Eaton Corporation ETN is poised to benefit from cost saving initiatives, widespread operations and research and development (R&D) to create advanced products, which will enable it to provide easy power management solutions to customers.
This Zacks Rank #2(Buy) stock delivered an earnings surprise of 16.78%, on average, in the last four quarters. The long-term earnings growth (three to five years) is currently pegged at 11%. The Zacks Consensus Estimate for 2021 earnings has moved up 10% in the past 60 days to $6.25 per share
Tailwinds
Eaton operates in a number of markets, and the quality of products supplied by the company enables it to retain a strong market position amid stiff competition.
In addition, Eaton’s acquisition strategy has allowed it to expand operations and enhance revenue stream. Acquisitions made by the company contributed 1% to total first-quarter 2021 revenues.
In 2021, the company plans to repurchase shares in the range of $500-$700 million. The lower shares outstanding will boost earnings of the company over the long run.
In the first three months of 2021, the company invested $148 million in R&D programs. Eaton has laid out a 10-year plan that includes $3 billion investment in R&D programs, which will allow it to create high-quality products. The products supplied by Eaton have been deemed to be critical part of the global infrastructure and are expected to have a stable demand.
Headwinds
Eaton, which utilizes a variety of raw materials and components in businesses, has to depend on information technology network. Hence, any failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, or computer viruses might affect the operations of the company.
Widespread operation exposes it to geopolitical risks. Further, issues like natural disaster, labor strike, war, political unrest, terrorist activity and economic upheaval can disrupt operations of the company.
Price Performance
In the past six months, shares of Eaton have gained 27% compared with the industry’s 19.9% rally.
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Other Stocks to Consider
Some other top-ranked stocks from the same industry are AZZ Inc. AZZ, Emerson Electric Co. EMR and Franklin Electric Co., Inc FELE. All stocks currently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The dividend yield for AZZ, Emerson Electric and Franklin Electric is 1.25%, 2.1% and 0.87%, respectively.
The Zacks Consensus Estimate for fiscal 2022 earnings for AZZ & Emerson Electric moved up 1.5% and 4.5%, respectively in the past 60 days. In the same time frame, 2022 earnings for Franklin Electric moved 5.7% upward.
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Emerson Electric Co. (EMR) : Free Stock Analysis Report
Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
AZZ Inc. (AZZ) : Free Stock Analysis Report
Franklin Electric Co., Inc. (FELE) : Free Stock Analysis Report