Eaton Beats Earnings Estimates, Cuts Full-Year Forecast

Citing the "uncertainty in Europe, as well as slower economic growth rates in China, India and Brazil," Eaton CEO Alexander Cutler said the company is scaling back its expectations for the rest of 2012. Still, Cutler said the company expects its improved operating margins and lower tax rate to help mitigate those factors.

Eaton Corp. (IW 500/72) reported record second-quarter net income per share and earnings per share but saw its revenue fall slightly year-over-year, as the Cleveland-based manufacturer of power-management systems felt the effects of the slowdown in Europe and elsewhere.

Citing the "uncertainty in Europe, as well as slower economic growth rates in China, India and Brazil," Eaton CEO Alexander Cutler said the company is scaling back its expectations for the rest of 2012.

"We now believe our end markets for the year are likely to grow by 3% to 4%, a reduction from the 5% growth we had forecast in April," Cutler said in a news release. "We also anticipate that the impact of foreign-exchange rates on revenue will be more negative than previously forecast."

Still, Cutler said the company expects its improved operating margins and lower tax rate to help mitigate those factors.

"As a result, we expect operating earnings per share in the third and fourth quarters to continue at record levels," Cutler added.

Eaton reported second-quarter net income of $382 million, up from $336 million in 2011. Net income per share surged to $1.12, up from 97 cents in second-quarter 2011.  

Meanwhile, operating earnings per share - excluding acquisition-related charges - increased to $1.15, up from 97 cents in 2011 and topping analysts' estimates.

Second-quarter revenue was $4.07 billion, down from $4.09 billion in second-quarter 2011.

"Our revenues were impacted in the second quarter by lower-than-expected end-market growth and by lower-than-expected foreign-exchange rates," Cutler said. "Nonetheless, we had strong incremental margins on our volume growth during the quarter, which allowed us to increase our segment margins to 14.7%, setting a new segment operating margin record for the second quarter."

Excluding acquisition-related charges, the company now forecasts operating earnings per share of between $4.20 and $4.50 for the year and net income per share of between $4.09 and $4.39.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish