/refinancing risk if credit lines tighten. However, strong cash balances (cash/short-term debt 8.50x) mitigate immediate liquidity stress. off_balance_sheet: No off-balance-sheet obligations disclosed in provided data. notable_bs_warnings: Goodwill decreased sharply (–75.7% YoY) and long-term loans fell ~52.7% — see notable_bs_changes for details.

Notable B/S Changes

Goodwill: -0.78 (–75.7%) — Goodwill decreased from ¥1.03bn to ¥0.25bn (100M JPY units: 1.03 → 0.25). Likely a disposal, derecognition, or impairment remeasurement; reduces intangible risk going forward but warrants review of one-time accounting treatment and whether any prior acquisition-related amortization/impairment affected P&L. Long-term Loans: -2.22 (–52.7%) — Long-term loans declined from ¥4.21bn to ¥1.99bn. Indicates liability reclassification/repayment or refinancing into short-term facilities; this reduces long-term leverage but may have contributed to the high short-term debt ratio and raises refinancing concentration risk.

Cash Flow Quality

earnings_quality: Key cash-flow metrics (OCF, FCF, CapEx) are not disclosed so conversion of reported profits to cash cannot be verified. Interest coverage is very strong (75.19x) which reduces financing stress. fcf_sustainability: Dividend payout ratio (~18.5%) appears comfortably covered by reported net income and the company holds large cash reserves; however, without OCF / CapEx data FCF sustainability cannot be confirmed. working_capital_signs: Receivables are high (Accounts receivable ¥15,503m) and DSO flagged at 107 days — this is a working-capital stress point and may indicate slow collections or generous customer credit terms. Inventories ¥5,930m are moderate relative to sales, but elevated DSO increases cash conversion cycle risk.

Dividend Sustainability

payout_ratio: Calculated payout ratio ~18.5% (based on disclosed mid + year-end DPS ¥12.5 + ¥12.5 and net income) — conservative and sustainable under current earnings. fcf_coverage: FCF coverage of dividends cannot be assessed (FCF not disclosed), but large cash balance and low net debt provide a sizeable margin of safety. policy_outlook: Management guidance indicates full-year DPS ¥16.5 per forecast data (note: forecast block shows dividend per share 16.5 — if actual policy is full-year ¥25.0 as Q2+YE disclosed, verify corporate release). Given current payout ratio and strong equity, dividend looks sustainable barring deterioration in cash conversion.

Risk Assessment

Business risks include Receivables concentration / slow collection (DSO 107 days) — raises customer credit risk and cash conversion cycle pressure., FX volatility — company recorded FX losses and gains; net FX volatility can erode margins., Demand or pricing pressure in core manufacturing markets leading to margin compression..

Financial risks include Refinancing risk due to high short-term debt ratio (93.3%) despite low absolute debt — high rollover dependence;, Working-capital funding pressure if receivables remain elevated or if credit lines are reduced..

Key concerns include High DSO is highest-priority (likelihood high, impact medium-high) because it directly affects liquidity and FCF., Short-term debt concentration is second priority (likelihood medium, impact medium) — mitigated by cash but structural reliance on short-term funding remains., Goodwill reduction requires monitoring for accounting/one-time effects (likelihood low-medium, impact low-medium)..

Investment Implications

Key takeaways include Operational performance improved markedly: operating income growth outpaced revenue growth, demonstrating operating leverage., Balance sheet remains conservative in net-debt terms with large cash buffers, but short-term debt concentration and very high DSO create execution risk on liquidity and cash conversion., Dividend payout is modest and appears sustainable given current earnings and cash, but verification against FCF is not possible with disclosed data., Watch for one-off balance-sheet adjustments (goodwill decline) which can distort YoY comparatives and investor perception..

Metrics to watch include DSO / accounts receivable trend (target: meaningful reduction from 107 days), Operating margin / EBIT margin (sustain >9% to meet full-year forecast), Composition of debt (short-term vs long-term) and any refinancing actions, OCF and FCF when disclosed (OCF/Net Income ratio particularly), Goodwill / extraordinary adjustment notes for potential non-recurring impacts.

Regarding relative positioning, Compared with manufacturing peers, Parker Corporation shows above-average margin improvement and a low net-debt posture, but lags on working-capital efficiency (DSO materially worse than industry benchmarks). The company is financially conservative on capital structure but operationally exposed to receivables and short-term funding execution.