DUBLIN, Ireland—Power management company Eaton Corporation plc (NYSE:ETN) today announced that operating earnings per share were $0.97 for the third quarter of 2015, down 25 percent from the third quarter of 2014. Sales in the third quarter of 2015 were $5.2 billion, down 9 percent from the same period in 2014. The sales decline consisted of 6 percent from negative currency translation and 3 percent from a decline in organic sales.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, “Our sales in the third quarter were approximately $300 million lower than we had expected at the start of the quarter, with organic sales lower by $240 million and negative currency translation reducing sales by $60 million.
“The majority of our markets experienced weaker conditions in the quarter, which makes us cautious about the sales outlook looking forward,” said Cutler.
“As we had announced when we issued second quarter earnings, we implemented a substantial restructuring program in the third quarter,” said Cutler. “We incurred restructuring costs of $113 million, while our savings in the quarter from the actions were $15 million.
“Our operating cash flow in the third quarter was $973 million, a quarterly record, reflecting strong cost control and tight management of working capital,” said Cutler. “During the quarter, we repurchased $284 million of our shares, making our repurchases so far in 2015 a total of $454 million, approximately 1½ percent of our outstanding shares at the beginning of the year. Given the weak stock price performance for U.S. dollar denominated industrials, we would expect to continue our strong bias toward deploying our excess cash flow over the next year for share repurchases.
“We anticipate operating earnings per share for the fourth quarter of 2015, which exclude an estimated $14 million of charges to integrate our recent acquisitions, to be between $1.05 and $1.15,” said Cutler. “We expect to incur restructuring charges of $10 million in the fourth quarter, while savings in the quarter from our restructuring program are expected to total $35 million.
“For the full year 2015, we now expect our operating earnings per share to be between $4.20 and $4.30, a reduction at the midpoint of 6 percent from our prior guidance,” said Cutler. “Despite the decline in earnings per share, we continue to believe we will achieve our prior forecasts for 2015 operating cash flow.
“As we begin to plan for 2016, it is apparent that markets are likely to remain soft,” said Cutler. “To deal with such weak markets, we will be expanding our 2016 restructuring program. We had been planning on this second restructuring program, in addition to the $145 million program we announced in the second quarter of 2015, to be on the order of $50 million to $60 million, but in light of current market weakness we are expanding the program to between $90 million and $100 million.”
Business Segment Results
Sales for the Electrical Products segment were $1.8 billion, down 6 percent from 2014. The sales decline was almost entirely due to negative currency translation. Operating profits were $322 million. Excluding acquisition integration charges of $5 million during the quarter, operating profits were $327 million, down 3 percent from the third quarter of 2014.
“The restructuring actions we took during the quarter reduced operating profits by a net of $10 million,” said Cutler. “Without these actions, our operating margin would have been 19.0 percent. Our bookings in the third quarter were flat with the third quarter a year ago.
“We were pleased to acquire Ephesus Lighting in late October,” said Cutler. “Ephesus is a leader in LED lighting for stadiums and other high lumen outdoor and industrial applications. Its sales over the last twelve months were $22 million.”
Sales for the Electrical Systems and Services segment were $1.5 billion, down 10 percent from the third quarter of 2014. Half of the sales decline was due to negative currency translation and half due to a decline in organic sales. The segment reported operating profits of $164 million. Excluding acquisition integration charges of $3 million during the quarter, operating profits were $167 million, down 31 percent from the third quarter of 2014.
“The restructuring actions we took during the quarter reduced operating profits by a net of $24 million,” said Cutler. “Without those actions, our operating margin in the quarter would have been 12.8 percent.
“Bookings in the third quarter were down 3 percent from the third quarter of 2014,” said Cutler. “Our bookings were impacted by continued weakness in the oil and gas market and weakening conditions in the non-residential market as the quarter progressed.”
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