DUBLIN, Ireland — Power management company Eaton Corporation plc today announced that net income and operating earnings per share were $1.15 for the second quarter of 2017. Net income per share in the second quarter of 2017 was up 7 percent over the second quarter of 2016. Operating earnings per share, which exclude $1 million of acquisition integration charges in the second quarters of both 2017 and 2016, were also up 7 percent over the second quarter of 2016.
Sales in the second quarter of 2017 were $5.1 billion, up 1 percent over the same period in 2016. The sales increase consisted of 2 percent growth in organic sales partially offset by a 1 percent decline from negative currency translation.
Craig Arnold, Eaton chairman and chief executive officer, said, “Our second quarter net income and operating earnings per share were at the high end of our guidance range. Coming into the quarter, we had expected organic sales would be up between 1 and 2 percent and negative currency translation would be 1.5 percent. Our organic sales grew 2 percent, the high end of our guidance range, and negative currency impacted sales 1 percent, less than we had expected. Organic growth of 2 percent was the same growth rate we experienced in the first quarter of 2017.
“Segment margins in the second quarter were 15.6 percent,” said Arnold. “Excluding restructuring costs of $27 million incurred in the segments in the quarter, segment margins were 16.2 percent. This represents a step up of 1.4 percentage points over the first quarter of 2017.
“Operating cash flow in the second quarter was $574 million,” said Arnold. “We continued to return substantial cash to our shareholders, repurchasing $210 million of our shares in the quarter, making our first half repurchases a total of $465 million.
“For full year 2017, we are narrowing our guidance range by 5 cents at the top and bottom of the range. As a result, we now expect net income and operating earnings per share to be between $4.50 and $4.70. This represents a 9 percent increase at the midpoint of our guidance over 2016,” said Arnold. “We anticipate net income and operating earnings per share for the third quarter of 2017 to be between $1.20 and $1.30.”
Business Segment Results
Sales for the Electrical Products segment were $1.8 billion, up 1 percent over the second quarter of 2016. Organic sales were up 2 percent partially offset by negative currency translation of 1 percent. Operating profits, excluding acquisition integration charges of $1 million during the quarter, were $315 million, down 2 percent from the second quarter of 2016.
“Operating margins in the second quarter were 17.5 percent, and excluding restructuring costs of $11 million, 18.1 percent,” said Arnold. “Margins increased 0.5 percentage point over the first quarter of 2017, excluding restructuring costs in both quarters.
“Orders in the second quarter were up 3 percent over the second quarter of 2016, driven by growth in the Americas and APAC, while EMEA was flat,” said Arnold. “We saw particular strength in the Americas in industrial controls.”
Sales for the Electrical Systems and Services segment were $1.4 billion, down 1 percent from the second quarter of 2016. Organic sales were flat and currency translation was negative 1 percent. Segment operating profits were $194 million, up 9 percent over the second quarter of 2016.
“Operating margins were 13.7 percent, and excluding restructuring costs of $5 million, 14.1 percent,” said Arnold. “The 2.3 percentage point increase in margins over the first quarter of 2017, excluding restructuring costs in both quarters, was due to a more favorable mix of projects and higher recovery of material cost increases.
“Orders in the second quarter were down 2 percent from the second quarter of 2016, due to declines in EMEA and APAC,” said Arnold. “The decline in EMEA was principally due to lower large project orders from the Middle East, while the decline in APAC reflects the impact of an unusually large utility order in the second quarter of 2016.”
Hydraulics segment sales were $633 million, up 7 percent over the second quarter of 2016. Organic sales were up 9 percent partially offset by negative currency translation of 2 percent. Operating profits in the second quarter were $74 million, an increase of 25 percent over the second quarter of 2016, with the increase driven by higher organic revenues and lower restructuring costs.
“Operating margins in the quarter were 11.7 percent, and excluding restructuring costs of $8 million, 13.0 percent,” said Arnold. “The 1.2 percentage point increase in margins over the first quarter of 2017, excluding restructuring costs in both quarters, was due to incremental sales and the benefits from our restructuring program.
“Hydraulics orders in the second quarter of 2017 were up 32 percent over the second quarter of 2016, with solid growth in all geographic regions,” said Arnold. “We continued to see order strength from both OEMs and distributors.”
Aerospace segment sales were $437 million, down 2 percent from the second quarter of 2016, entirely driven by negative currency translation. Operating profits in the second quarter were $81 million, down 2 percent from the second quarter of 2016.
“Operating margins in the quarter were 18.5 percent,” said Arnold. “Orders in the quarter were up 12 percent compared to the second quarter of 2016. We saw strength across all our major end markets, with the exception of military rotorcraft.”
The Vehicle segment posted sales of $846 million, up 2 percent over the second quarter of 2016. Organic sales were up 1 percent and currency translation was up 1 percent. Operating profits in the second quarter were $139 million, up 1 percent over the second quarter of 2016.
“Operating margins in the quarter were 16.4 percent, and excluding restructuring costs of $3 million, 16.8 percent,” said Arnold. “The 2.8 percentage point increase in margin over the first quarter of 2017, excluding restructuring costs in both quarters, was due to incremental sales and the benefits from our restructuring program.
“We also closed our previously announced Eaton Cummins Automated Transmission Technologies joint venture on July 31,” said Arnold. “We're pleased the JV closed on schedule and we're looking forward to working with Cummins.”
Financial Results
The company's comparative financial results for the six months ended June 30, 2017.
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