Eaton Rides The AI/Electrification Wave To Strong Total Returns

Summary

• Driven by strong growth in AI data centers, electrification, and digitization trends, Eaton has significantly outperformed the S&P 500 and Nasdaq 100 during the past five years.
• Recent acquisitions and collaborations, including Resilient Power Systems and Nvidia, position Eaton for continued innovation and margin expansion moving forward.
• Eaton has a whopping $1.9 trillion backlog and is expected to generate $3.9 billion in free cash flow (~$9.90/share) this year.
• However, given the recent rally in the shares and its current valuation, I'm downgrading Eaton from Buy to Hold, as much of the upside is now priced in.

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Since my last Seeking Alpha article on Ireland-based Eaton (NYSE:ETN), the company has more than doubled the returns of the S&P 500 (see Eaton: Buy The Q1 Earnings Dip) and has now delivered total returns of 57.8% since

Analyst’s Disclosure:I/we have a beneficial long position in the shares of ETN, AMZN, VOO, DIA, QQQ either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am an electronics engineer, not a CFA. The information and data presented in this article were obtained from company documents and/or sources believed to be reliable, but have not been independently verified. Therefore, the author cannot guarantee their accuracy. Please do your own research and contact a qualified investment advisor. I am not responsible for the investment decisions you make.