DUBLIN, Ireland — Power management company Eaton Corporation plc announced that operating earnings per share were $0.88 for the first quarter of 2016, down 13 percent from the first quarter of 2015. Operating earnings exclude acquisition integration charges, which were negligible in the first quarter of 2016 and were $11 million in the first quarter of 2015. Sales in the first quarter of 2016 were $4.8 billion, 8 percent lower than the same period in 2015. Net income and operating earnings for the first quarter of 2016 were $404 million.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, “Our first quarter results are a solid start to the year, coming in near the top end of our guidance range.
“Our 8 percent sales decline in the first quarter consisted of a 6 percent decline in organic sales and an additional 2 percent from negative currency translation,” said Cutler. “Our organic sales in the quarter came in modestly higher than our guidance.
“We had strong cash flow in the first quarter, generating operating cash flow of $371 million, a record for the first quarter,” said Cutler. “We returned substantial cash to our shareholders during the quarter, raising our quarterly dividend in February by 4 percent and repurchasing $100 million of our shares.
“Our restructuring program is proceeding well,” said Cutler. “We spent $63 million in the first quarter, slightly less than we had forecast at the start of the year. Our expected savings in 2016 from restructuring actions remains the same as our earlier estimate.
“Our segment margins were 13.9 percent, and excluding the restructuring costs incurred in the quarter, 15.1 percent,” said Cutler.
“We still expect a decline in organic revenue in 2016 of between 2 and 4 percent,” said Cutler. “We now believe the impact from negative currency translation in 2016 will be less than the $400 million we estimated at the start of the year. Our current estimate is that negative currency translation for the year is likely to be about $200 million.
“We anticipate operating earnings per share for the second quarter of 2016 to be between $1.00 and $1.10,” said Cutler. “We are maintaining our guidance for full year operating earnings per share of between $4.15 and $4.45.”
Business Segment Results
Sales for the Electrical Products segment were $1.7 billion, down 1 percent from 2015. Organic sales grew slightly while negative currency translation was 1 percent. Operating profits were $271 million, up 2 percent over the first quarter of 2015.
“Our operating margins in the first quarter were 16.1 percent, and excluding restructuring costs of $17 million, 17.1 percent,” said Cutler. “Our bookings in the first quarter in the Electrical Products segment were up 2 percent over the first quarter a year ago. Orders grew in the Americas and EMEA, while orders in APAC registered a small decline.”
Sales for the Electrical Systems and Services segment were $1.3 billion, down 7 percent from the first quarter of 2015. Organic sales were down 5 percent and currency translation was negative 2 percent. Segment operating profits, excluding acquisition integration charges of $1 million, were $160 million, down 15 percent from the first quarter of 2015.
“As we expected, organic sales declined in the first quarter reflecting the softness we saw in bookings during the second half of 2015,” said Cutler. “Our operating margins were 11.9 percent, and excluding restructuring costs of $10 million, 12.7 percent. Bookings in the first quarter were down 2 percent from the first quarter of 2015, driven by a double-digit decline in orders from APAC.”
Hydraulics segment sales were $551 million, down 17 percent from the first quarter of 2015. Organic sales in the quarter declined 14 percent and currency translation was negative 3 percent. Operating profits in the first quarter were $41 million, down 39 percent from the first quarter of 2015.
“The hydraulics markets in the first quarter of 2016 were down, reflecting the continued downturns in global agricultural equipment, the global oil and gas industry, and the Chinese construction equipment market,” said Cutler. “Our operating margins were 7.4 percent, and excluding restructuring costs of $16 million, 10.3 percent. Our bookings in the quarter were down 10 percent from the first quarter of 2015.”
Aerospace segment sales were $445 million, down 4 percent from the first quarter of 2015. Organic sales declined 3 percent and negative currency translation was 1 percent. Operating profits in the first quarter were $80 million, up 4 percent over the first quarter of 2015.
“Our operating margins in the quarter were 18.0 percent, and excluding restructuring costs of $4 million, 18.9 percent,” said Cutler. “Bookings in the quarter rose 6 percent compared to the first quarter of 2015. Commercial and military transport aircraft were the largest drivers of the bookings increase.”
The Vehicle segment posted sales of $795 million, down 17 percent compared to the first quarter of 2015. Organic sales declined 13 percent and negative currency translation was 4 percent. The segment reported operating profits in the first quarter of $118 million, down 28 percent from the first quarter of 2015.
“Our operating margins in the quarter were 14.8 percent, and excluding restructuring costs of $12 million, 16.4 percent,” said Cutler.
“North American Class 8 truck production declined 19 percent in the first quarter compared to the first quarter of 2015,” said Cutler. “We now expect full-year 2016 production to be 230,000 units.”
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