Analysis: Closer look at recent financial results for Hubbell, Eaton

By Bridget McCrea

If the sales results from the second quarter of 2012 are any
indication, industrial manufacturers are dealing with a host of different
challenges and market conditions, depending on what they’re selling, where, and
to whom.  Hubbell Incorporated, for example, reported net sales in the second
quarter of 2012 of $778.4 million, an increase of 10% compared to the $709.2
million reported in the second quarter of 2011.

Hubbell’s operating income was $124.5 million, or 16.0% of
net sales, compared to $105.1 million, or 14.8% of net sales, for the
comparable period of 2011. Net income in the second quarter of 2012 was $77.5
million versus $65.2 million reported in the second quarter of 2011.

Hubbell’s earnings per diluted share were $1.29 in the
second quarter of 2012 compared to $1.07 reported in the second quarter of
2011. For the first six months of 2012, the company’s net sales were $1.5 billion,
an increase of 10% compared to the same period last year. 

Eaton Corporation’s results were a mixed bag.  While the
company posted record net income per share of $1.12 for the second quarter of
2012 (an increase of 15 percent over the $0.97 earned in the second quarter of
2011), sales in the second quarter were $4.1 billion, slightly below the second
quarter of 2011. Net income in the second quarter was $382 million compared to
$336 million in 2011.

Net income for Eaton during both periods included charges
for integration of acquisitions. Before these acquisition integration charges,
operating earnings per share in the second quarter of 2012 were a record $1.15
compared to $0.97 per share in 2011, an increase of 19 percent.

Boiling it down

On their respective earnings calls, which are published by, the company leaders
and industry analysts discussed the results, current market conditions, and the
outlook for the rest of the year. Alexander M. Cutler, president and CEO, for
example, pointed out that Eaton posted a number of records during the second

Operating earnings per share were up 19% and net income per
share was up 15%, Cutler said. “Those were all-time records and they reflect
[on the fact] that we think our strategy and our balance is really working quite
well,” he said. Cutler credited recent acquisitions and market volatility with
creating the firm’s slight sales decrease.

Analyst Eli S. Lustgarten of Longbow Research LLC, asked
about Eaton’s expectations for the rest of the year, particularly in the
domestic power markets. “We don’t see a reason to assume there’s [going to] be
a big rebound,” said Cutler. “We think the third quarter is likely going to
look a lot like the second quarter here.”

Dave Nord, Hubbell’s president and COO, said the firm’s 10%
sales increase was “broad-based” in nature. He said the firm’s harsh and
hazardous business was up 20%, and that its power business continues to
“perform well on all fronts.” The early-second-quarter acquisition of TayMac
also helped boost sales, according to Nord, who hinted that more acquisitions
could be announced by the end of the year.

Jeff Sprague, an analyst with Vertical Research Partners,
asked about Hubbell’s progress in terms of new product initiatives, including
the switchgear product line. Nord said the company’s new product pipeline
includes several new introductions, and that the manufacturer is also focused
on “taking traditional products and marketing them smarter with a feedback

“The distribution and automation in the public utilities is
something that [utilities] are spending money on and working toward, to improve
the feedback loop in distribution lines so they can deal better with outages
and get restored service better,” said Sprague. “We are producing [products]
like cutouts and traditional items that are more automated with feedback loops
than we ever have before.”

McCrea is a Florida-based writer who covers business, industrial, and
educational topics for a variety of magazines and journals. You can reach her
at or
visit her website at

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