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Wed, Feb. 3, 3:59 PM
- Eaton (ETN +6.9%) moves to its highs of the day after saying it will extend its business cost-cutting program through 2017, as it anticipates continued sluggish demand for its electrical equipment, truck transmissions and hydraulic components.
- ETN's Q4 earnings beat estimates despite a 9% drop in sales, as is responding to lower sales volumes by shoring up its business units’ profit margins and doubling down on its stock buybacks after spending $682M on its stock in 2015.
- After spending $129M on cost-cutting moves during 2015 that included closing eight plants, ETN plans to spend an additional $140M on restructuring in 2016 and $130M in 2017, which the company expects to yield $290M in estimated annual cost reduction benefits.
- Eaton predicts that organic revenue, which excludes forex rates and revenue from acquisitions, will decline by 2%-4% in 2016 after falling 2% in 2015, but it expects to nudge up its operating margin this year from 15.2% in 2015, helping hold this year’s earnings about flat with 2015.
Wed, Feb. 3, 8:10 AM
- Operating earnings of $541M, or $1.17 per share, vs. $602M, or $1.27 per share, a year earlier.
- Revenue by segment: Electrical Products -5%; Electrical Systems and Services -9%; Hydraulics -18%; Aerospace -4%; Vehicle -13%.
- Announced an expanded three-year $400M restructuring program (2015-2017) and a $3B share repurchase plan.
- "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," CEO Alexander Cutler declared.
- The company expects operating EPS for Q1 of 2016 (impacted by restructuring costs of $70M) to be between $0.80-$0.90, and full year operating EPS to be between $4.15-$4.45.
- ETN +3.1% premarket
- Q4 results
Wed, Feb. 3, 6:31 AM
Tue, Feb. 2, 5:30 PM
Dec. 8, 2015, 3:18 PM
- It's been a rough run for value stocks over the past few years, but the metric used to determine value - price/book - may not be the right one, says Citi's Robert Buckland. Free-cash-flow yield is better, he argues. noting this metric tracked traditional value in the 1990s and 2000s, but has easily outperformed over the past decade.
- It's a sign of the times, he says, as FCF is a "capex-suspicious metric," and investors are concerned about the economic outlook, and cynical about capital allocation decisions of managements.
- The list of 28 U.S. value (as defined by FCF yield) plays: BHI, VIAB, WFM, ANTM, HPQ, ABC, LBTYA, M, AAPL, CTL, XRX, LYB, CMI, ETN, MRK, VLO, CSCO, WRK, IBM, LVS, ESRX, IP, CAH, ADM, INTC, CAT, ABBV, EMN
Nov. 20, 2015, 11:30 AM
- Market growth remains challenging whether there is an industrial recession or not, so investors should focus on stocks with strong end markets, particularly Allegion (ALLE +0.3%) and Danaher (DHR +0.5%), Bernstein's Steven Winoker says.
- Other stocks in a lower but still generally favorable tier include General Electric (GE +0.8%), Honeywell (HON +0.9%), Ingersoll-Rand (IR +0.9%) and 3M (MMM +0.7%), as these companies are exposed to favorable end markets but also to meaningfully weak markets, the analyst says.
- Aside from their portfolio transformations, DHR and GE have benefited and should continue to benefit from their above-average growth profiles in the current low-growth environment, Winoker says.
- Energy-heavy Dover (DOV +0.2%), Pentair (PNR +0.4%) and Emerson Electric (EMR +0.2%) remain the most challenged, according to Winoker, while Eaton (ETN +1.1%), Rockwell Automation (ROK +0.5%) and Tyco (TYC -0.2%) have a mix of tailwinds and headwinds, with the former more challenged on hydraulics/trucks and the latter two on energy.
- Winoker sees limited downside for DOV, which is highly linked to crude oil prices but is performing well in the ~80% of its portfolio not linked to oil.
- Earlier: Low expectations are no longer enough for multi-industry stocks, analyst says (Nov. 19)
Nov. 19, 2015, 6:25 PM
- A sluggish U.S. economy is likely to make life tough next year for industry conglomerates such as Danaher (NYSE:DHR), Honeywell (NYSE:HON), Tyco (NYSE:TYC), Emerson Electric (NYSE:EMR) and General Electric (NYSE:GE), says Bernstein's Steven Winoker.
