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Eaton's (ETN) Earnings and Revenues Lag Estimates in Q2

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Eaton Corporation plc’s (ETN - Free Report) second-quarter 2017 operating earnings per share of $1.15 lagged the Zacks Consensus Estimate of $1.16 by a penny.

The reported earnings were at the upper end of the management’s guidance range of $1.05–$1.15 per share. The bottom line was up 7.5% from the year-ago quarter level.

Revenues

In the quarter under review, Eaton’s total revenue came in at $5.13 billion, missing the Zacks Consensus Estimate of $5.14 billion by 0.2%. Total revenue was 1% higher than the year-ago level.

The year-over-year sales increase consists of 2% growth in organic sales, partially offset by 1% decline from negative currency translations.

Total revenue improved primarily due to a higher contribution from Electric Products, Vehicle and Hydraulics segments, offset marginally by lower contribution from Aerospace, and Electrical Systems and Services segments.

 

Eaton Corporation, PLC Price, Consensus and EPS Surprise

 

Eaton Corporation, PLC Price, Consensus and EPS Surprise | Eaton Corporation, PLC Quote

 

Quarterly Highlights

Cost of products sold in the reported quarter was $3,450 million, up 0.9% from the prior-year period.

Selling and administrative expenses increased 0.6% to $902 million from $897 million a year ago.

In the second quarter of 2017, the company’s research and development expenses were $150 million, up 0.7% from $149 million in the prior-year quarter.

Interest expenses of $60 million were up 5.3% from the prior-year quarter figure.

Financial Update

Eaton’s cash and short-term investments were $312 million as of Jun 30, 2017 compared with $543 million as of Dec 31, 2016.

As of Jun 30, 2017, long-term debt was $6,264 million compared with $6,711 million as of Dec 31, 2016.

Guidance

Third-quarter 2017 earnings per share are expected to be between $1.20 and $1.30.

The company narrowed the lower and upper end of its earnings guidance for 2017 by 5%. Post revision new expectation for 2017 will be $4.50–$4.70 per share, down from the prior guidance of $4.55–$4.75 per share.

A Peer Release

ABB Ltd (ABB - Free Report) reported second-quarter 2017 earnings of 30 cents per share, beating the Zacks Consensus Estimate of 29 cents by 3.4%.

Upcoming Releases

SPX FLOW Inc. (FLOW - Free Report) is slated to report second-quarter earnings on Aug 2. The Zacks Consensus Estimate is pegged at 34 cents.

CUI Global Inc. (CUI - Free Report) is slated to report second-quarter 2017 earnings on Aug 9. The Zacks Consensus Estimate is pegged at a loss of 12 cents.

Our View

Eaton failed to beat second-quarter earnings and total revenue estimates, but has continued to increase shareholders value through share buybacks.

Organic revenue growth is expected in the range of 15.5–16.1% in 2017, primarily due to improvements in the end markets of Eaton.

We believe growth in orders from most of Eaton’s operating segments and benefits from restructuring activities will drive its performance in the coming quarters.

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