Investing.com — Melius Research upgraded Eaton Corp to Buy from Hold and lifted its price target to $495 from $412, given stronger demand from data centers and a less stretched valuation.
The brokerage said worries earlier this year about slowing earnings momentum and high multiples have eased as investment in artificial intelligence and other large-scale projects continues to rise.
“What we see today from the demand side is nothing short of ‘wow,’” analysts at Melius wrote.
Eaton, which makes electrical equipment and power management systems, has seen margins expand even as it added capacity. Its Electrical Americas unit has lifted profitability by 10 percentage points since 2021 while nearly doubling revenue.
Melius said it expects supply constraints to support growth, noting long lead times for transformers and other products. “New capacity should not tip the scales,” the firm said, adding that consensus forecasts underestimate the company’s earnings potential.
Cyclical businesses such as autos, trucks and residential markets are also expected to recover in 2026, while aerospace could benefit as supply chains improve.
The brokerage forecasts earnings per share of $17 in 2027 compared with market expectations of about $15.30, with $20 or more possible in 2028.
Melius said Eaton’s exposure to data centers, utilities, aerospace and defense gives it an advantage over peers.
It estimated that 45% of sales come from these end-markets, a share that rises further when including industrial mega projects such as semiconductor fabrication and liquefied natural gas plants.
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