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Adjusted EPS: $2.84, up 15% from prior year, an all-time record.
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Segment Margins: 24.3%, up 70 basis points from last year.
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Revenue: $6.3 billion, up 8% both in total and organically.
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Operating Cash Flow: $1.3 billion, up 15% year-over-year.
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Free Cash Flow: $1.1 billion, up 23% versus prior year.
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Electrical Americas Organic Sales Growth: 14%, with a 26% increase in backlog.
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Electrical Global Organic Growth: 4%, with a 19% increase in backlog.
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Aerospace Organic Growth: 8%, with a 14% increase in backlog.
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Vehicle Segment Revenue: Down 7%, with a 19.4% operating margin.
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Backlog: Total backlog of $15.5 billion, up 25% in electrical and 14% in aerospace.
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2024 Adjusted EPS Guidance: $10.75 to $10.81, representing 18% growth.
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2025 Initial Market Growth Expectations: Double-digit growth in data centers, commercial aerospace, and electric vehicles.
Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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Eaton Corp PLC (NYSE:ETN) achieved an all-time record adjusted EPS of $2.84, up 15% from the previous year.
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The company delivered record segment margins of 24.3%, an increase of 70 basis points from last year.
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Electrical orders were up 12% on a rolling 12-month basis, with electrical Americas orders up 16% and aerospace orders increased by 6%.
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Eaton Corp PLC (NYSE:ETN) has a strong backlog, up 26% for electrical Americas and 14% for aerospace, with strong book-to-bill ratios.
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The company is making significant investments in manufacturing capacity, with incremental capacity investments now at $1.5 billion, up $500 million from previous estimates.
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Revenue was negatively impacted by about $50 million due to Hurricane Helene and labor strikes in the aerospace industry.
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The company expects its revenue growth to be on the low end of its 8% to 9% guidance range due to ongoing aerospace industry labor strikes and a slowdown in vehicle markets.
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Eaton Corp PLC (NYSE:ETN) lowered its growth guidance for the aerospace business by 150 basis points due to the labor strike.
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The vehicle segment experienced a 7% decline in total revenue, including a 6% organic decline, primarily driven by weakness in the light vehicle market.
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The e-mobility business reported an operating loss of $7 million, as the company continues to incur launch costs related to new programs.
Q: Can you provide more details on the performance of your data center business in terms of organic growth, orders, and negotiation pipeline in the third quarter? A: Craig Arnold, CEO: Our data center business performed exceptionally well, with sales up 35% in the quarter, an increase from 27% in the prior quarter. Orders were up 55% on a rolling 12-month basis, and negotiations increased by 90%. This indicates strong momentum in the data center market, which we expect to continue for years to come.
Q: How did Hurricane Helene impact your third-quarter results, and do you expect any lingering effects in the fourth quarter? A: Craig Arnold, CEO: The hurricane affected our facilities in the Carolinas, where we have about 3,000 employees. All facilities are now operational, and while the hurricane impacted Q3 results, it mainly affected the timing of revenue, not demand. We expect some impact on Q4 revenue, but it will be realized later as it is not lost business.
Q: Can you discuss the operating leverage and margin potential for Electrical Americas, given the recent performance and future outlook? A: Olivier Leonetti, CFO: We believe there is still room for improvement in Electrical Americas’ margins. We see opportunities through higher volume growth, improved manufacturing efficiencies, and ongoing restructuring programs. We also see margin improvement potential in our Electrical Global and Aerospace businesses.
Q: How are mega projects progressing, and what is the outlook for cancellations and starts? A: Craig Arnold, CEO: Only 16% of the $1.6 trillion in mega projects have started, meaning 84% are still on the horizon. Cancellations are modest at around 10%, below historical levels. We expect a record number of starts in 2025, driven by diverse projects across various sectors, including data centers and utilities.
Q: What is Eaton’s strategy regarding capital deployment, particularly in the data center cooling space? A: Craig Arnold, CEO: While cooling is a hot topic, we are focused on organic growth and executing well in our existing markets. We have strong growth opportunities in data centers without needing to expand into adjacent areas like cooling. Our capital deployment strategy includes organic growth and potential M&A opportunities across various sectors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.