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Eaton to Sell Lighting Business & Focus on Core Operations

Zacks Equity Research

Eaton Corporation plc ETN has entered into an agreement to sell the Lighting business to Signify N.V. for a cash purchase price of $1.4 billion. The company had announced to sell the business in the first quarter of 2019. Although this business unit is among the global leaders of providers of LED lighting and control solutions, it no longer fits in the long-term plans of Eaton. Post divestiture, it will focus on higher-margin business.

Subject to necessary approvals, this transaction is expected to be completed by the first quarter of 2020. Eaton continues to manage its portfolio in an effective way to create value for its shareholders. It continues to review various potential transaction alternatives to increase its shareholders’ value.

What Lies Ahead?

To build on its existing platform, the company engages in strategic acquisitions, which enable it to expand its operations.

In April 2019, the company acquired Turkey-based Ulusoy Elektrik Imalat Taahhut ve Ticaret A.S. (Ulusoy Elektrik). This buyout complements its services that are spread across 175 countries. Ulusoy Elektrik exports products to more than 70 countries across the globe. The acquisition of Ulusoy Elektrik will allow Eaton to sell electric products of different varieties to existing customers. The acquired assets are expected to boost 2019 revenues by $100 million.

The company continues to make steady investment in research and development activities to churn out new electrical products, which will help reduce energy consumption and carbon emissions. This enables Eaton to remain competitive in the countries it operates.

Eaton expects its segment operating income in 2019 to increase in the range of 17.1-17.5%, while its organic revenues are expected to improve 3% in 2019 with end markets registering growth.

Price Performance
 
Shares of Eaton have outperformed its industry in the past three months.



Zacks Rank & Key Picks

Currently, Eaton has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same sector are AZZ Inc. AZZ, Cintas Corporation CTAS and ESCO Technologies Inc. ESE. While AZZ Inc. sports a Zacks Rank #1, Cintas Corporation and ESCO Technologies carry a Zacks Rank #2 (Buy).

AZZ Inc. reported positive earnings surprise of 2.12% in the last reported quarter. The Zacks Consensus Estimate for fiscal 2020 has moved up 4.5% year over year to $2.70 per share in the past 60 days.

Cintas Corporation reported positive earnings surprise of 6.26% in the last four quarters. The Zacks Consensus Estimate for fiscal 2020 has moved up 1.8% to $8.57 per share in the past 60 days.

ESCO Technologies reported positive earnings surprise of 11.19% in the last four quarters. The Zacks Consensus Estimate for fiscal 2019 has moved up 0.6% to $3.10 per share in the past 60 days.

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