TLDR
- Eaton Corporation posted Q3 adjusted earnings of $3.07 per share, beating the $3.05 analyst estimate
- Revenue reached $7 billion, a quarterly record, but missed Wall Street’s $7.07 billion target
- Stock fell 8.3% as vehicle segment dropped 8% and eMobility plunged 19%
- Electrical Americas segment surged 15% to $3.4 billion with 30.3% operating margins
- Company maintains full-year earnings guidance of $11.97 to $12.17 per share
Eaton Corporation turned in a paradoxical third quarter that had investors hitting the exit. The company beat earnings expectations but missed on revenue.
Adjusted earnings came in at $3.07 per share. That topped the analyst consensus of $3.05 per share.
Revenue hit $7 billion for the quarter. That’s a new record for Q3 but still fell short of the $7.07 billion Wall Street wanted to see.
The stock dropped 8.3% on the news. Sometimes beating on the bottom line just isn’t enough.
The revenue growth broke down to 7% organic growth and 3% from acquisitions. Total year-over-year growth reached 10%.
Segment Performance Shows Clear Winners and Losers
The electrical Americas division carried the team. Sales jumped 15% to reach $3.4 billion in the quarter.
Operating margins in this segment hit 30.3%. That’s the kind of profitability that usually gets attention.
Aerospace also delivered strong results. Sales climbed 14% to $1.1 billion with record operating margins of 25.9%.
But the vehicle segment stumbled badly. Sales fell 8% to $639 million.
The eMobility segment performed even worse with a 19% sales decline to $136 million. These two weak segments make up roughly 14% of Eaton’s total 2024 sales.
Their poor performance weighed heavily on the overall revenue number. The contrast between segments couldn’t be more stark.
CEO Paulo Ruiz highlighted order strength despite the mixed results. “We continued to see strong demand in the quarter with order acceleration,” Ruiz stated.
Margins Hit Records While Top Line Disappoints
Segment margins across the company reached a record 25.0%. This beat management’s own guidance and improved 70 basis points year-over-year.
The company maintained a positive book-to-bill ratio. Orders continue flowing in faster than shipments going out.
Backlog levels remained elevated throughout the quarter. This suggests future revenue potential even if current numbers disappointed.
On Monday, Eaton announced a $9.5 billion acquisition of Boyd Thermal from Goldman Sachs. This marks the third data center deal this year.
The move reinforces the company’s strategy in the fast-growing data center market. That sector is driving much of the electrical Americas strength.
Looking Ahead to Q4 and Full Year
Eaton projects Q4 organic growth of 10-12%. Adjusted earnings per share should land between $3.23 and $3.43.
The analyst consensus for Q4 sits at $3.36 per share. Eaton’s range comfortably includes that estimate.
The company held its full-year adjusted earnings guidance steady at $11.97 to $12.17 per share. This matches the analyst expectation of $12.09 per share.
Management isn’t wavering on targets despite the revenue miss. Confidence in Q4 execution appears intact.
The electrical Americas segment generated $3.4 billion in sales with transmission components and engine valves showing weakness in the vehicle division while data center demand drove electrical component sales.
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