Eaton Is Positioned Well For Years To Come

| About: Eaton Corp. (ETN)

One of the best ways to tell the quality of management is by the adjustments that are made in the midst of difficulty. Having been born in Canada, I am a huge hockey fan. Many times, the best coached teams that are down big during the first period go into the locker room and come out in a different gear. Adjustments are made between periods to set them up to compete better. This same thing has been happening over the past few months with Eaton Corporation (NYSE:ETN). Led by CEO Sandy Cutler, I have seen the company reposition itself for future success and growth.

Eaton is intent on growing revenues and earnings through making strategic acquisitions. In May, Eaton acquired Cooper Industries (CBE), making the largest acquisition in its history at a cost of $11.8 billion in a cash & stock deal. Cooper Industries is a global electrical products manufacturer with 2011 revenues of $5.4 billion. This deal is set to close some time in the fall. Just a couple short weeks later, the company made a much smaller acquisition of another electrical company called Gycom, that sells electrical products under the name Moeller Electric in Sweden, Finland and Denmark. It had sales of $24 million in 2011.

This is the epitome of strategic acquisitions. What this does is place Eaton in a better place to compete with its closest competitors in the electrical business. In 2011, electrical only accounted for 45% of the business, but after the acquisitions close electrical will make up 56% of the business. With the aging of power grids worldwide, let the competition between Eaton, General Electric (NYSE:GE), Siemens (SI), ABB Ltd. (NYSE:ABB), and Schneider Electric [FR: ((NYSE:SU))] to benefit from the increase in infrastructure spending.

This also puts the CEO, Sandy Cutler, right in his sweet spot. His background in Cutler-Hammer before it was acquired makes the increase in electrical focus of Eaton fall right where he is comfortable. It doesn't hurt that the electrical profits in America are growing at a nice 21%. The company has been posting record sales in its electrical divisions, and it expects margins to continue improving for the foreseeable future.

With the recent pullback in the share price, it looks like a great time to jump in for the long haul. I like the $365 million in synergies projected by 2016 and the position the company is in considering the growing electrical market.

Disclosure: I am long ETN.

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