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Eaton (ETN) Up 6.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Eaton (ETN - Free Report) . Shares have added about 6.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Eaton due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Eaton Corporation reported first-quarter 2024 earnings of $2.40 per share, which surpassed the Zacks Consensus Estimate by 5.3%. The bottom line increased 27.7% year over year and beat the earnings guidance of $2.21-$2.31 per share. The improvement was due to increased project activity tied to megatrends, reindustrialization and infrastructure spending.
GAAP earnings for the reported quarter were $2.04, up 28.3% from $1.59 reported in the year-ago quarter. The difference between GAAP and operating earnings for the reported quarter was due to charges of 21 cents for intangible assets amortization, 12 cents for a multi-year restructuring program and 3 cents for acquisitions and divestitures.
Revenues
Total quarterly revenues were $5.94 billion, which surpassed the Zacks Consensus Estimate of $5.9 billion by 0.7%. The first-quarter revenue growth was entirely driven by organic sales growth. Total revenues improved 8.4% year over year.
Segmental Details
Electrical Americas’ total first-quarter sales were $2.69 billion, up 17.3% year over year due to increased organic sales. Operating profit was $785 million, up 50% year over year.
Electrical Global’s total sales were $1.5 billion, on par with the year-ago quarter. Operating profit of $284 million flat year over year.
Aerospace’s total sales were $0.87 billion, up 9% year over year, driven by organic sales growth. Operating profit was $201 million, up 12% year over year.
Vehicle’s total sales were $0.72 billion, down 2% year over year due to a decline in organic sales, partially offset by positive currency translation. Operating profit was $116 million, up 8% year over year.
The eMobility segment’s total sales were $158 million, up 7% year over year, driven by organic sales growth. Operating loss in the quarter was $4 million, on par with the year-ago quarter’s loss.
Highlights of the Release
Selling and administrative expenses were $1.02 billion, up 13.4% year over year.
Research and development expenses were $189 million, up 5.6% year over year. Interest expenses were $30 million, down 40% year over year.
Eaton’s backlog growth, with orders, increased 31%, 11% and 12% in Electrical Americas, Aerospace and Electric Global, respectively, on a rolling 12-month basis.
Financial Update
As of Mar 31, 2024, the company’s cash was $473 million, down from $488 million as of Dec 31, 2023.
As of Mar 31, 2024, ETN’s long-term debt was $8.2 billion, down 0.6% from $8.24 billion as of Dec 31, 2023.
Guidance
Eaton’s second-quarter 2024 earnings are expected in the range of $2.52-$2.62 per share. The Zacks Consensus Estimate is pegged at $2.55, lower than the mid-point of the company’s guidance. The company expects organic growth in the range of 6.5-8.5%.
Eaton now projects adjusted earnings per share in the range of $10.20-$10.60 for 2024, indicating an increase of 14% at the midpoint from the prior-year levels. The company raised its organic sales guidance for 2024 from 6.5-8.5% to 7-9%. Eaton also raised its segment margin guidance from 22.4-22.8% to 22.8-23.2%.
The company estimates its 2024 operating cash flow in the range of $4-$4.4 billion. Free cash flow is forecast in the range of $3.2-$3.6 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
Currently, Eaton has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Eaton has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Eaton (ETN) Up 6.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Eaton (ETN - Free Report) . Shares have added about 6.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Eaton due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Eaton Q1 Earnings Beat Estimates, 2024 View Raised
Eaton Corporation reported first-quarter 2024 earnings of $2.40 per share, which surpassed the Zacks Consensus Estimate by 5.3%. The bottom line increased 27.7% year over year and beat the earnings guidance of $2.21-$2.31 per share. The improvement was due to increased project activity tied to megatrends, reindustrialization and infrastructure spending.
GAAP earnings for the reported quarter were $2.04, up 28.3% from $1.59 reported in the year-ago quarter. The difference between GAAP and operating earnings for the reported quarter was due to charges of 21 cents for intangible assets amortization, 12 cents for a multi-year restructuring program and 3 cents for acquisitions and divestitures.
Revenues
Total quarterly revenues were $5.94 billion, which surpassed the Zacks Consensus Estimate of $5.9 billion by 0.7%. The first-quarter revenue growth was entirely driven by organic sales growth. Total revenues improved 8.4% year over year.
Segmental Details
Electrical Americas’ total first-quarter sales were $2.69 billion, up 17.3% year over year due to increased organic sales. Operating profit was $785 million, up 50% year over year.
Electrical Global’s total sales were $1.5 billion, on par with the year-ago quarter. Operating profit of $284 million flat year over year.
Aerospace’s total sales were $0.87 billion, up 9% year over year, driven by organic sales growth. Operating profit was $201 million, up 12% year over year.
Vehicle’s total sales were $0.72 billion, down 2% year over year due to a decline in organic sales, partially offset by positive currency translation. Operating profit was $116 million, up 8% year over year.
The eMobility segment’s total sales were $158 million, up 7% year over year, driven by organic sales growth. Operating loss in the quarter was $4 million, on par with the year-ago quarter’s loss.
Highlights of the Release
Selling and administrative expenses were $1.02 billion, up 13.4% year over year.
Research and development expenses were $189 million, up 5.6% year over year. Interest expenses were $30 million, down 40% year over year.
Eaton’s backlog growth, with orders, increased 31%, 11% and 12% in Electrical Americas, Aerospace and Electric Global, respectively, on a rolling 12-month basis.
Financial Update
As of Mar 31, 2024, the company’s cash was $473 million, down from $488 million as of Dec 31, 2023.
As of Mar 31, 2024, ETN’s long-term debt was $8.2 billion, down 0.6% from $8.24 billion as of Dec 31, 2023.
Guidance
Eaton’s second-quarter 2024 earnings are expected in the range of $2.52-$2.62 per share. The Zacks Consensus Estimate is pegged at $2.55, lower than the mid-point of the company’s guidance. The company expects organic growth in the range of 6.5-8.5%.
Eaton now projects adjusted earnings per share in the range of $10.20-$10.60 for 2024, indicating an increase of 14% at the midpoint from the prior-year levels. The company raised its organic sales guidance for 2024 from 6.5-8.5% to 7-9%. Eaton also raised its segment margin guidance from 22.4-22.8% to 22.8-23.2%.
The company estimates its 2024 operating cash flow in the range of $4-$4.4 billion. Free cash flow is forecast in the range of $3.2-$3.6 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
Currently, Eaton has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Eaton has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.