By Nathalie Tadena
Eaton Corp. PLC's (ETN) third-quarter earnings increased 48% as
the diversified manufacturer's Cooper Industries acquisition
boosted sales, but the company now expects flat industry-wide sales
this year due to weakness in the truck and hydraulics markets.
Results fell short of expectations and the company offered
fourth-quarter guidance below analyst expectations.
Eaton expects current-quarter operating earnings of $1 to $1.10
a share, short of the $1.12 a share estimate from analysts polled
by Thomson Reuters. It also lowered the top end of its full-year
earnings guidance by 10 cents, now projecting a profit of $4.05 to
$4.15 a share.
The manufacturer said sales in its overall markets are likely to
be flat this year with 2012, due to recent softness in the truck
market and continued weakness in the global hydraulics market. The
company in August had projected growth of 1% for the year.
Weak global economic growth has weighed on demand for the
company's electrical products, hydraulic systems and truck
transmissions. Hydraulics markets in the latest period were
particularly sluggish in the construction equipment industries in
the U.S. and China, the company said.
The company said it posted little revenue growth in the latest
period from the second quarter. The company had expected
third-quarter sales to increase $75 million from the prior quarter,
however sales only increased $5 million sequentially as a result of
continued sluggish economic growth around the world, Chief
Executive Alexander M. Cutler said. He noted third-quarter bookings
strengthened in Eaton's electrical, hydraulics and aerospace
businesses, which suggests growth is likely to accelerate going
into 2014.
Eaton has been counting on strengthening demand for its circuit
breakers, fuses, lighting and other electrical gear to support the
company's acquisition of Cooper Industries last year for $11.8
billion. The deal expanded Eaton's electrical products business,
making Eaton a more formidable competitor for global rivals that
include Schneider Electric S.A. (SU.FR) of France, Emerson Electric
Co. (EMR) in the U.S. and Switzerland's ABB Ltd. (ABB).
Eaton reported a profit of $510 million, or $1.07 a share, up
from $345 million, or $1.02 a share, a year earlier. Excluding
special items, per-share operating earnings rose to $1.12 from
$1.07.
The company in August had projected operating earnings of $1.05
to $1.15 a share, below analyst estimates at the time.
Sales jumped 42% to $5.61 billion on a year-over-year basis.
Acquisitions contributed to 40% of revenue growth.
Analysts polled by Thomson Reuters most recently predicted sales
of $5.7 billion.
Electrical-products sales nearly doubled from the prior year to
$1.82 billion while electrical-systems and services sales climbed
80% to $1.64 billion, as both segments benefited from gains from
the Cooper acquisition. Aerospace sales rose 6.9% and sales in the
company's vehicle business, which supplies commercial truck
transmissions and components for cars and light trucks, improved
2.7%. Hydraulics sales, meanwhile, slipped 3.1%.
Shares closed at $68.50 and were inactive premarket. The stock
has gained 26% year-to-date.
Write to Nathalie Tadena at nathalie.tadena@wsj.com
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