It's been a sad week for Eaton Corporation plc (NYSE:ETN), who've watched their investment drop 14% to US$90.72 in the week since the company reported its annual result. Revenues of US$21b were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$5.25, missing estimates by 4.8%. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Taking into account the latest results, the current consensus, from the 22 analysts covering Eaton, is for revenues of US$20.3b in 2020, which would reflect a perceptible 5.0% reduction in Eaton's sales over the past 12 months. Statutory earnings per share are expected to rise 8.8% to US$5.74. Yet prior to the latest earnings, analysts had been forecasting revenues of US$20.3b and earnings per share (EPS) of US$5.74 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
Analysts reconfirmed their price target of US$108, showing that the business is executing well and in line with expectations. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Eaton, with the most bullish analyst valuing it at US$121 and the most bearish at US$92.00 per share. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 5.0% a significant reduction from annual growth of 0.008% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 3.0% next year. It's pretty clear that Eaton's revenues are expected to perform substantially worse than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Eaton going out to 2023, and you can see them free on our platform here.
You can also view our analysis of Eaton's balance sheet, and whether we think Eaton is carrying too much debt, for free on our platform here.
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