- The analyst notes that Q3 saw 12 of Bernstein's 13 covered companies miss on revenues, 10 either lower FY 2015 EPS guidance or issue below-consensus FY 2016 guidance, and none raise growth guidance, yet 10 stocks outperformed during earnings season.
- The companies "can’t transform their way out of the reality of a low growth world, which became even more challenging this quarter, with an indication of the worst still to come," Winoker writes, expecting guidance conservatism from the group during investor meetings before the end of the year.
- Also: MMM, ROK, IR, ETN, ALE, IEX
Nov. 11, 2015, 11:41 AM
- Eaton (ETN -1.2%) is downgraded to Hold from Buy at Argus, which cites a weak near-term outlook from slumping oil prices, as energy customers cut capex, as well as slower industrial spending and unfavorable currency translation.
- The firm says ETN's earnings outlook is uncertain as the company struggles in four of its five verticals, with substantial weakness expected in its vehicle and hydraulics businesses into 2016.
- Argus says ETN could benefit from restructuring actions and return to EPS growth in 2016 but that earnings expectations could still decline in the near-term, leading to further share price weakness.
Nov. 2, 2015, 10:42 AM
- Bernstein has downgraded Eaton (ETN +0.6%) to Market Perform from Outperform, and lowered its price target on the stock from $65 to $59.
- Comments from Bernstein's Steven Winoker: "Although the company’s shares have declined over the past year, disappointing growth outlook, reduced Cooper synergies, and lack of near-term catalysts call for the downgrade"..."at ~12.5x NTM consensus EPS, Eaton trades at easily the lowest P/E multiple in our coverage"...selling Eaton's shares now "would mean exiting into an unfavorable part of the cycle and in any case tax leakage is likely to drive that to late 2017."
- Previously: Eaton dips on restructuring charges, lower guidance (Oct. 30 2015)
Oct. 30, 2015, 7:50 AM
- Operating earnings of $453M, or $0.97 per diluted share, vs. $616M, or $1.29 per share, a year earlier.
- Revenue by segment: Electrical Products -6%; Electrical Systems and Services -10%; Hydraulics -18%; Aerospace -1%; Vehicle -11%.
- Incurred restructuring costs of $113M and repurchased $284M of shares during the quarter.
- "As we begin to plan for 2016, it is apparent that markets are likely to remain soft", CEO Alexander Cutler. "To deal with such weak markets, we will be expanding our 2016 restructuring program...to between $90M-$100M."
- The company expects operating EPS for Q4 of 2015 (which exclude an estimated $14M of charges) to be between $1.05-$1.15, and full year operating EPS to be between $4.20-$4.30, a 6% reduction at the midpoint from prior guidance.
- ETN -1.9% premarket
- Q3 results
Oct. 30, 2015, 6:31 AM
- Eaton (NYSE:ETN): Q3 EPS of $0.97 misses by $0.03.
- Revenue of $5.2B (-9.2% Y/Y) misses by $120M.
Oct. 29, 2015, 5:30 PM| Oct. 29, 2015, 5:30 PM | 19 Comments
Oct. 27, 2015, 12:09 PM
- Eaton (NYSE:ETN) declares $0.55/share quarterly dividend, in line with previous.
- Forward yield 4.17%
- Payable Nov. 20; for shareholders of record Nov. 9; ex-div Nov. 5.
Oct. 19, 2015, 5:55 PM
- Eaton (NYSE:ETN) -2.4% AH after saying Q3 revenues came in ~$300M below expectations, meaning Q3 EPS is now expected at $0.95-$1.00 vs. $1.02 analyst consensus estimate.
- However, ETN says Q3 operating cash flow came in as expected, achieving a quarterly record, thus full-year guidance for operating cash flow remains unchanged.
Oct. 19, 2015, 10:09 AM
Oct. 8, 2015, 2:21 PM
- Citigroup questions the sustainability of the recent rally for some machinery stocks, saying its cautious view on the global economy and downbeat near-term outlook for most commodities make it wary on the more China/commodity-levered names such as Caterpillar (CAT +1.8%) and Joy Global (JOY +10.9%).
- Citi says short-covering does not appear to have played a major role in the recent rally, at least relative to other heavily-shorted sectors; the firm senses conviction levels have been growing on the short side in recent weeks for JOY, Oshkosh (OSK +2.3%) and United Rentals (URI +3.4%), and historical seasonal patterns argue against being too bearish against Deere (DE +2.2%).
- In light of bearish investor positioning, the firm favors Buy-rated URI, OSK and Eaton (ETN +1.6%).
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