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Eaton's (ETN) Wide Market Reach, R&D Program Aid Operations
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We recently updated a research report on Eaton Corporation (ETN - Free Report) . The company’s operations are going to thrive due to wide market reach and systematic R&D expenditures, which in turn will help it create new products that are set to help customers in efficient power management. In addition, its restructuring programs will help the company to sustain operation amid COVID-19-related challenges.
This Zacks Rank #3 (Hold) stock has delivered an average earnings surprise of 8.99% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved up nearly 8% in the past 30 days to $3.93 per share.
Factors Acting as Tailwinds
Eaton has been consistently investing in R&D programs to introduce new products, including power management solutions, which will reduce energy consumption and carbon emissions. For first-half 2020, R&D expenses were $279 million compared with $307 million in the comparable year-ago period. Eaton has laid out a 10-year plan that includes $3 billion investment in R&D programs, which will allow the company to create sustainable products over this period of time. The products supplied by Eaton have been deemed to be critical part of the global infrastructure and are absolutely essential in the crisis situation.
It operates in a number of markets and the quality of products supplied by the company enables it to retain a strong market position. Eaton’s strategic acquisitions allow it to foray into new markets and enhance its revenue stream. Eaton supplies products to around 175 countries and this in a sense provides stability to the company’s revenue generation ability amid the novel coronavirus-led economic challenges, as the loss of a customer will not have any significant impact on revenues and margins.
Eaton decided to implement a multi-year restructuring program to deal with the anticipated prolonged weakness in some of the end markets served. The cost of the program is estimated to be $280 million, including the $187 million charge it took in the second quarter. These actions will reduce structural cost and are targeted for those end markets — including Eaton’s commercial aerospace, oil and gas, NAFTA Class 8 truck, as well as North America and European light vehicle markets — wherein recovery from the pandemic-induced weakness could take several years.
Headwinds
Due to prevailing economic uncertainty across the globe as a result of the COVID-19 pandemic, the company reaffirmed decremental margin expectation of 25-30% for 2020. Weakness in some of the end markets is likely to persist and reduce its margins from 2019.
Eaton, which utilizes a variety of raw materials and components in businesses, has to depend on others for the supply of raw materials. Hence, any significant shortage, price increase or supplier insolvencies could increase operating costs and adversely impact its competitive position.
Price Performance
In the past 12 months, shares of Eaton have gained 28.7% compared with the industry’s 23.4% rally.
Stocks to Consider
Some better-ranked stocks from the same industry include Rexnord Corporation , ABB Ltd and Regal Beloit Corporation (RBC - Free Report) . Rexnord currently sports a Zacks Rank #1 (Strong Buy) and the other two stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term (three to five years) earnings growth for Rexnord, ABB Ltd and Regal Beloit is projected at 7.07%, 6.20%, and 10%, respectively.
The Zacks Consensus Estimate for Rexnord, ABB and Regal Beloit’s earnings for the next reporting year has moved 6%, 12.7% and 12.1% upward, respectively, in the past 30 days.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Eaton's (ETN) Wide Market Reach, R&D Program Aid Operations
We recently updated a research report on Eaton Corporation (ETN - Free Report) . The company’s operations are going to thrive due to wide market reach and systematic R&D expenditures, which in turn will help it create new products that are set to help customers in efficient power management. In addition, its restructuring programs will help the company to sustain operation amid COVID-19-related challenges.
This Zacks Rank #3 (Hold) stock has delivered an average earnings surprise of 8.99% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved up nearly 8% in the past 30 days to $3.93 per share.
Factors Acting as Tailwinds
Eaton has been consistently investing in R&D programs to introduce new products, including power management solutions, which will reduce energy consumption and carbon emissions. For first-half 2020, R&D expenses were $279 million compared with $307 million in the comparable year-ago period. Eaton has laid out a 10-year plan that includes $3 billion investment in R&D programs, which will allow the company to create sustainable products over this period of time. The products supplied by Eaton have been deemed to be critical part of the global infrastructure and are absolutely essential in the crisis situation.
It operates in a number of markets and the quality of products supplied by the company enables it to retain a strong market position. Eaton’s strategic acquisitions allow it to foray into new markets and enhance its revenue stream. Eaton supplies products to around 175 countries and this in a sense provides stability to the company’s revenue generation ability amid the novel coronavirus-led economic challenges, as the loss of a customer will not have any significant impact on revenues and margins.
Eaton decided to implement a multi-year restructuring program to deal with the anticipated prolonged weakness in some of the end markets served. The cost of the program is estimated to be $280 million, including the $187 million charge it took in the second quarter. These actions will reduce structural cost and are targeted for those end markets — including Eaton’s commercial aerospace, oil and gas, NAFTA Class 8 truck, as well as North America and European light vehicle markets — wherein recovery from the pandemic-induced weakness could take several years.
Headwinds
Due to prevailing economic uncertainty across the globe as a result of the COVID-19 pandemic, the company reaffirmed decremental margin expectation of 25-30% for 2020. Weakness in some of the end markets is likely to persist and reduce its margins from 2019.
Eaton, which utilizes a variety of raw materials and components in businesses, has to depend on others for the supply of raw materials. Hence, any significant shortage, price increase or supplier insolvencies could increase operating costs and adversely impact its competitive position.
Price Performance
In the past 12 months, shares of Eaton have gained 28.7% compared with the industry’s 23.4% rally.
Stocks to Consider
Some better-ranked stocks from the same industry include Rexnord Corporation , ABB Ltd and Regal Beloit Corporation (RBC - Free Report) . Rexnord currently sports a Zacks Rank #1 (Strong Buy) and the other two stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term (three to five years) earnings growth for Rexnord, ABB Ltd and Regal Beloit is projected at 7.07%, 6.20%, and 10%, respectively.
The Zacks Consensus Estimate for Rexnord, ABB and Regal Beloit’s earnings for the next reporting year has moved 6%, 12.7% and 12.1% upward, respectively, in the past 30 days.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>