Manufacturers

Eaton Reports 3Q Earnings, Raises Guidance

Eaton Reports 3Q Earnings, Raises Guidance

DUBLIN — Power management company Eaton Corporation plc today announced that earnings per share were $0.95 for the third quarter of 2018. Earnings per share were $1.43, an increase of 14 percent over the third quarter of 2017, excluding the impact of the 2018 arbitration decision related to the legacy Cooper business and the 2017 gain on the Eaton Cummins joint venture.

Sales in the third quarter of 2018 were $5.4 billion, up 4 percent over the same period in 2017. The sales increase consisted of 6 percent growth in organic sales, partially offset by 1 percent negative currency translation and negative 1 percent from the divestiture in 2017 of our share in a small electrical joint venture and the formation of the Eaton Cummins joint venture.

Craig Arnold, Eaton chairman and chief executive officer, said, “We had a solid third quarter. Revenue growth was strong and we had record segment margins.

“Our segment margins in the third quarter were 17.6 percent, an all-time quarterly record, and above the high end of our guidance,” said Arnold. “This represents a 120 basis point improvement over the third quarter of 2017. We had all-time record margins in the quarter in three segments: Electrical Products, Electrical Systems and Services, and Aerospace.

“Operating cash flow in the third quarter was $1.00 billion,” said Arnold. “Year-to-date, we have generated operating cash flow of $1.84 billion.

“We now expect the midpoint of 2018 earnings per share to be $5.35, up $0.05 from our prior guidance, representing a 15 percent increase over 2017, excluding the third quarter 2018 arbitration decision, the 2017 gain on the formation of the Eaton Cummins joint venture, and the income arising from the 2017 tax bill,” said Arnold. “We are also narrowing our earnings per share guidance for the year, resulting in revised guidance of between $5.30 and $5.40. Accordingly, for the fourth quarter of 2018, we anticipate earnings per share to be between $1.38 and $1.48.”

Business Segment Results

Sales for the Electrical Products segment were $1.8 billion, even with the third quarter of 2017. Organic sales were up 1 percent while currency translation was negative 1 percent. Excluding Lighting, organic sales were up 3 percent. Operating profits were a record $343 million, up 4 percent over the third quarter of 2017.

“Operating margins in the third quarter were 19.2 percent, 70 basis points over 2017 and an all-time quarterly record,” said Arnold. “Orders in the third quarter were up 3 percent over the third quarter of 2017, driven by solid growth in both industrial and residential markets in the Americas, and modest growth in Lighting.”

Sales for the Electrical Systems and Services segment were $1.5 billion, up 7 percent over the third quarter of 2017. Organic sales were up 9 percent, currency translation was negative 1 percent, and the sale in 2017 of our stake in a small joint venture reduced sales by 1 percent. Operating profits were $234 million, up 19 percent over the third quarter of 2017.

“Operating margins were 15.4 percent, an improvement of 160 basis points over 2017 and an all-time quarterly record,” said Arnold. “Orders in the third quarter were up 4 percent over the third quarter of 2017, led by strong growth in EMEA and Asia Pacific, and continued growth in data center markets.”

Hydraulics segment sales were $670 million, up 6 percent over the third quarter of 2017. Organic sales were up 7 percent while currency translation was negative 1 percent. Operating profits in the third quarter were $94 million, up 18 percent over the third quarter of 2017.

“Operating margins in the quarter were 14.0 percent, an improvement of 140 basis points over 2017,” said Arnold. “Orders in the third quarter were up 4 percent over the third quarter of 2017, with solid growth in the Americas and Asia Pacific.”

Aerospace segment sales were $478 million, up 9 percent over the third quarter of 2017, all coming from organic sales growth. Operating profits in the third quarter were a record $105 million, up 25 percent over the third quarter of 2017.

“Operating margins in the quarter were 22.0 percent, 280 basis points over 2017 and an all-time quarterly record,” said Arnold. “Orders in the quarter were up 12 percent over the third quarter of 2017. We saw particular strength in orders for commercial transports, commercial aftermarket, and military rotorcraft.”

The Vehicle segment posted sales of $876 million, up 2 percent over the third quarter of 2017. Organic sales were up 7 percent partially offset by negative 2 percent as a result of the formation of the Eaton Cummins joint venture in 2017 and negative 3 percent from currency translation. Operating profits in the third quarter were $166 million, up 11 percent over the third quarter of 2017.

“Operating margins in the quarter were 18.9 percent, an improvement of 140 basis points over 2017,” said Arnold. “We now forecast NAFTA Class 8 production in 2018 to be 320,000 units.”

eMobility segment sales were $80 million, up 7 percent over the third quarter of 2017, all coming from organic sales. Operating profits in the third quarter were $10 million, down 38 percent from the third quarter of 2017 due to increased R&D investments. Operating margins in the quarter were 12.5 percent.

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