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Eaton's Pre-Q3 Earnings Analysis: How to Play the Stock?
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Eaton Corporation (ETN - Free Report) is expected to report an improvement in its top and bottom lines when it reports third-quarter 2024 results on Oct. 31, before market open.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The Zacks Consensus Estimate for ETN’s third-quarter revenues is pegged at $6.37 billion, indicating an 8.3% increase from the year-ago reported figure.
The consensus estimate for earnings is pegged at $2.8 per share. The Zacks Consensus Estimate for ETN’s third-quarter earnings has moved up 0.7% in the past 60 days. The estimate suggests year-over-year growth of 13.4%.
Image Source: Zacks Investment Research
Eaton’s 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%.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our proven model predicts a likely 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 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.
Megatrends and re-industrialization in the markets in which Eaton operates are driving significant capital investments and creating demand for the company’s products.
Electrification, energy transition, and reindustrialization are driving growth across nearly 75% of ETN’s end markets. These are likely to have boosted third-quarter earnings. Courtesy of the mega projects, the backlog of the company has increased substantially.
Eaton has been capitalizing on the global growth trends of electrification and digitalization. Its ability to provide urgent power management challenges results in organic growth in most of its segments, which is likely to positively impact earnings.
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.
Eaton consistently invests in research and development activities, which improve the quality of its existing products and create new products for its customers. The ongoing development allows ETN to get more orders and expand its market reach, which boosts its earnings. ETN expects its organic revenues to improve in the range of 8-9% in the third quarter.
Eaton offers the broadest portfolio of efficient electric solutions for Commercial & Institutional buildings. This also consistently contributes to the earnings of the company. The ongoing buyback of shares will also have a positive impact on earnings.
Eaton Stock Trading at a Premium
Eaton’s stock is currently overvalued compared to its industry, on a forward 12-month P/E multiple basis (P/E F12M), as shown in the chart below. ETN is currently trading at 29.07X compared with its industry average of 24.94X.
Image Source: Zacks Investment Research
Some of the other operators in the same space, like Illinois Tool Works (ITW - Free Report) , and Parker-Hannifin (PH - Free Report) , are trading cheaper compared with Eaton. The shares of ITW and PH are trading at forward 12-month P/E multiples of 24.24X and 22.61X, 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 solutions 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.
Summing Up
Eaton’s rising earnings estimates and improving backlog, will continue to boost the performance of the company. It is a nice entry point for investors to add this Zacks Rank #2 stock to their portfolio, given its stable performance and rising contribution from organic assets.
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Eaton's Pre-Q3 Earnings Analysis: How to Play the Stock?
Eaton Corporation (ETN - Free Report) is expected to report an improvement in its top and bottom lines when it reports third-quarter 2024 results on Oct. 31, before market open.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The Zacks Consensus Estimate for ETN’s third-quarter revenues is pegged at $6.37 billion, indicating an 8.3% increase from the year-ago reported figure.
The consensus estimate for earnings is pegged at $2.8 per share. The Zacks Consensus Estimate for ETN’s third-quarter earnings has moved up 0.7% in the past 60 days. The estimate suggests year-over-year growth of 13.4%.
Image Source: Zacks Investment Research
Eaton’s 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%.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our proven model predicts a likely 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 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.
Eaton Corporation, PLC Price and EPS Surprise
Eaton Corporation, PLC price-eps-surprise | Eaton Corporation, PLC Quote
Earnings ESP: Eaton has an Earnings ESP of +1.25%.
Zacks Rank: Eaton currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Have Shaped ETN’s Q3 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.
Electrification, energy transition, and reindustrialization are driving growth across nearly 75% of ETN’s end markets. These are likely to have boosted third-quarter earnings. Courtesy of the mega projects, the backlog of the company has increased substantially.
Eaton has been capitalizing on the global growth trends of electrification and digitalization. Its ability to provide urgent power management challenges results in organic growth in most of its segments, which is likely to positively impact earnings.
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.
Eaton consistently invests in research and development activities, which improve the quality of its existing products and create new products for its customers. The ongoing development allows ETN to get more orders and expand its market reach, which boosts its earnings. ETN expects its organic revenues to improve in the range of 8-9% in the third quarter.
Eaton offers the broadest portfolio of efficient electric solutions for Commercial & Institutional buildings. This also consistently contributes to the earnings of the company. The ongoing buyback of shares will also have a positive impact on earnings.
Eaton Stock Trading at a Premium
Eaton’s stock is currently overvalued compared to its industry, on a forward 12-month P/E multiple basis (P/E F12M), as shown in the chart below. ETN is currently trading at 29.07X compared with its industry average of 24.94X.
Image Source: Zacks Investment Research
Some of the other operators in the same space, like Illinois Tool Works (ITW - Free Report) , and Parker-Hannifin (PH - Free Report) , are trading cheaper compared with Eaton. The shares of ITW and PH are trading at forward 12-month P/E multiples of 24.24X and 22.61X, 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 solutions 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.
Summing Up
Eaton’s rising earnings estimates and improving backlog, will continue to boost the performance of the company. It is a nice entry point for investors to add this Zacks Rank #2 stock to their portfolio, given its stable performance and rising contribution from organic assets.