Electrical equipment maker Eaton Corp. (ETN) reported better-than-expected first-quarter 2010 results, helped by surging sales and cost cuts amid a rebounding global economy.
Earnings per share, excluding the impact of acquisition integration charges and the non-cash tax charge related to Medicare Part D due to the new U.S. health care law, came in at $1.09, beating the Zacks Consensus Estimate of 83 cents. In the year-ago period, the Cleveland, Ohio-based company lost 22 cents per share.
Revenue
Total quarterly revenue of $3.1 billion surpassed the Zacks Consensus Estimate and was up 10% year over year. Improved sales in the quarter came from a combination of organic growth and favorable foreign exchange rates. End markets in the first quarter increased by 4%.
Eaton witnessed sales decline across its Electrical Americas and Aerospace segments, which were more than offset by robust growth at its Electrical Rest of World, Hydraulics, Truck and Automotive segments.
Segment Analysis
Electrical Americas
Within its Electrical unit, Electrical Americas revenue dropped 7% from the first quarter of 2009 to $802 million, while operating profit was down 1% to $106 million (excluding acquisition integration charges). The negative results were primarily caused by the weakness in late cycle non-residential markets. Bookings (adjusted for foreign exchange and acquisitions) held up quite well and were down just 4% year over year.
Electrical Rest of the World
Electrical Rest of the World segment sales were up 12% to $608 million, driven by volume increase and foreign exchange effects. Operating income of $49 million (excluding acquisition integration charges) was up significantly from the year-ago level of $10 million. Segment bookings (adjusted for foreign exchange and acquisitions) grew 18%, buoyed by accelerating strength in the Asia Pacific market.
Hydraulic
At $490 million, Hydraulic segment sales rose 14% year-over-year, while operating profit (excluding acquisition integration charges) came in at $54 million, up from $7 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 10% and 32%, respectively, adversely affected by a fall in the market size.
Truck
The Truck segment posted a 55% improvement in sales to $453 million. It earned $46 million during the quarter, turning around from a loss of $34 million in the first quarter of 2009. Eaton benefited from a 19% increase in truck markets and from its cost reduction efforts.
Automotive
Helped by a 46% year-over-year growth in the global automotive market, the segment’s first quarter sales were up 39%. It posted operating profits of $42 million compared to a loss of $45 million in the first quarter of 2009.
Guidance
Eaton guided towards second quarter earnings in the range of $1.05 – $1.15 per share. Additionally, buoyed by the strong first quarter results and strengthening market outlook, the company raised its full-year 2010 earnings outlook to $4.15 – $4.45 per share.
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