--Eaton beats second-quarter earnings estimate
--Eaton scales back 2012 revenue, earnings forecasts
--Company says emerging market growth slowing
(Updates with more details throughout about end-markets and 2012
outlook.)
By Bob Tita
Eaton Corp.'s (ETN) second-quarter profit rose 14%, but revenue
unexpectedly dropped as weakening demand from overseas markets
caused the company to scale back its revenue and earnings forecasts
for 2012.
The diversified manufacturer's second-quarter profit topped
analysts' expectations. Improved margins and a lower tax rate
offset revenue that dropped from a year earlier.
"Our revenues were impacted in the second quarter by
lower-than-expected end-market growth and by lower-than-expected
foreign exchange rates," said Chairman and Chief Executive
Alexander Cutler in a written statement.
Mr. Cutler attributed the lower revenue to slower economic
growth in China, India and Brazil, as well as uncertainty in Europe
caused by the ongoing crisis over sovereign debt.
The Cleveland company now expects end-market sales this year to
increase 3% to 4% over 2011, down from the 5% growth predicted in
April.
The company also revised its full-year profit guidance, calling
for earnings of $4.20 to $4.50 a share. Eaton in April said it
expected per-share profit of $4.30 to $4.70. As a result, the
midpoint of Eaton's profit range dropped to $4.35 a share from
$4.50.
Eaton, which makes electrical products, truck transmissions,
hydraulic systems and aerospace components, has reported a series
of double-digit earnings increases over the past two years, aided
by increased production volumes in construction and farm machinery
and a rebound in the commercial-truck industry. Eaton's lowered
expectations are likely to trigger investor anxiety about the
performance of other diversified manufacturers, as well as truck
makers and machinery manufacturers, such as Caterpillar Inc. (CAT)
and Deere & Co. (DE).
Eaton's stock has fallen almost 18% in the past three months
amid concerns about the outlook for manufacturing. The shares
recently were up 3.l% at $40.27. Eaton in May agreed to acquire
electrical products company Cooper Industries PLC (CBE) in a
roughly $11.8 billion cash-and-stock deal. The deal will require
approval from the two companies' shareholders.
For the quarter ended June 30, Eaton reported a profit of $382
million, or $1.12 a share, compared with a year-earlier profit of
$336 million, or 97 cents a share. Stripping out acquisition- and
integration-related costs, earnings rose to a record $1.15 a share
from 97 cents a year earlier. Analysts polled by Thomson Reuters
expected the company to earn $1.09 a share
Revenue edged down 0.5% to $4.1 billion, short of the $4.24
billion expected by analysts.
-Chelsea Stevenson contributed to this article.
Write to Bob Tita at robert.tita@dowjones.com
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