It doesn't get much better than this for
Eaton Corporation
(ETN). This Zacks #2 Rank (buy) recently raised full year guidance
after better-than-expected second quarter results and expects to
see record sales and profits in 2011.
Eaton is a diversified global industrial
manufacturer of products in the Electrical, Hydraulics, Aerospace
and Vehicles sectors.
The company is involved in power distribution and
power control products including circuit breakers, meters, relays
and inverters. The company's hydraulic systems are used in
aerospace, agriculture, construction, machine tools and the oil and
gas industries.
Eaton also makes powertrain systems for the
commercial market as well as clutches, and manual and automatic
transmissions, valves, cylinder heads, spoilers and fluid
connectors.
Eaton Surprised for the 15th Consecutive
Time
On July 25, Eaton reported its second quarter
results and, once again, beat the Zacks Consensus Estimate by 2
cents.
The last time Eaton missed the estimate was in
September 2007. That's an impressive track record considering it
covers the time period during the financial crisis.
Earnings per share were 97 cents compared to the
consensus of 95 cents. The company made just 68 cents in the year
ago quarter.
Double Digit Sales Growth
Sales jumped 21% to $4.09 billion compared to the
second quarter of 2010. They were also up 8% from the first quarter
of the year.
Sales were boosted by the Electrical segment.
Electrical Americas saw sales jump 16% from last year to $1.03
billion. Electrical Rest of the World had a sales increase of 18%
to $787 million from the second quarter of 2010, with 13% the
result of currency translation.
Sales for the Electrical Rest of World segment were
$787 million, an increase of 18 percent compared to the second
quarter of 2010.
2011 To Be a Record Year
Eaton expects 2011 to be the company's best year
ever, which is especially symbolic as it is coming in the year of
the company's 100th anniversary.
It expects sales to be 19% above 2010 and 6% above
2008, which was the company's prior best year ever.
2011 Guidance Raised
Eaton is extremely bullish on the full year and
raised the 2011 guidance by 15 cents to a range of $3.86 to
$4.06.
"The year is shaping up to be better than we
forecasted in April," said Alexander M. Cutler, Eaton chairman and
CEO.
"We now anticipate our overall end markets will
grow by 11 percent versus our earlier forecast of 10 percent," he
added.
2011 Zacks Consensus Estimate Jumps
12 estimates have been revised higher for 2011
since the guidance was raised. The 2011 Zacks Consensus Estimate
moved to $4.03 from $3.92 per share.
This is earnings growth of 43.4% as the company
only made $2.81 in 2010.
88 Years of Paying a Dividend
Eaton continues to reward shareholders through its
dividend program.
The company has paid dividends since 1923- that's
through the Great Depression, 2 World Wars, space travel, the
internet boom and the Great Recession of 2008.
For example, in 1985, it paid a quarterly payout of
2 cents per share. Currently, it is paying 34 cents per share per
quarter, after raising it 17% in January.
That is a yield of 2.6%.
Still a Value Stock
After a big run up in the shares off the 2009 lows,
and hitting a 10-year high, shares haven't done much in 2011.
But the solid valuation is still there.
Eaton is trading at just 12.3x forward estimates,
well under the S&P 500 average of 13.5.
It also has a price-to-book ratio of only 2.1,
which is well under the 3.0 used as an indicator of "value."
It also has a solid 1-year return on equity (ROE)
of 14.9%.
Eaton, with its global business model, is an
attractive way to play the opportunities in emerging markets.
This Week's Value Zacks Rank Buy Stocks
Crude may be soaring, but some of the energy stocks
are cheap. VAALCO Energy, Inc. (EGY) is an E&P which is
trading at just 8.6x forward estimates. This Zacks #1 Rank (strong
buy) is also expected to generate double digit earnings growth in
2011. Read the full article.
With gold prices soaring, it's not surprising that
the estimates on the gold miners are also moving higher. Gold
Fields Limited (GFI) is expected to grow its earnings by 134%
in 2011. Read the full article.
Snap-on Inc. (SNA) did it again, recently
beating the Zacks Consensus Estimate for the 7th consecutive time.
This Zacks #1 Rank (strong buy) continues to be a value stock, with
a forward P/E of 14.1. Read the full article.
There is no slowdown in agriculture. CNH Global
N.V. (CNH) recently blew by the Zacks Consensus Estimate for
the second quarter as agriculture equipment sales jumped 22%. Yet
even as agriculture remains hot, this Zacks #1 Rank (strong buy) is
a value stock with a forward P/E of just 13.7. Read the full
article.
EATON CORP (ETN): Free Stock Analysis Report
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