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Eaton (ETN) Buys Green Motion, Boosts Electric Vehicle Capacity

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Zacks Equity Research
·3 min read
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Eaton Corporation plc ETN recently completed the buyout of Switzerland-based designer and manufacturer of electric vehicle (EV) charging hardware and related software, Green Motion SA. The company will benefit from Green Motion???s proven charger designs, advanced power and billing management software.

The motive behind this acquisition is to use power management technologies and services in enhancement of environmental sustainability.

Rationale Behind the Acquisition

With increasing global warming, companies across the globe are shifting to EV industry to look for sustainable options. Even traditional automakers are investing heavily in EVs to adapt to the changes. To this end, it is imperative to mention that strong support from the U.S. administration in terms of tax incentives and government funding has been boosting EV growth in the nation. Notably, consumers can currently get a federal tax credit of up to $7,500 on the purchase of an all-electric or plug-in hybrid EV althoughthe facility is not available for all EVs.

While the EV is a relatively young industry, President Joe Biden is taking further efforts to make it and green initiatives a top priority for the United States. As stated by a CNBC report, President Biden is supportive of a rebate program, wherein American car buyers could trade their older vehicles for new EVs. All such initiatives will help in rapid conversion of high carbon footprint creating vehicles and boost sales of EVs.

According to EV-Volumes.com report, 2020 EV sales in the United States fared better than the auto market, with Tesla TSLA dominating the market. Looking ahead, IHS Markit expects global EV sales to grow at 70% in 2021. By 2025, IHS Markit expects global sales to reach12.2 million at a CAGR of 52%. This will likely encourage Eaton to expand its footprint in the growing EV market space, through the latest buyout of Green Motion.

Other Buyout Efforts

In December 2020, Eaton completed the acquisition of Chicago-based Tripp Lite, which is helping the company expand the Power Quality Business in the Americas. The Tripp Lite acquisition will complement Eaton???s power quality portfolio that encompasses uninterruptible power supplies, DC power solutions, surge protective devices, switchgear, power distribution units, remote monitoring, meters, software, connectivity, enclosures and services.

It is evident from the above discussion that Eaton follows a systematic acquisition strategy that enables it to foray into new markets, thereby enhancing its revenue stream. Acquisitions made by the company contributed 2% to its total fourth-quarter revenues. The latest Green Motion buyout can also be expected to contribute positively to the top line in the days ahead.

Price Performance

In the past six months, shares of Eaton have gained 14.2% compared with the industry???s 11.5% rally.

Zacks Rank & Other Key Picks

Eaton currently has a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the same industry include Emerson Electric Co. EMR and Regal Beloit Corporation RBC. You can see the complete list of today???s Zacks #1 Rank (Strong Buy) stocks here.

Emerson Electric and Regal Beloit???s long-term (three to five years) earnings growth is currently projected at 9.8%, and 10%, respectively.

Emerson Electric and Regal Beloit???s Electric delivered a trailing four-quarter earnings surprise of 21.5% and 31.6%, on average, respectively.

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Emerson Electric Co. (EMR) : Free Stock Analysis Report

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Eaton Corporation, PLC (ETN) : Free Stock Analysis Report

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