Electrical equipment maker Eaton Corp. (ETN) reported third quarter earnings of $1.21 per share, beating its own guidance of 80-90 cents per share and the Zacks Consensus Estimate of 91 cents per share. Better-than-expected earnings in the quarter were primarily a result of substantial reduction in costs.
However, quarterly earnings were down 38% from the year-ago profit of $1.95 per share. The company’s cost-cutting efforts were more than offset by lower sales and a stronger dollar.
Eaton’s revenues fell 26.4% year over year to $3 billion. The revenue decline was a result of 23% decline in core sales and a 3% negative impact of foreign exchange translation.
The company witnessed double digit sales decline across its segments. The truck and the Hydraulic segments posted sales decline of 35% and 34%, respectively. These segments witnessed more than 40% decline in the U.S. markets. Hydraulic markets outside the U.S. were down 34%, while the non-U.S. truck markets declined 17%.
Sales in the Electrical Americas segment fell 20% compared to last year, primarily due to weakness in the non-residential electrical market. Electrical Rest of the World segment sales were down 28%, driven by a 26% decline in European markets, 9% decline in Asia, and a 5% unfavorable impact of foreign currency translation.
Eaton’s Automotive segment reported a 27% decline in sales in the third quarter. Automotive unit production declined 17% during the quarter. Sales in the Aerospace business were down 16% due to lower volumes resulting from late-cycle nature of aerospace markets.
Eaton now expects fourth quarter earnings of $1.15−$1.25 per share and full-year earnings in the range of $2.40−$2.50. It expects a 21%−22% decline in its overall end markets. The company forecasts around 25% decline in the U.S. markets and a 19% decline in the non-U.S. markets.
Eaton expects to benefit from the U.S. economic stimulus bill over the next two years. Earlier in September, the company’s chairman said that the company is on track to book revenue of about $500 million each in 2010 and 2011, as the government spends on improving energy efficiency in buildings.
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