Eaton (ETN) Tops Q1 Earnings Estimates, Lifts 2018 Guidance

Eaton Corporation’s ETN earnings per share of $1.10 in first-quarter 2018 topped the Zacks Consensus Estimate of $1.06 by 3.8%. Reported earnings were at the high end of management’s guided range of $1.00-$1.10. Also, earnings were 14.6% higher than the year-ago figure.    

Revenues

In the quarter, Eaton’s total revenues came in at $5,251 million, surpassing the Zacks Consensus Estimate of $1,199 million by 3.2%. The figure was 8.3% higher than the year-ago quarter.

The year-over-year sales increase includes 6% growth in organic sales and 3% rise in positive currency translations, which was better than the expected growth of 4% from organic sales and 1.0% from positive currency translations.

Eaton Corporation, PLC Price, Consensus and EPS Surprise
 

Eaton Corporation, PLC Price, Consensus and EPS Surprise | Eaton Corporation, PLC Quote

Segment Details

In the first quarter, Electrical Products’ total sales were $1,732 million, up 4.9% from the year-ago quarter. Organic sales were up 1% and currency translation was a positive 4%. The quarter’s operating income was $307 million, up 7.3% year over year.

Electrical Systems and Services’ total sales were $1,381 million, up 3.6% from the year-ago quarter. Organic sales were up 2% and currency translation was a positive 2%. Operating income in the quarter was $167 million, up 7.8% year over year.

Hydraulics total sales were $710 million, up 20.9% from the year-ago quarter. Organic sales were up 16% and currency translation was a positive 5%. The quarter’s operating income was $90 million, up 50% year over year.

Aerospace total sales were $458 million, up 7% from the year-ago quarter. Organic sales were up 6% and currency translation was a positive 1%. Operating income in the quarter was $89 million, up 12.6% year over year.

Vehicle total sales were $893 million, up 13.6% from the year-ago quarter. Organic sales were up 13% and currency translation was a positive 3%. The quarter’s operating income was $132 million, up 22.2% year over year.

eMobility segment’s total sales were $77 million, up 22.2% from the year-ago quarter. Organic sales were up 19% and currency translation was a positive 3%. Operating income in the quarter was $11 million, flat year over year.

Quarterly Highlights

Cost of products sold in the reported quarter was $3.5 million, up 8.0% from the prior-year quarter.

Selling and administrative expenses were $889 million, up 1.5% from the year-ago quarter.

In the first quarter, the company’s research and development expenses were $156 million, up 9% from $143 million in the prior-year quarter.

Interest expenses of $70 million were up 14.7% from the prior-year quarter.

Order in Electrical Systems and Services, Hydraulics and Aerospace was up 8%, 4% and 1% year over year, respectively.

During the quarter, the company repurchased shares worth $300 million.

Financial Update

Eaton’s cash and short-term investments were $317 million as of Mar 31, 2018, compared with $561 million as of Dec 31, 2017.

As of Mar 31, 2017, long-term debt was $6,845 million compared with $7,167 million as of Dec 31, 2017.

Guidance

Second-quarter 2018 earnings per share are expected to be between $1.25 and $1.35.

The company raised its 2018 earnings expectation by 10 cents at both ends and is now expected in the range of $5.10-$5.30 per share for the year.

Eaton now expects its organic revenues to increase 5% in 2018, up 100 basis points. It now expects segment margins in 2018 to be between 16.4% and 17.0%, up from the previous expectation between 16.3% and 16.9%.

Zacks Rank

Eaton has a Zacks Rank #2 (Buy).
 
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Our View

Eaton’s earnings and total revenues in the first quarter were better than expectations, thanks to the strong performance by every segment. Better-than-expected organic sales and positive currency translation also boosted the performance of the company.

We believe that improvement in end-market conditions is boosting the order book of the company. Its new eMobility segment is well placed to gain new contracts in the fast growing $33 billion market.

Upcoming Releases

Rexnord Corp. RXN is scheduled to report fiscal fourth-quarter 2018 earnings on May 14, 2018. The Zacks Consensus Estimate for the quarter is pegged at 39 cents.

SPX FLOW Inc. FLOW is slated to report first-quarter 2018 earnings on May 2. The Zacks Consensus Estimate is pegged at 37 cents.

CUI Global Inc. CUI is slated to report first-quarter 2018 earnings on May 7. The Zacks Consensus Estimate is pegged at a loss of 9 cents.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SPX FLOW, Inc. (FLOW) : Free Stock Analysis Report
 
CUI Global, Inc. (CUI) : Free Stock Analysis Report
 
Rexnord Corporation (RXN) : Free Stock Analysis Report
 
Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research