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Eaton's (ETN) Pre-Q2 Earnings Analysis: Should You Buy or Hold?
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Eaton (ETN - Free Report) is expected to report an improvement in its top and bottom lines when it reports second-quarter 2024 results on Aug 1, before market open.
The Zacks Consensus Estimate for ETN’s second-quarter revenues is pegged at $6.35 billion, indicating an 8.2% increase from the year-ago reported figure.
The consensus estimate for earnings is pegged at $2.61 per share. The Zacks Consensus Estimate for ETN’s second-quarter earnings has moved up 2.4% in the past 90 days. The estimate suggests year-over-year growth of 18.1%.
Image Source: Zacks Investment Research
Solid Earnings Surprise History
Eaton’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 4.7%.
Our proven model does not conclusively predict an earnings beat for Eaton this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you can see below.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: Eaton has an Earnings ESP of -0.04%.
Megatrends and re-industrialization in the markets in which Eaton operates are driving significant capital investments and creating demand for the company’s products. These are likely to have boosted earnings.
Eaton provides the broadest portfolio of industrial solutions. The ongoing improvements in the artificial intelligence-driven data center space are likely to have driven Eaton’s earnings as huge power requirements from these centers continue to generate interest in efficient power solutions.
The company has been capitalizing on the global growth trends of electrification and digitalization. Eaton’s ability to provide urgent power management challenges results in organic growth in most of its segments, which is going to positively impact earnings.
The ongoing buyback of shares will also have a positive impact on earnings.
Price Performance and Valuation
ETN’s shares have gained 19.2% in the last six months compared with the industry’s rally of 11.8%.
Image Source: Zacks Investment Research
Eaton’s stock is currently overvalued compared to its industry,on a forward 12 months P/E multiple basis, as shown in the chart below. Given Eaton’s strong product offering, rising earnings estimates and strong organic growth, a premium valuation is quite justified for this stock.
Image Source: Zacks Investment Research
Some of the other operators in the same space, like Illinois Tool Works (ITW - Free Report) and, ParkerHannifin (PH - Free Report) , are trading cheaper compared with Eaton. The shares of ITW and PH are trading at forward 12 months P/E multiple of 23.56 and 20.7, respectively.
Investment Thesis
Eaton benefits from strong demand for the products supplied through its different segments. The company is upgrading the quality of its products through research and development work. Proper power management is essential for the successful performance of a project and Eaton continues to provide the required solution to its customers.
Eaton operates in nearly 175 countries and has manufacturing facilities worldwide. This definitely enhances the revenue stream of the company but exposes it to unpredictable geo-political risks, which can delay shipments, stop the production process, result in the cancellation of orders and impact operations.
To Sum Up
Eaton’s premium valuation can be a concern for investors, but given its rising earnings estimates and improving backlog, it will be wise for those who hold the stock to remain invested in this utility at this moment. New investors can wait for a better entry point later.
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Eaton's (ETN) Pre-Q2 Earnings Analysis: Should You Buy or Hold?
Eaton (ETN - Free Report) is expected to report an improvement in its top and bottom lines when it reports second-quarter 2024 results on Aug 1, before market open.
The Zacks Consensus Estimate for ETN’s second-quarter revenues is pegged at $6.35 billion, indicating an 8.2% increase from the year-ago reported figure.
The consensus estimate for earnings is pegged at $2.61 per share. The Zacks Consensus Estimate for ETN’s second-quarter earnings has moved up 2.4% in the past 90 days. The estimate suggests year-over-year growth of 18.1%.
Image Source: Zacks Investment Research
Solid Earnings Surprise History
Eaton’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 4.7%.
Eaton Corporation, PLC Price and EPS Surprise
Eaton Corporation, PLC price-eps-surprise | Eaton Corporation, PLC Quote
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Eaton this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you can see below.
You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Earnings ESP: Eaton has an Earnings ESP of -0.04%.
Zacks Rank: Eaton currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Have Shaped ETN’s Q2 Earnings
Megatrends and re-industrialization in the markets in which Eaton operates are driving significant capital investments and creating demand for the company’s products. These are likely to have boosted earnings.
Eaton provides the broadest portfolio of industrial solutions. The ongoing improvements in the artificial intelligence-driven data center space are likely to have driven Eaton’s earnings as huge power requirements from these centers continue to generate interest in efficient power solutions.
The company has been capitalizing on the global growth trends of electrification and digitalization. Eaton’s ability to provide urgent power management challenges results in organic growth in most of its segments, which is going to positively impact earnings.
The ongoing buyback of shares will also have a positive impact on earnings.
Price Performance and Valuation
ETN’s shares have gained 19.2% in the last six months compared with the industry’s rally of 11.8%.
Image Source: Zacks Investment Research
Eaton’s stock is currently overvalued compared to its industry,on a forward 12 months P/E multiple basis, as shown in the chart below. Given Eaton’s strong product offering, rising earnings estimates and strong organic growth, a premium valuation is quite justified for this stock.
Image Source: Zacks Investment Research
Some of the other operators in the same space, like Illinois Tool Works (ITW - Free Report) and, ParkerHannifin (PH - Free Report) , are trading cheaper compared with Eaton. The shares of ITW and PH are trading at forward 12 months P/E multiple of 23.56 and 20.7, respectively.
Investment Thesis
Eaton benefits from strong demand for the products supplied through its different segments. The company is upgrading the quality of its products through research and development work. Proper power management is essential for the successful performance of a project and Eaton continues to provide the required solution to its customers.
Eaton operates in nearly 175 countries and has manufacturing facilities worldwide. This definitely enhances the revenue stream of the company but exposes it to unpredictable geo-political risks, which can delay shipments, stop the production process, result in the cancellation of orders and impact operations.
To Sum Up
Eaton’s premium valuation can be a concern for investors, but given its rising earnings estimates and improving backlog, it will be wise for those who hold the stock to remain invested in this utility at this moment. New investors can wait for a better entry point later.