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Eaton Corporation plc (NYSE:ETN) investors will be delighted, with the company turning in some strong numbers with its latest results. Results were good overall, with revenues beating analyst predictions by 7.5% to hit US$4.5b. Statutory earnings per share (EPS) came in at US$1.11, some 5.5% above whatthe analysts had expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, Eaton's 19 analysts currently expect revenues in 2021 to be US$18.1b, approximately in line with the last 12 months. Statutory earnings per share are predicted to soar 41% to US$4.83. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$17.9b and earnings per share (EPS) of US$4.75 in 2021. 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.
The analysts reconfirmed their price target of US$115, showing that the business is executing well and in line with expectations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Eaton at US$130 per share, while the most bearish prices it at US$100.00. This is a very narrow spread of estimates, implying either that Eaton is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that sales are expected to reverse, with the forecast 1.7% revenue decline a notable change from historical growth of 0.09% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Eaton is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Eaton's revenues are expected to perform worse than the wider industry. 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 in mind, we wouldn't be too quick to come to a conclusion on Eaton. Long-term earnings power is much more important than next year's profits. We have forecasts for Eaton going out to 2024, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 3 warning signs for Eaton that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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