Eaton Beats Earnings, Sales Lag - Analyst Blog
29 Aprile 2013 - 1:40PM
Zacks
Diversified power management
company Eaton Corporation (ETN) released its first
quarter results with earnings per share of 84 cents falling short
of the year-ago figure of 92 cents by 8.7%. However, earnings were
ahead of the Zacks Consensus Estimate by a nickel.
Eaton’s GAAP earnings during the first quarter were 79 cents per
share versus 91 cents reported in the year-ago quarter. The
difference between GAAP and operating earnings was due to charges
of 5 cents related to integrating recent acquisitions.
Revenue
Eaton’s first quarter total revenue was $5.31 billion, up 34.1%
from $3.96 billion a year ago.
The year-over-year increase was due to positive contribution from
acquired assets, offset to some extent by a decline in core sales
and unfavorable currency conversion.
However, quarterly revenue was $88 million lower than the Zacks
Consensus Estimate of $5.39 billion.
Segment Analysis
Electrical Americas: Within its Electrical unit, Electrical
Americas’ revenues improved 87% from the year-ago quarter to $1.7
billion, while operating profit (excluding acquisition integration
charges) increased 76% to $244 million. The significant upside
reflects the positive impact from the acquisition of Cooper
Industries.
Electrical Rest of the World: The Electrical Rest of the World
segment’s sales were up 79% to $1.5 billion. Operating income of
$215 million (excluding acquisition integration charges) was up
176% from the year-ago quarter. Combined booking in the quarter
improved 2% year over year.
Hydraulics: At $756 million, Hydraulics sales improved 3% over the
prior year, while operating profits came in at $90 million, down
18% from the corresponding quarter last year.
Aerospace: Segmental sales in the quarter grew 1% to $434 million
while operating profit was up 3.0% to $62 million.
Vehicle: Segment revenue improved 11% year over year to $939
million. However, operating income of $132 million declined
18% from the year-ago quarter.
Operating Update
Cost of product sold in the first quarter 2013 was $3.73 billion,
increasing 35.6% from the prior-year period.
Selling and administrative expenses also followed a similar trend,
increasing 36.5% to $958 million from $702 million in the prior
year. Corporate integration charges for the Cooper acquisition were
included in selling and administrative expenses resulting in the
jump in expenses.
Research and development expenses increased 44.8% to $152
million.
Despite the increase in expenses in the reported quarter, a more
significant improvement in the top line benefited margins. Total
segment operating profit was up 32.9% to $723 million.
Financial Health
Cash and short-term investments as of Mar 31, 2013 were $639
million versus $577 million as of Dec 31, 2012.
Long-term debt was $9.47 billion as of Mar 31, 2013 compared with
$9.76 billion as of Dec 31, 2012.
Guidance
Eaton reiterated its 2013 pro forma earnings in the range of
$4.05–$4.45 per share. The guidance excludes acquisition
integration charges. Second quarter 2013 earnings are expected to
be between $1.05 and $1.15 per share.
Eaton expects the Cooper acquisition to contribute to its top line
and expects its overall markets to improve by 2% to 3% in 2013 from
2012 levels.
Other Company Releases
A. O. Smith Corporation (AOS) reported earnings of
96 cents per share in the first quarter 2013, beating the Zacks
Consensus Estimate by 19 cents.
Parker-Hannifin Corporation (PH) reported earnings
of $1.68 per share in the third quarter of fiscal 2013, surpassing
the Zacks Consensus Estimate by a penny.
UQM Technologies Inc. (UQM) is expected to report
its fourth quarter fiscal 2013 earnings on May 25, 2013. The Zacks
Consensus Estimate is at a loss of 3 cents.
Our View
Eaton Corporation’s first quarter results benefited from the
contribution of its acquired assets. The acquired assets are
expected to boost the performance of Eaton going forward.
However, the pace of economic recovery in Eaton’s service
territories has been sluggish, which we believe resulted in a 5%
decline in Eaton’s core sales. In addition, bookings in Electrical
Products and Hydraulics segments declined from the year-ago
quarter.
Even though Eaton continues to benefit from its acquired assets,
the decline in core sales of the company in the last three quarters
is something that the company needs to address.
Cleveland, Ohio-based Eaton
Corporation was founded in 1916. This company is a leading supplier
of power accessories in the aerospace industry and has customers
spanning 150 countries. With a market cap of $27.63 billion, the
company has 103,000 full time employees. Eaton Corporation
currently retains a Zacks Rank #3 (Hold).
SMITH (AO) CORP (AOS): Free Stock Analysis Report
EATON CORP PLC (ETN): Free Stock Analysis Report
PARKER HANNIFIN (PH): Free Stock Analysis Report
UQM TECH INC (UQM): Free Stock Analysis Report
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