Diversified power management company
) released its second quarter results with earnings per share of
$1.09 falling short of the year-ago figure of $1.15 by 5.2%.
Earnings were also lower than the Zacks Consensus Estimate of
$1.11 by 2 cents.
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Eaton's GAAP earnings during the second quarter were $1.04 per
share versus $1.12 per share reported in the year-ago quarter.
The difference between GAAP and operating earnings was due to
charges of 5 cents related to integrating recent acquisitions.
Eaton's second quarter total revenue was $5.6 billion, up 37.7%
from $4.06 billion a year ago.
The year-over-year increase was primarily due to the
contributions from acquired assets. The acquired assets
contributed to a 40% improvement in sales, while core sales
declined by 2% from the year-ago period. The decline in core
sales indicates a sluggish demand in some of its end markets.
The quarterly revenue was lower than the Zacks Consensus Estimate
of $5.81 billion by 3.6%.
: Total revenue for the segment was $1.8 billion, up 95%
from the year-ago quarter, reflecting the impact of the Cooper
Industries acquisition. Operating profit, excluding acquisition
integration charges of $12 million, was $284 million, up 88% from
the year-ago comparable period.
Electrical Systems and Service
: Total revenue for the segment was $1.6 billion, up 78% from the
year-ago quarter, reflecting the impact of the Cooper Industries
acquisition. Operating profit, excluding acquisition integration
charges of $11 million, was $238 million, surging 148% year over
: At $772 million, Hydraulics sales improved nearly 1% over the
prior year, while operating profit excluding integration charges
came in at $112 million, a decline of 11% from the corresponding
quarter last year.
: Segmental sales in the quarter grew 2% to $4446 million while
operating profit was up 14.0% to $67 million.
: Segment revenue declined by 4% year over year to $1 billion.
However, operating income of $172 million improved 2% from the
Cost of product sold in the second quarter 2013 was $3.87
billion, increasing 37.5% from the prior-year period.
Selling and administrative expenses also followed a similar
trend, increasing 39.1% to $960 million from $690 million in the
prior year. Corporate integration charges for the Cooper
acquisition were included in selling and administrative expenses
resulting in the jump in expenses.
Research and development expenses increased 51.9% to $161
Total segment operating profit was up 42.2% to $842 million.
Cash and short-term investments as of Jun 30, 2013 were $1
billion versus $1.1 billion as of Dec 31, 2012.
Long-term debt was $9.01 billion as of Jun 30, 2013 compared with
$9.76 billion as of Dec 31, 2012.
Since some of its end markets are growing at a much slower pace
than previously expected, Eaton decided to lower its capital
expenditure for 2013 by $50 million to $650 million.
Eaton trimmed the top end of its 2013 pro forma earnings by 20
cents. The revised earnings expectation is in the range of
$4.05-$4.25 per share. Third quarter 2013 earnings are expected
to be between $1.05 and $1.15 per share, which exclude
integration charges of $64 million.
Eaton expects the Cooper acquisition to add to its top line with
synergy savings outstripping earlier estimates. Synergy savings
in 2013 are expected to be $115 million, $25 million higher than
the prior estimate and in 2014 to be $210 million, $30 million
higher than earlier estimate.
Other Company Releases
A. O. Smith Corporation
) reported earnings of 52 cents per share in the second quarter
2013, beating the Zacks Consensus Estimate of 43 cents by 20.93%.
) reported first quarter fiscal 2014 earnings of 24 cents,
surpassing the Zacks Consensus Estimate of 20 cents.
) is scheduled to release its fourth quarter fiscal 2013 results
on Aug 6, 2013. The Zacks Consensus Estimate for the quarter is
Eaton continues to benefit from the contributions of its acquired
assets. The acquired assets are saving the day for the company,
when core sales are declining due to sluggish end markets.
In the reported quarter, Eaton's research and development
expenses increased 51.9%, an indication of its efforts to bring
in new technology to support the wide customer base spread across
Dublin, Ireland based Eaton Corporation was founded in 1916. This
company is a leading supplier of power accessories in the
aerospace industry. With a market cap of $33.08 billion, the
company has 103,000 full time employees. Eaton Corporation
currently retains a Zacks Rank #3 (Hold).