Diversified power management company
) released its third quarter results with earnings per share of
$1.12 surpassing the year-ago figure of $1.07 by 4.7%. Earnings
were in line with the Zacks Consensus Estimate.
As expected, the year-over-year increase was primarily due to
higher contribution from the acquired assets of Cooper
Eaton's GAAP earnings during the third quarter were $1.07 per
share versus $1.02 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 third quarter total revenue was $5.6 billion, up 41.9%
from $3.95 billion a year ago.
The year-over-year increase was primarily due to the
contributions from acquired assets. These assets led to a 40%
improvement in sales, while core sales contributed 3% to the
Quarterly revenue was lower than the Zacks Consensus Estimate of
$5.7 billion by 1.6%.
: Total revenue for the segment was $1.82 billion, up 97.7%
from the year-ago quarter on the back of acquisition synergies.
Operating profit, excluding acquisition integration charges of $9
million, was $310 million, up 79% from the year-ago comparable
Electrical Systems and Service
: Total revenue for the segment was $1.6 billion, up 80% from the
year-ago quarter, reflecting the impact of the Cooper Industries
acquisition. Operating profit, excluding acquisition integration
charges of $10 million, was $241 million, surging 115% year over
: At $739 million, Hydraulics sales improved nearly 3% over the
prior year, while operating profit excluding integration charges
came in at $97 million, a decline of 1% from the corresponding
quarter last year.
: Segmental sales in the quarter grew 7% to $448 million while
operating profit was up 31.0% to $64 million.
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: Segment revenue declined by 3% year over year to $964 million.
However, operating income of $161 million improved 12% from the
Cost of product sold in the third quarter 2013 was $3.88 billion,
increasing 41.3% from the prior-year period.
Selling and administrative expenses also followed a similar
trend, increasing 40.7% to $967 million from $687 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 62.7% to $166
Total segment operating profit was up 48.7% to $846 million. The
increase was driven by a better performance from the Electrical
Product, Electrical Systems and Service and Vehicle segments.
Cash and short-term investments as of Sep 30, 2013 were $1.34
billion versus $1.1 billion as of Dec 31, 2012.
Long-term debt was $9.03 billion as of Sep 30, 2013 compared with
$9.76 billion as of Dec 31, 2012.
Eaton trimmed the top end of its 2013 pro forma earnings by 10
cents. The revised earnings expectation is in the range of
$4.05-$4.15 per share. Fourth quarter 2013 earnings are expected
to be between $1.00 and $1.10 per share, which exclude
integration charges of $40 million.
The downward revision in guidance was primarily due to NAFTA
Class 8 truck market and continued weakness in the global
hydraulics markets, which will eventually impact Eaton's overall
performance in 2013.
Other Company Releases
A. O. Smith Corporation
) reported earnings of 54 cents per share in the third quarter
2013, beating the Zacks Consensus Estimate of 44 cents by 22.73%.
) reported second quarter fiscal 2014 earnings of 31 cents per
share, surpassing the Zacks Consensus Estimate of 26 cents.
) reported first quarter fiscal 2014 earnings of $1.67 per share,
surpassing the Zacks Consensus Estimate of $1.47 by 13.61%.
Eaton continues to benefit from the contributions of its acquired
assets. In addition, the nominal core sales growth has added to
the reported numbers.
On the flip side, the continued softness in the hydraulics market
could impact the overall performance of the company. In addition,
seasonal variance could affect the company's fourth quarter.
We appreciate Eaton's consistent endeavor to develop new products
and technology and to support the wide customer base spread
across 175 countries. Accordingly, research and development
expenses increased 62.7% in the quarter, ahead of the 51.9%
increase incurred in the second quarter.
Eaton Corporation currently retains a Zacks Rank #3 (Hold). With
a market cap of $32.46 billion, the company has 102,000 full time