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Eaton (ETN) Beats Q4 Earnings Estimates, Issues '17 Outlook
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Eaton Corporation plc’s (ETN - Free Report) fourth-quarter 2016 operating earnings per share of $1.12 beat the Zacks Consensus Estimate by 1.8%. Also, reported earnings were within management’s guidance range of $1.05 to $1.15 per share. However, the bottom line was down 4% from the year-ago quarter level.
Full-year operating earnings came in at $4.22 per share, down 1.9% from the 2015 tally of $4.30. The year-over-year decline in earnings was due to lower-than-expected organic sales in 2016. Reported earnings, however, exceeded the Zacks Consensus Estimate of $4.20.
Revenues
In the quarter under review, Eaton’s total revenue came in at $4.87 billion, lagging the Zacks Consensus Estimate of $4.9 billion by 0.8%.
On a year-over-year basis, revenues were down nearly 3.8% due to lower Aerospace (3.4%), Vehicle (11.9%), Electrical Systems and Services (2.6%), and Hydraulics (5.8%) sales.
Unfavorable currency translation and a decline in organic sales were the primary reasons for the top-line deterioration. Sales took a 1% hit from currency translation, while the drop in organic sales accounted for 3%.
Full-year revenues amounted to $19.75 billion, down 5.4% from than the prior-year figure of $20.86 billion. The top line also missed the Zacks Consensus Estimate of $19.80 billion.
Quarterly Highlights
Cost of products sold in the reported quarter was $3,319 million, down 3.1% from the prior-year period.
Selling and administrative expenses decreased 1.1% to $863 million from $873 million a year ago.
In the fourth quarter of 2016, the company’s research and development expenses were $145 million, down 5.2% from $153 million in the prior-year quarter.
Interest expenses of $60 million were up 5.3% from the prior-year quarter figure.
Eaton is on track with its restructuring program, with restructuring costs amounting to $211 million.
Eaton Corporation, PLC Price, Consensus and EPS Surprise
Eaton’s cash and short-term investments were $543 million as of Dec 31, 2016, compared with $268 million as of Dec 31, 2015.
As of Dec 31, 2016, long-term debt was $6,711 million, compared with $7,746 million as of Dec 31, 2015.
Guidance
First-quarter 2017 earnings per share are expected to be between 80 cents and 90 cents.
For 2017, Eaton anticipates flattish growth in organic revenues over the 2016 levels. Currency translation is projected to have a roughly $300 million impact during the year.
Eaton expects 2017 operating earnings in the range of $4.30 to $4.60 per share.
Upcoming Releases
ABB Ltd is slated to report fourth-quarter earnings on Feb 8. The Zacks Consensus Estimate is pegged at 27 cents. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CUI Global Inc. , with a Zacks Rank #3 stock, is slated to report fourth-quarter 2016 earnings on Mar 13. The Zacks Consensus Estimate is pegged at a loss of 7 cents.
SPX FLOW Inc. (FLOW - Free Report) , another Zacks Rank #3 stock, is slated to report fourth-quarter earnings on Feb 8. The Zacks Consensus Estimate is pegged at 52 cents.
Our View
Eaton managed to beat fourth-quarter earnings estimates even though revenues lagged the mark. The company is grappling with persistent weakness in its end markets and negative currency translations.
The drop is bookings at some of Eaton’s business segments is a major concern. Moreover, negative currency translation is expected to have an adverse impact on the company’s results, as was the case last year.
However, Eaton anticipates gaining substantially from its restructuring initiatives as well as higher orders for Electrical Products and Hydraulics in 2017.
Eaton currently carries a Zacks Rank #3.
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Eaton (ETN) Beats Q4 Earnings Estimates, Issues '17 Outlook
Eaton Corporation plc’s (ETN - Free Report) fourth-quarter 2016 operating earnings per share of $1.12 beat the Zacks Consensus Estimate by 1.8%. Also, reported earnings were within management’s guidance range of $1.05 to $1.15 per share. However, the bottom line was down 4% from the year-ago quarter level.
Full-year operating earnings came in at $4.22 per share, down 1.9% from the 2015 tally of $4.30. The year-over-year decline in earnings was due to lower-than-expected organic sales in 2016. Reported earnings, however, exceeded the Zacks Consensus Estimate of $4.20.
Revenues
In the quarter under review, Eaton’s total revenue came in at $4.87 billion, lagging the Zacks Consensus Estimate of $4.9 billion by 0.8%.
On a year-over-year basis, revenues were down nearly 3.8% due to lower Aerospace (3.4%), Vehicle (11.9%), Electrical Systems and Services (2.6%), and Hydraulics (5.8%) sales.
Unfavorable currency translation and a decline in organic sales were the primary reasons for the top-line deterioration. Sales took a 1% hit from currency translation, while the drop in organic sales accounted for 3%.
Full-year revenues amounted to $19.75 billion, down 5.4% from than the prior-year figure of $20.86 billion. The top line also missed the Zacks Consensus Estimate of $19.80 billion.
Quarterly Highlights
Cost of products sold in the reported quarter was $3,319 million, down 3.1% from the prior-year period.
Selling and administrative expenses decreased 1.1% to $863 million from $873 million a year ago.
In the fourth quarter of 2016, the company’s research and development expenses were $145 million, down 5.2% from $153 million in the prior-year quarter.
Interest expenses of $60 million were up 5.3% from the prior-year quarter figure.
Eaton is on track with its restructuring program, with restructuring costs amounting to $211 million.
Eaton Corporation, PLC Price, Consensus and EPS Surprise
Eaton Corporation, PLC Price, Consensus and EPS Surprise | Eaton Corporation, PLC Quote
Financial Update
Eaton’s cash and short-term investments were $543 million as of Dec 31, 2016, compared with $268 million as of Dec 31, 2015.
As of Dec 31, 2016, long-term debt was $6,711 million, compared with $7,746 million as of Dec 31, 2015.
Guidance
First-quarter 2017 earnings per share are expected to be between 80 cents and 90 cents.
For 2017, Eaton anticipates flattish growth in organic revenues over the 2016 levels. Currency translation is projected to have a roughly $300 million impact during the year.
Eaton expects 2017 operating earnings in the range of $4.30 to $4.60 per share.
Upcoming Releases
ABB Ltd is slated to report fourth-quarter earnings on Feb 8. The Zacks Consensus Estimate is pegged at 27 cents. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CUI Global Inc. , with a Zacks Rank #3 stock, is slated to report fourth-quarter 2016 earnings on Mar 13. The Zacks Consensus Estimate is pegged at a loss of 7 cents.
SPX FLOW Inc. (FLOW - Free Report) , another Zacks Rank #3 stock, is slated to report fourth-quarter earnings on Feb 8. The Zacks Consensus Estimate is pegged at 52 cents.
Our View
Eaton managed to beat fourth-quarter earnings estimates even though revenues lagged the mark. The company is grappling with persistent weakness in its end markets and negative currency translations.
The drop is bookings at some of Eaton’s business segments is a major concern. Moreover, negative currency translation is expected to have an adverse impact on the company’s results, as was the case last year.
However, Eaton anticipates gaining substantially from its restructuring initiatives as well as higher orders for Electrical Products and Hydraulics in 2017.
Eaton currently carries a Zacks Rank #3.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>