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Eaton's (ETN) Q1 Earnings Beat Estimates, Revenues Miss

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Zacks Equity Research
·5 min read
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Eaton Corporation ETN reported first-quarter 2020 earnings of $1.09 per share, which surpassed the Zacks Consensus Estimate of $1.06 by 2.8%. However, the reported earnings fell short of management’s guided range of $1.16-$1.26 per share. The company’s earnings were negatively impacted by 14 cents due to the COVID-19 pandemic impact.

GAAP earnings in the reported quarter were $1.07 per share compared with $1.23 in the year-ago period. The difference between GAAP and operating earnings in the reported quarter was due to a one-time charge of 2 cents associated with acquisitions and divestitures.

Revenues

Total revenues in the quarter came in at $4,789 million, lagging the Zacks Consensus Estimate of $4,793 million by 0.1%. Quarterly revenues also decreased 9.7% from the year-ago quarter.

At the start of the year, organic sales were expected to be down 3%. The COVID-19 pandemic reduced its sales by an additional 4% in the first quarter. This 7% total fall in organic sales resulted in the year-over-year revenue decline.

Eaton Corporation, PLC Price, Consensus and EPS Surprise

Eaton Corporation, PLC Price, Consensus and EPS Surprise
Eaton Corporation, PLC Price, Consensus and EPS Surprise

Eaton Corporation, PLC price-consensus-eps-surprise-chart | Eaton Corporation, PLC Quote

Segment Details

Electrical Americas’ total first-quarter sales were $1,788 million, down 8.8% from the year-ago level. The decline was due to the impact of the divestiture of the Lighting business, negative currency translation and reduced organic sales.

Electrical Global’s total sales were $1,144 million, down 7.9% from the year-ago quarter. Organic sales were down 6% from the year-ago quarter, primarily due to the COVID-19 outbreak. Negative currency translation impacted sales by 3%, while the acquisition of Ulusoy added 1% to sales.

Hydraulics’ total sales were $507 million, down 16.2% from the year-ago quarter. The revenue decline was due to 14% fall in organic sales and a 2% impact from negative currency translation.

Aerospace total sales were $680 million, up 12.6% from the year-ago quarter. The acquisition of Souriau-Sunbank contributed 14% to revenues but organic sales was down 1% from a year ago.

Vehicle total sales were $598 million, down 26.2% from the year-ago quarter. Decline in organic sales, divestiture of the automotive fluid conveyance business and negative currency translation affected the results.

eMobility segment’s total sales were $72 million, down 13.2% from the year-ago quarter. The drop in the top line was due to decline in organic sales and negative currency translation.

Highlights of the Release

Eaton continues to make changes in its portfolio. The company sold the Lighting business for $1.4 billion and entered into an agreement to sell the Hydraulics Business for $3.3 billion by 2020-end.

Selling and administrative expenses were $865 million, down 5.7% from the year-ago quarter.

The company’s research and development expenses in the first quarter were $153 million, down 1.% from the prior-year period. Interest expenses in the quarter were $34 million, down 43.3% from the year-ago period.

Orders in Electrical Americas were up 3% year over year, while the same in Electrical Global, Hydraulics and Aerospace were down 1%, 11% and 1%, respectively.

In the first quarter, it repurchased shares worth $1.3 billion, which equates to 3.4% shares outstanding of Eaton at the beginning of 2020.

Financial Update

Eaton’s cash was $239 million as of Mar 31, 2020 compared with $370 million on Dec 31, 2019.

As of Mar 31, 2020, long-term debt of the company was $7,842 million, up from $7,819 million on Dec 31, 2019.

Guidance

Amid the novel coronavirus-led economic crisis and destruction of demand, the company has decided to withdraw its 2020 earnings guidance. Eaton expects free cash flow in the range of $2.3-$2.7 billion in 2020.

Zacks Rank

Currently, Eaton has a Zacks Rank #4 (Sell).
 
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

SPX FLOW, Inc. FLOW is slated to announce first-quarter 2020 earnings on May 12. The Zacks Consensus Estimate for the bottom line for the quarter to be reported is pegged at a loss of 2 cents per share.

Energous Corporation WATT is slated to announce first-quarter 2020 earnings on May 12. The Zacks Consensus Estimate for the bottom line for the quarter to be reported is pegged at a loss of 27 cents per share.

ESCO Technologies ESE is slated to announce second-quarter fiscal 2020 earnings on May 6. The Zacks Consensus Estimate for the bottom line for the quarter to be reported is pegged at 73 cents per share.

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