) released its second quarter results with earnings per share of
$1.15 beating the year-ago quarter figure of 97 cents per share.
Earnings were ahead of the Zacks Consensus Estimate of $1.09 per
Eaton's GAAP earnings during the second quarter were $1.12 per
share versus 97 cents per share reported in the year-ago quarter.
The difference between GAAP and operating earnings of 3 cents
during the reported quarter was due to acquisition integration
In the second quarter, Eaton earned net quarterly revenue of
$4.07 billion, which was marginally lower than the year-ago
performance of $4.09 billion. The year-over-year results were
impacted by lower-than-expected end market growth and an
unfavorable foreign exchange rate, which were marginally offset by
growth in core sales and positive contribution from the acquired
Quarterly revenue was also lower than the Zacks Consensus
Estimate of $4.2 billion.
Within its Electrical unit, Electrical Americas' revenues improved
10% from the year-ago quarter to $1.1 billion, while operating
profit (excluding acquisition integration charges) spiked 32% to
$192 million. The upside reflected end market growth of 8% and 4%
in order bookings, compared to the prior-year quarter.
Electrical Rest of the World:
The Electrical Rest of the World segment's sales were down 13% year
over year to $683 million. Operating income of $55 million
(excluding acquisition integration charges) was down 29% from the
year-ago level. Segment bookings for the quarter saw a 4% dip due
to a sharp drop in orders for solar inverters.
At $769 million, Hydraulics segment's sales rose 6% over the prior
year, while operating profits came in at $126 million, up 5% from
the corresponding quarter last year. Global Hydraulics markets grew
2% and the U.S. market was up by 7% in the quarter.
Segmental sales in the second quarter grew 7% to $436 million and
operating profits grew 18.0% to $59 million. Aerospace booking in
the second quarter was up by 2%, attributable to higher commercial
aircraft production offset by soft sales in military markets.
The Truck segment posted a decline of 7% resulting in sales of $625
million. It brought in operating income of $120 million during the
quarter, flat with the year-ago quarter.
The segment's second quarter sales declined 8% year over year to
$422 million. It posted an operating profit of $48 million,
reflecting a decline of 13% from the comparable quarter last
The cost of product sold in the second quarter 2012 were $2,815
million, declining marginally from $2,862 million in the year-ago
Selling and administrative expenses also followed a similar
trend, declining to $690 million from $698 million in the prior
The decline in expenses benefited the segment operating income
of the company. The segment operating profit grew by 4.6% year over
year to $592 million from $566 million in the year-ago quarter.
Cash and short-term investments of the company as of June 30,
2012 were $1.17 billion versus $1.08 billion as of December 31,
Long-term debt was $3.67 billion as of June 30, 2012 compared
with $3.37 billion as of December 31, 2011.
Eaton expects its 2012 pro forma and GAAP earnings to be in the
range of $4.20 - $4.50 per share and $4.09 -$4.39 per share,
respectively. Pro forma earnings estimates exclude acquisition
After registering a strong performance in the first half of the
year, the company expects the Electrical Americas market to improve
8% in 2012, up from the earlier projection of 6%.
Electrical Rest of the World registered soft results in the
first half of 2012 and the company expects a 3% year-over-year
decline in the business in the fiscal.
The company expects that the global hydraulics business will
grow at a 3% rate in 2012, lower than the previous expectation due
to delay in recovery in the Chinese markets.
The company competes with
). Parker-Hannifin is expected to release its fiscal 2012 results
on August 2, 2012. The company expects 2012 earnings per share to
be in the range of $7.30 to $7.50. The Zacks Consensus expectation
is presently pegged at $7.39 per share, which is within the guided
The top-line results of the company were impacted by currency
fluctuation and lower-than-expected growth in the end markets,
stemming from slower economic growth rates in China, India and
The decline in cost and a lower tax rate will likely benefit the
company in the second half of 2012. Electrical Americas is also
expected to register a strong performance in the second half
However, we prefer to remain on the sidelines as the acquisition
of Cooper Industries will substantially increase the debt burden of
the company. We maintain our long-term Neutral recommendation on
Cleveland, Ohio-based diversified power management company Eaton
Corporation is a leading supplier of power accessories in the
aerospace industry and has customers spanning 150 countries. Eaton
Corporation currently retains a Zacks #3 Rank (short-term Hold
EATON CORP (ETN): Free Stock Analysis Report
PARKER HANNIFIN (PH): Free Stock Analysis
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