DUBLIN, Ireland — Power management company Eaton Corporation plc announced operating earnings per share for the fourth quarter of $1.17, which exclude charges of $0.02 per share to integrate recent acquisitions, a decrease of 8 percent from the fourth quarter of 2014. Sales in the quarter were $5.1 billion, down 9 percent from the same period in 2014. Operating earnings for the fourth quarter of 2015, which exclude charges of $14 million to integrate recent acquisitions, were $541 million compared to $602 million in the fourth quarter of 2014.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, “Our earnings came in above the high end of our guidance range. Organic sales in the fourth quarter declined by 4 percent compared to the fourth quarter of 2014, reflecting weakness in most of our markets. The impact of currency translation reduced sales by 5 percent.
“In light of the challenging markets, we were pleased with our performance in the quarter,” said Cutler. “We slightly exceeded our revenue guidance, achieved record fourth quarter segment margins, lowered our structural costs, generated operating cash flow of $742 million, and repurchased $228 million of our shares. Our record segment margins of 16.0 percent reflect the positive impact of the significant restructuring actions we initiated in the third quarter of 2015.”
For the full year 2015, sales were $20.9 billion, 7½ percent lower than in 2014. The sales decline consisted of a decrease in organic sales of 2 percent and a decrease of 5½ percent from negative currency translation. Restructuring actions during the year incurred a total cost of $129 million. Excluding charges to integrate recent acquisitions, operating earnings totaled $2.0 billion. Operating earnings per share for 2015, excluding acquisition integration charges, were $4.30. Operating cash flow in 2015 was $2.4 billion. Share repurchases in 2015 totaled $682 million, resulting in the repurchase of 2.4 percent of the shares outstanding at the start of 2015.
“In 2016, we anticipate our organic revenues will decline between 2 and 4 percent, reflecting a continuation of sluggish markets around the world,” said Cutler. “We expect the impact of negative currency translation to be approximately 2 percent.
“For the first quarter, operating earnings per share are expected to be between $0.80 and $0.90 per share,” said Cutler. “The first quarter will be impacted by restructuring costs of approximately $70 million, as we implement the second phase of the restructuring plan we announced last year. For the full year 2016, we estimate that operating earnings per share will be between $4.15 and $4.45 per share. Our guidance for 2016 includes the net impact of restructuring actions. We anticipate acquisition integration costs in 2016 will be insignificant, resulting in net income per share in 2016 equal to operating earnings per share, and at the midpoint of our guidance up 2 percent over net income per share in 2015.
“We anticipate 2016 will be the second consecutive year of decline in our end markets, the first back-to-back decline in our end markets since the industrial recession of 2001-2002,” said Cutler. “Looking at our expected performance in 2016, we plan to generate about the same pretax profits as in 2015 despite a reduction of approximately $1 billion in revenue at the midpoint of our guidance, with significant restructuring actions boosting segment margins by 40 basis points.
“Building upon the effective restructuring activity we undertook in 2015, we have increased our three-year restructuring program, bringing the 2015 through 2017 program to a total cost of $400 million, with mature year savings estimated at approximately a similar amount. In addition, we expect to continue to deploy the bulk of our excess funds to share repurchases, resulting in anticipated repurchases totaling approximately $3 billion from 2015 through 2018.”
Business Segment Results
Fourth quarter sales for the Electrical Products segment were $1.7 billion, down 5 percent from the fourth quarter of 2014. Organic sales declined 1 percent, and negative currency translation was another 4 percent. Operating profits in the fourth quarter were $298 million. Excluding acquisition integration charges of $8 million during the quarter, operating profits totaled $306 million, down 5 percent from the fourth quarter of 2014.
“Our bookings in the Electrical Products segment declined 1 percent from the fourth quarter a year ago,” said Cutler. “We saw particular weakness in Asia Pacific, while European orders increased and Americas orders were marginally lower.”
Fourth quarter sales for the Electrical Systems and Services segment were $1.5 billion, down 9 percent from the fourth quarter of 2014. Organic sales declined 5 percent, and negative currency translation was another 4 percent. Operating profits were $203 million. Excluding acquisition integration charges of $5 million during the quarter, operating profits totaled $208 million, down 17 percent from the fourth quarter of 2014.
“Our bookings in the Electrical Systems and Services segment were down 2 percent from the fourth quarter of 2014,” said Cutler. “Orders were lower in all regions, with particular weakness in Asia Pacific.”
Hydraulics segment fourth quarter sales were $552 million, down 18 percent from the fourth quarter of 2014. Organic sales declined 12 percent, and negative currency translation was another 6 percent. Operating profits in the fourth quarter were $62 million, down 24 percent from the fourth quarter of 2014.
“The hydraulics market was impacted during the quarter by a continuation of broad-based weakness in stationary and mobile equipment end markets,” said Cutler. “Our bookings in the fourth quarter declined 22 percent compared to last year.”
The Aerospace segment posted fourth quarter sales of $440 million, a decrease of 4 percent from the fourth quarter of 2014. Organic sales declined 2 percent, and negative currency translation was an additional 2 percent. Operating profits in the fourth quarter were $77 million, up 10 percent over the fourth quarter of 2014.
“Aerospace bookings in the fourth quarter increased 6 percent over the fourth quarter of 2014,” said Cutler. “We were pleased with the strength in aftermarket bookings, which grew 14 percent.”
The Vehicle segment posted sales of $841 million in the fourth quarter, down 13 percent from the fourth quarter of 2014. Organic sales declined 6 percent, and negative currency translation was another 7 percent. Operating profits were $155 million, down 5 percent from the fourth quarter of 2014.
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