ETN Eaton Corp New

Eaton Corp.'s (ETN) first-quarter income rose 8.4%, as higher profit from the company's electrical products business in the U.S. offset lower sales and profit from electrical in the rest of the world.

The company's first-quarter profit topped analysts' expectations, even though sales came in slightly lower than analysts had anticipated. Eaton raised its 2012 profit outlook for the second time this year. Chairman and Chief Executive Alexander Cutler cited better-than-expected growth in the U.S. as the driver behind the higher forecast.

"The U.S. is where the strength is," said Cutler during a conference call with analysts "It's a reversal of what's been the trend for the last four or five years" of stronger growth in overseas markets.

Besides making equipment used in the distribution of electric power, the Cleveland-based company also supplies components and systems for hydraulic equipment, automobiles, commercial trucks and passenger jets.

In the Eaton's electrical Americas unit -- the company's largest business segment -- first-quarter operating profit rose 21% to $163 million, as sales grew 13% to $1.09 billion. The unit's operating margin rose to 15% from 14% a year earlier. Eaton attributed the improvement in the business to a 10% increase on spending on non-residential construction and higher orders from the oil and gas industry.

"We're feeling quite good about the segment," Cutler said. "Markets stronger and [order] bookings stronger."

Conversely, profit from Eaton's electrical business in the rest of the world fell 23% from a year ago to $54 million, as sales slipped 12% to $651 million. The company said the decline was driven by lower demand from Europe and China. Eaton does not expect the business to rebound until late in the year.

"We think it's more prudent now to think it's going to be a fourth-quarter recovery," said Cutler after earlier predicting a third-quarter recovery.

Eaton's overall operating margin for the first quarter was 13.8%, up from 13% a year earlier, but down from 15% in the fourth-quarter of 2011.

Eaton raised its full-year profit guidance, calling for operating earnings of $4.30 to $4.70 a share. Eaton in February lifted its target to $4.20 to $4.60 a share after announcing the acquisition of a hose manufacturer in Turkey.

For first quarter ended March 31, Eaton reported a profit of $311 million, or 91 cents a share, compared with a year-earlier profit of $287 million, or 83 cents a share. Stripping out acquisition-related costs, earnings rose to 92 cents a share from 84 cents a year ago, topping the company's January guidance for earnings of 80 cents to 90 cents a share.

Sales rose 4.1% to $3.96 billion. Analysts expected the company to earn 90 cents a share on $4.01 billion in sales.

Eaton was recently trading down 2.4% at $46.26 a share.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

--Mia Lamar contributed to this article

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