Eaton Corporation Plc. ETN announced that its four facilities have resumed operation in Puerto Rico following the damage and disruption caused by the hurricanes. The facilities suffered modest damages and some of the plants are nearing pre-hurricane production levels. Eaton’s facilities in Puerto Rico manufacture low- and medium-voltage circuit protection components.
Eaton expects that hurricanes Maria, Irma and Harvey, as well as the earthquake in Mexico City will have an adverse impact of 3 cents on its third-quarter projected earnings per share guidance of $1.20 to $1.30.
Eaton operates in nearly 175 countries and has manufacturing facilities worldwide. This enhances the revenue stream of the company but at the same time exposes it to disruptions due to natural disaster and geo-political hazards.
Eaton’s Long-Term Strategy
The impact of hurricanes is no doubt a short-term headwind for Eaton. However, thanks to its strategic initiatives and gradual improvements in the end markets, its long-term prospects look bright.
Eaton’s restructuring programs are yielding positive results and organic revenues are expected to improve 1% to 3% in 2017, primarily due to improvement in end-market conditions.
Eaton’s steady cash flow generation capability is helping it increase shareholders’ value and make investments to further strengthen existing operations.
Eaton’s shares have gained 23.5% in last 12 months, outperforming 17.7% rally of its industry.
We believe the company’s extensive market reach, consistent cash flow generation, share buybacks, excellent restructuring initiatives and prudent product innovation are going to drive its performance.
Zacks Rank & Stocks to Consider
Eaton currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector are BPC Acquisition Corp. BERY, Graco Inc. GGG and Cintas Corporation CTAS. All these stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BPC Acquisition reported positive earnings surprises in each of the last four quarters with an average surprise of 16.2%. Its 2017 Zacks Consensus Estimate moved up 5.6% to $3.03 in the last 90 days.
Graco reported positive earnings surprises in each of the last four quarters with an average surprise of 23.95%. Its 2017 Zacks Consensus Estimate moved up 8.6% to $4.52 in the last 90 days.
Cintas reported positive earnings surprises in three of the last four quarters with an average surprise of 6.96%. Its 2017 Zacks Consensus Estimate moved up 7.6% to $5.36 in the last 90 days.
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