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Eaton's (ETN) Q2 Earnings and Revenues Surpass Estimates

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Eaton Corporation (ETN - Free Report) reported second-quarter 2020 earnings of 70 cents per share, which surpassed the Zacks Consensus Estimate of 52 cents by 34.6%. However, earnings were down 54.2% year over year due to weakness in some of its end markets.

GAAP earnings in the reported quarter were 13 cents per share compared with $1.50 in the year-ago period. The difference between GAAP and operating earnings in the reported quarter was due to a one-time charge of 20 cents associated with acquisitions and divestitures, as well as 37 cents related to a multi-year restructuring program.

Revenues

Total quarterly revenues came in at $3,856 million, which beat the Zacks Consensus Estimate of $3,653 million by 5.6%. However, total revenues decreased 30.3% from the year-ago quarter.

In the reported quarter, organic sales were down 22% from the prior-year period. Divestiture of the Lighting and Automotive Fluid Conveyance businesses resulted in an 8% decline in revenues, and negative currency translation impacted the same by 2%. Acquired assets added 2% to second-quarter sales.

Eaton Corporation, PLC Price, Consensus and EPS Surprise

Eaton Corporation, PLC Price, Consensus and EPS Surprise

Eaton Corporation, PLC price-consensus-eps-surprise-chart | Eaton Corporation, PLC Quote

Segment Details

Electrical Americas’ total second-quarter sales were $1,490 million, down 28.5% from the year-ago level. The decline was due to the impact of the Lighting business divestiture, negative currency translation and reduced organic sales.

Electrical Global’s total sales were $1,111 million, down 16.1% from the year-ago quarter. Organic sales were down 14% from the year-ago quarter, primarily due to the COVID-19 outbreak. Negative currency translation impacted sales by 2%.

Hydraulics’ total sales were $411 million, down 31.8% from the year-ago quarter. The revenue decline was due to 30% fall in organic sales and a 2% impact from negative currency translation.

Aerospace total sales were $461 million, down 27.3% from the year-ago quarter. The acquisition of Souriau-Sunbank contributed 8% to revenues. However, organic sales were down 27% from a year ago.

Vehicle total sales were $327 million, down 59.3% from the year-ago quarter. Decline in organic sales, divestiture of the automotive fluid conveyance business and negative currency translation affected the results.

eMobility segment’s total sales were $56 million, down 33% from the year-ago quarter. The deterioration in the top line was due to a decline in organic sales.

Highlights of the Release

Eaton continues to make changes in its portfolio. The company sold the Lighting business for $1.4 billion and entered into an agreement to sell the Hydraulics Business for $3.3 billion by 2020-end.

Selling and administrative expenses were $691 million, down 23.8% from the year-ago quarter.

The company’s second-quarter research and development expenses were $126 million, down 16.6% from the prior-year period. Interest expenses for the quarter were $38 million, down 24% from the year-ago period.

Orders in Electrical Americas were up 2.1% year over year, while the same in Electrical Global, Hydraulics and Aerospace was down 4.6%, 33.7% and 12.8%, respectively.

Despite the novel coronavirus-related challenges early in the quarter, orders registered an impressive growth in June, with the residential and utility end markets witnessing the maximum improvement.

The company decided to implement a multi-year restructuring program that will cost nearly $280 million. Total second-quarter expenses of $187 million were incurred by Eaton.

Financial Update

Eaton’s cash was $292 million as of Jun 30, 2020 compared with $370 million on Dec 31, 2019.

As of Jun 30, 2020, long-term debt of the company was $6,906 million, down from $7,819 million on Dec 31, 2019.

Guidance

Amid the novel coronavirus-led economic crisis and destruction of demand, the company decided to withdraw its 2020 earnings guidance. Eaton expects free cash flow in the range of $2.3-$2.7 billion for 2020.

It is targeting share buyback in the range of $1.7-$1.9 billion in 2020, of which $1.3 billion is already completed in first-quarter 2020.

Zacks Rank

Currently, Eaton has a Zacks Rank #3 (Hold).
 
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Regal Beloit Corporation (RBC - Free Report) is slated to announce second-quarter 2020 earnings on Aug 3. The Zacks Consensus Estimate for the bottom line for the quarter to be reported is pegged at 65 cents per share.

Energous Corporation (WATT - Free Report) is slated to announce second-quarter 2020 earnings on Aug 5. The Zacks Consensus Estimate for the bottom line for the quarter to be reported is pegged at a loss of 18 cents per share.

A. O. Smith Corporation (AOS - Free Report) is slated to announce second-quarter 2020 earnings on Jul 30. The Zacks Consensus Estimate for the bottom line for the quarter to be reported is pegged at 44 cents per share.

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