Eaton (ETN) Sets Over $500M for North American Manufacturing

Eaton Corporation plc ETN is set to invest more than $500 million in its North American manufacturing to meet rapidly increasing demand for the company’s electrical solutions across different industries. The majority of these investments is expected to be completed in 2024 and 2025.

Eaton is committed to the energy transition, and its solutions can be considered important for reinventing the way power is distributed, stored and consumed.

Details of the Move

The company plans to double the size of the facility in Nacogdoches, TX, by adding 200,000 square feet area to the same. This expansion is expected to double Eaton’s voltage regulators’ manufacturing capacity and aid utility customers in accelerating grid modernization. In order to address the acute supply shortage for the products, Eaton will continue to produce single-phase, pole-mount and pad-mount transformers in Texas.

Eaton also plans to invest in new equipment to increase manufacturing of three-phase transformers at its plant in Waukesha, WI. This initiative will be for utility, data center, large commercial and industrial applications.

The company is also increasing production of busway. This addition features Eaton’s EV charging busway, a first for the industry innovation that significantly accelerates and simplifies infrastructure for fleet charging while avoiding major infrastructure modifications.

ETN is expanding production of its circuit breakers and meters for residential and commercial buildings. This will increase the availability of its solutions for customers, improve the effectiveness of the supply chain and boost production resilience.

The company’s most recent developments have improved its switchgear and switchboard manufacturing plants, which supply the foundational electrical infrastructure for customers throughout the United States.

Eaton recently opened its largest regional distribution center in Chicago and is expanding its distribution center in Dallas to serve commercial, data center, industrial, healthcare and communications customers.

In 2023, Eaton expects its Electrical Americas segment to register top-line growth in the range of 14-16%. Further operation expansion in North America will ensure added improvement in top-line growth in the next few years.

Eaton’s Focus on Investments

Eaton has been investing consistently in research and development (R&D) programs to introduce new products, including power management solutions that will reduce energy consumption and carbon emissions. The new products are allowing the company to expand its market space and add new customers.

ETN has laid out a 10-year plan that includes $3 billion investment in R&D programs, which will allow the company to create sustainable products over this period. Eaton invested $665 million in R&D programs in 2022, up 8% year over year. In the first half of 2023, Eaton invested $366 million in R&D activities, up 9.9% from the year-ago period’s level.

Price Performance

In the past three months, shares of Eaton have risen 24.4% compared with the industry’s 19.7% growth.

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Zacks Rank & Other Stocks to Consider

Eaton currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the same industry are Zurn Elkay Water Solutions Co. ZWS, A.O. Smith Corporation AOS and Enersys ENS, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ZWS’ long-term (three- to five-year) earnings growth rate is 15.01%. The company delivered an average earnings surprise of 9.4% in the last four quarters.

AOS’ long-term earnings growth rate is 9%. It delivered an average earnings surprise of 10.5% in the last four quarters.

ENS’ long-term earnings growth rate is 14%. It delivered an average earnings surprise of 10.3% in the last four quarters.

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