The large global corporations have reaped the benefits of the recovery. Eaton Corporation (ETN) grew sales 16% in 2010 as demand returned to the emerging markets. This Zacks #1 Rank (strong buy) still has value, with a forward P/E of 14.9.
Eaton is a diversified industrial manufacturer of products in the Electrical, Hydraulics, Aerospace and Vehicles sectors.
Its involved in power distribution and power control products including circuit breakers, meters, relays and inverters. The company’s hydraulic systems are used in aerospace, agriculture, construction, machine tools and the oil and gas industries.
The company also makes powertrain systems for the commercial market as well as clutches, and manual and automatic transmissions, valves, cylinder heads, spoilers and fluid connectors.
88 Years of Rewarding Shareholders
Headquartered in Cleveland, the company will celebrate its 100th anniversary this year in style. On Jan 27, it announced it would increase its dividend by 17% to 68 cents from 58 cents per share.
The company has paid dividends since 1923. Its shares are currently yielding 2.4%.
Eaton is also splitting its shares 2 for 1 at the close of business on Feb 28, for shareholders of record as of Feb 7. The split-adjusted shares will start trading on Mar 1.
Eaton Surprised for the 13th Consecutive Quarter
On Jan 27, Eaton reported its fourth quarter results and surprised on the Zacks Consensus by 1.2%. It continued the incredible earnings surprise streak which has continued for 13 quarters.
The company has only missed once in the last 5 years.
Earnings per share were $1.69 compared to the Zacks Consensus of $1.67. The company made just $1.25 in the year ago quarter.
Sales jumped 17% to $3.7 billion in the quarter with growth in core sales up 16% and acquisitions contributing 2%. This was offset by a 1% decline due to foreign exchange. End markets grew by 13%.
The best performing segment was Hydraulics, with sales up 36% year over year led by sales in the U.S. which jumped 46%. Non-U.S. markets saw 32% gains.
For the full year, sales climbed 16% to $13.7 billion due to a rebound from the awful environment of 2009 and a huge rebound in emerging market sales, which soared 30%.
Momentum Expected to Continue in 2011
The company is bullish on 2011. It expects its markets to grow 8% with all 6 of its segments seeing growth for the first time in the same year since 2006.
Revenue, including $160 million from recent acquisitions, is expected to grow 12% to $15.3 billion.
First quarter earnings per share are expected in the range of $1.50 to $1.60 and full year are estimated to be between $7.00 and $7.60 per share.
Zacks Consensus Estimates Move Higher
Given the company’s bullish guidance, it’s not surprising that the analysts moved to raise estimates after the report.
The 2011 Zacks Consensus climbed 22 cents to $7.42 per share in the last 30 days with 12 estimates being revised higher in that time. That is on the higher end of the company’s guidance range.
It is earnings growth of 32.3%.
The 2012 Zacks Consensus also moved higher, to $8.79 from $8.36, in the last month. That is continuing earnings growth of 18.3%.
Still Value In ETN
With the forward P/E at 14.9, just below the 15x cut-off I use for “value”, Eaton is on the edge of being within the value parameters.
But it does have some other value characteristics, including a price-to-book ratio of just 2.5 which is well within the value parameters of under 3.0.
Additionally, the company has a solid return on equity (ROE) of 13.7%.
Shares at All-Time Highs
The stock has been on an incredible rally off the 2009 lows, gaining 63% in just the last 52 weeks alone. Shares have now surpassed the previous high all-time high.
Check out the 10-year chart.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.
EATON CORP (ETN): Free Stock Analysis Report
Zacks Investment Research
