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Eaton (ETN) Buys Royal Power, Expands in Multiple Markets

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Eaton Corporation Plc. (ETN - Free Report) announced that it has acquired Royal Power Solutions, a U.S.-based manufacturer of high-precision electrical connectivity components. The products manufactured by Royal Power solutions are utilized in electric vehicle, energy management, industrial and mobility markets. Eaton has paid $600 million for the acquisition, which will further expand operations in multiple growth markets in the United States.

Transportation-related emissions are one of the primary sources of increasing air pollution across the globe. Many governments across the globe are providing additional incentives for the usage of electric vehicles (EV), and the ongoing development of more efficient EVs is expanding the market for EVs and the ancillary products needed in EVs.

Expanding EV Markets Create New Opportunities

Per International Energy Agency, the usage of EVs is going to increase around 36% annually from 2019 levels and touch 245 million vehicles across the globe in 2030. A sizeable portion of the expected growth is likely to come from the North American markets and Eaton’s decision to acquire Royal Power solutions will allow it to capitalize on the improving demand for EVs.

EV charging points are quite essential for the smooth functioning of EVs and replacing the vehicles operating on conventional fuels.

Eaton has been making strategic acquisitions to further expand the business and product offerings. The company has already closed the acquisition of Green Motion, a manufacturer of electric vehicle charging hardware and software. This has expanded its electric vehicle charging infrastructure and will allow ETN to reap benefits from the energy transition. At present, Eaton’s global focus is on lowering transportation-related emissions.

Given the huge growth potential of the EV charging business, energy giants like BP Plc. (BP - Free Report) and TotalEnergies SE (TTE - Free Report) , among others, are investing and expanding their EV charging business globally.

BP has started to invest in developing the EV charging network in the United Kingdom and China. To expand EV charging operations, BP has acquired Chargemaster, which is the operator of U.K.’s largest EV charging network, rebranded as BP Chargemaster. BP has also invested $7 million in IoTecha, in sync with its objective of providing more than 70,000 public EV charging points worldwide by 2030.

TTE has long-term plans to install more than 150,000 electric vehicle charge points in Europe by 2025. TotalEnergies already has electric charging point networks in operation or under construction in other cities of Europe. TTE has also received a contract to construct EV charging points in Singapore and China.

Price Performance

In the past si months, shares of Eaton have gained 11.1% compared with the industry’s 7.4% rally.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank & Another Key Pick

Eaton currently has a Zacks Rank #2 (Buy). Another top-ranked stock in the same industry is SPX Flow Inc. , currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SPX Flow delivered an average earnings surprise of 40.4% in the last four quarters. The Zacks Consensus Estimate for FLOW’s 2021 and 2022 earnings has moved up 8.4% and 23.5%, respectively, in the past 60 days.


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