) announced its decision to acquire Santiago-based Rolec Comercial
e Industrial S.A. This acquisition will expand Eaton's operations
on Latin American soil, further strengthening its existing base in
Brazil and Mexico.
Rolec Comercial e Industrial S.A. primarily engages in the
manufacture of integrated power assemblies, and low- and
medium-voltage switchgears. In addition, the company provides
engineering and mining services, and also offers heavy industrial
applications. Apart from Chile, the company also has presence in
In view of Eaton's last few acquisitions, it is evident that the
company is intent on diversifying its portfolio while expanding its
line of businesses as well as global footprint, particularly in
Europe, Middle East and Africa ("EMEA"), the Asia-Pacific region
("APAC") and now in Latin America, by taking the inorganic route.
In July 2012, Eaton completed the acquisition of a South Korean
company called Jeil Hydraulics, a manufacturer of track and swing
drive motors, main control valves and remote control valves. This
transaction is expected to bolster Eaton's presence in the emerging
markets and also expand its product coverage, with respect to its
motor item segment.
As of June 30, 2012, the company had cash and short-term
investments of $1.18 billion compared with $1.08 billion as of
December 31, 2011. We believe Eaton's strong cash position enables
it to pursue a steady inorganic growth approach.
Following its adoption of an aggressive acquisition strategy, Eaton
already experienced positive impacts in second-quarter 2012. In the
last couple of quarters, the company inked some significant deals,
which include the acquisition of E.A. Pedersen Company and IE
Power, Inc. Riding on these acquisitions, the company's sales for
the Electrical Americas segment edged up 1% year over year. In
addition, we believe that decline in cost of goods sold and lower
tax rate will likely benefit the company in the second half of
2012. Electrical Americas is also expected to report a strong
performance in the second half of 2012.
However, we are concerned about volatile currency market conditions
and slow economic growth rate in the emerging countries, primarily
in China, India and Brazil, which might have a negative impact on
Eaton's future results.
Eaton Corporation currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating.
Cleveland, Ohio-based Eaton Corporation offers an array of
products, such as powertrain, truck and automotive systems,
electrical components and systems, hydraulics and pneumatic systems
for commercial and military use. The company competes with
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