Electrical equipment maker Eaton Corporation (ETN) reported better-than-expected second quarter 2010 results, helped primarily by stronger end-markets.
Earnings per share, excluding acquisition-related integration charges, came in at $1.36, beating the Zacks Consensus Estimate of $1.17. In the year-ago period, the Cleveland, Ohio-based company earned 23 cents per share.
Revenue
Total quarterly revenue of $3.4 billion was up 16% year over year and 9% sequentially. Improved sales in the quarter came from a combination of organic growth, continued expansion in the company’s markets around the world and favorable foreign exchange rates.
In the quarter, Eaton witnessed robust sales growth across all its business segments except Aerospace. Sales at the Electrical Americas segment remained almost flat.
Segment Analysis
Electrical Americas: Within its Electrical unit, Electrical Americas revenue improved 1% from the first quarter of 2009 to $894 million, while operating profit was down 17% to $121 million (excluding acquisition integration charges). Flat results at the segment were primarily due to weakness in late cycle non-residential markets, while the early-cycle businesses witnessed continued growth and the mid-cycle markets began to recover. Bookings (adjusted for foreign exchange) showed a growth of 27% from the year-ago period.
Electrical Rest of the World: Electrical Rest of the World segment sales were up 12% to $665 million, driven by volume increase and synergies of acquisitions, offset by foreign currency declines. Operating income of $67 million (excluding acquisition integration charges) was up significantly from the year-ago level of $26 million. Segment bookings (adjusted for foreign exchange and acquisitions) grew 23%, buoyed by accelerating strength in Asia and Europe.
Hydraulic: At $568 million, Hydraulic segment sales rose 34% year-over-year, while operating profit (excluding acquisition integration charges) came in at $77 million, up from $14 million in the corresponding quarter last year. A rebound in the global market, coupled with improvement in the company’s cost structure, accounted for the improvements.
Aerospace: Compared to the first quarter of 2009, the Aerospace segment sales and operating profit posted declines of 9% and 33%, respectively, adversely affected by a fall in the market size.
Truck: The Truck segment posted a 53% improvement in sales to $492 million. It earned $59 million during the quarter, turning around from a loss of $3 million in the second quarter of 2009. Eaton benefited from a 28% increase in truck production, with U.S. markets up 32% and non-U.S. markets up 24%.
Automotive: Helped by a 34% year-over-year growth in the global automotive market, the segment’s second quarter sales were up 44%. It posted operating profits of $39 million compared to a loss of $19 million in the second quarter of 2009.
Dividend
Based on robust second quarter results and an improved outlook for the remainder of the year, Eaton has raised its quarterly dividend by 16%, from $0.50 per share to $0.58 per share.
Guidance
Eaton guided third quarter earnings in the range of $1.25 – $1.35 per share. Additionally, buoyed by strong second quarter results and a stronger market outlook, the company raised its full-year 2010 earnings outlook to $4.90 – $5.10 per share.
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