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Eaton (ETN) to Buy Tripp Lite for $1.65B, Boost UPS Business

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Eaton Corporation PLC (ETN - Free Report) announced that it has entered into a definitive agreement to acquire Tripp Lite for $1.65 billion. The purchase price represents nearly 12 times Tripp Lite’s 2020 EBITDA and 11 times estimated 2021 EBITDA. Subject to necessary approvals, this acquisition is expected to close in mid-2021.

The acquisition of this power quality products and connectivity solutions provider will help Eaton to expand the edge computing and distributed IT product portfolio, and single-phase UPS business in Americas.

Transforming the Company

Eaton has been working on transforming itself into an intelligent power management company. The business portfolio, having market-leading businesses, is making the overall company stronger. In 2019, Eaton strengthened key businesses through strategic acquisitions such as Ulusoy Elektrik, Innovative Switchgear and Power Distribution, Inc. in the Electrical Systems and Services segment, along with the addition of Souriau-Sunbank in the Aerospace segment. These acquisitions boosted the company’s top line in 2020.

In 2020, it announced its decision to acquire a 50% stake in HuanYu High Tech. Eaton has decided to continue with inorganic initiatives in 2021 to further expand its well-spread-out operations across the globe.

Price Performance

Eaton’s shares have gained 23.3% in the past 12 months compared with the industry’s rally of 32%.

Zacks Rank & Key Picks

Eaton currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same industry include ABB Ltd. (ABB - Free Report) , Emerson Electric Co. (EMR - Free Report) and SPX FLOW Inc. (FLOW - Free Report) , each currently having a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term (three to five years) earnings growth of ABB, Emerson Electric and SPX FLOW is currently projected at 6.2%, 9.6%, and 8.9%, respectively.

The Zacks Consensus Estimate for 2021 earnings of ABB and SPX Flow has moved up 1.7% and 0.5%, respectively, in the past 60 days. The same for fiscal 2021 earnings of Emerson Electric has moved up 2.8% in the past 60 days.

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