Eaton Reports Record Third Quarter 2024 Results, with Accelerating Orders and Continued Backlog Growth
-
Third quarter earnings per share of
$2.53 , up 14% over 2023, and record quarterly adjusted earnings per share of$2.84 , up 15% over 2023 - Record segment margins of 24.3%, 70 basis points above the third quarter of 2023
- 8% organic sales growth, including approximately 50 basis points of headwinds from Hurricane Helene and labor strikes in the aerospace industry
- Strong backlog growth of 25% in Electrical and 14% in Aerospace
- Order acceleration including Electrical Americas to 16% with 1.2 book-to-bill ratio on a rolling twelve-month basis
- Raised full year 2024 segment margin, earnings per share, and adjusted earnings per share guidance
Sales in the quarter were
Segment margins were 24.3%, a quarterly record and a 70-basis point improvement over the third quarter of 2023.
Operating cash flow was
Guidance
For the full year 2024, the company is raising the following guidance:
- Segment margins from 23.3-23.7% to 23.5-23.9%
-
Earnings per share to between
$9.47 and$9.53 , up 18% at the midpoint over the prior year -
Adjusted earnings per share to between
$10.75 and$10.81 , up 18% at the midpoint over the prior year
For the fourth quarter of 2024, the company anticipates:
- Organic growth of 6-7%
- Segment margins of 23.6-24.0%
-
Earnings per share between
$2.42 and$2.48 -
Adjusted earnings per share between
$2.78 and$2.84
Business Segment Results
Sales for the Electrical Americas segment were a record
The twelve-month rolling average of orders in the third quarter was up 16% organically. Backlog at the end of September remained at record levels, up 26% organically over
Sales for the Electrical Global segment were a third quarter record
The twelve-month rolling average of orders in the third quarter was up 6% organically. Backlog at the end of September was up 19% organically over
On a rolling twelve-month basis, the book-to-bill ratio for the Electrical businesses remained strong at 1.1.
Aerospace segment sales were a third quarter record
The twelve-month rolling average of orders in the third quarter was up 6% organically. The backlog at the end of September was up 14% organically over
The Vehicle segment posted sales of
eMobility segment sales were
Eaton is an intelligent power management company dedicated to protecting the environment and improving the quality of life for people everywhere. We make products for the data center, utility, industrial, commercial, machine building, residential, aerospace and mobility markets. We are guided by our commitment to do business right, to operate sustainably and to help our customers manage power ─ today and well into the future. By capitalizing on the global growth trends of electrification and digitalization, we’re accelerating the planet’s transition to renewable energy sources, helping to solve the world’s most urgent power management challenges, and building a more sustainable society for people today and generations to come.
Eaton was founded in 1911 and has been listed on the
Notice of conference call: Eaton’s conference call to discuss its third quarter results is available to all interested parties today as a live audio webcast at
This news release contains forward-looking statements concerning fourth quarter and full year 2024 earnings per share, adjusted earnings per share and segment margins; fourth quarter 2024 organic growth; 2025 earnings momentum; as well as anticipated multi-year restructuring program charges and savings. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: a global pandemic such as COVID-19; geopolitical tensions or war, unanticipated changes in the markets for the company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; competitive pressures on sales and pricing; supply chain disruptions, unanticipated changes in the cost of material, labor, and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; strikes or other labor unrest at Eaton or at our customers or suppliers; natural disasters; the performance of recent acquisitions; unanticipated difficulties completing or integrating acquisitions; new laws and governmental regulations; interest rate changes; changes in tax laws or tax regulations; stock market and currency fluctuations; and unanticipated deterioration of economic and financial conditions in
Financial Results
The company’s comparative financial results for the three months ended
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CONSOLIDATED STATEMENTS OF INCOME |
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Three months ended
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Nine months ended
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(In millions except for per share data) |
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2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Net sales |
$ |
6,345 |
|
|
$ |
5,880 |
|
|
$ |
18,638 |
|
|
$ |
17,229 |
|
|
|
|
|
|
|
|
|
||||||||
Cost of products sold |
|
3,899 |
|
|
|
3,684 |
|
|
|
11,564 |
|
|
|
11,030 |
|
Selling and administrative expense |
|
1,028 |
|
|
|
949 |
|
|
|
3,074 |
|
|
|
2,839 |
|
Research and development expense |
|
207 |
|
|
|
187 |
|
|
|
593 |
|
|
|
553 |
|
Interest expense - net |
|
29 |
|
|
|
33 |
|
|
|
88 |
|
|
|
124 |
|
Other income - net |
|
(22 |
) |
|
|
(52 |
) |
|
|
(80 |
) |
|
|
(56 |
) |
Income before income taxes |
|
1,204 |
|
|
|
1,079 |
|
|
|
3,399 |
|
|
|
2,739 |
|
Income tax expense |
|
193 |
|
|
|
187 |
|
|
|
573 |
|
|
|
463 |
|
Net income |
|
1,011 |
|
|
|
892 |
|
|
|
2,827 |
|
|
|
2,277 |
|
Less net income for noncontrolling interests |
|
(1 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
Net income attributable to Eaton ordinary shareholders |
$ |
1,009 |
|
|
$ |
891 |
|
|
$ |
2,823 |
|
|
$ |
2,273 |
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|
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|
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||||||||
Net income per share attributable to Eaton ordinary shareholders |
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Diluted |
$ |
2.53 |
|
|
$ |
2.22 |
|
|
$ |
7.05 |
|
|
$ |
5.67 |
|
Basic |
|
2.54 |
|
|
|
2.23 |
|
|
|
7.08 |
|
|
|
5.70 |
|
|
|
|
|
|
|
|
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||||||||
Weighted-average number of ordinary shares outstanding |
|
|
|
|
|
|
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||||||||
Diluted |
|
398.9 |
|
|
|
401.6 |
|
|
|
400.6 |
|
|
|
400.9 |
|
Basic |
|
397.1 |
|
|
|
399.4 |
|
|
|
398.7 |
|
|
|
399.0 |
|
|
|
|
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Reconciliation of net income attributable to Eaton ordinary shareholders to adjusted earnings |
|
|
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|
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||||||||
Net income attributable to Eaton ordinary shareholders |
$ |
1,009 |
|
|
$ |
891 |
|
|
$ |
2,823 |
|
|
$ |
2,273 |
|
Excluding acquisition and divestiture charges (income), after-tax |
|
(4 |
) |
|
|
14 |
|
|
|
17 |
|
|
|
54 |
|
Excluding restructuring program charges, after-tax |
|
43 |
|
|
|
5 |
|
|
|
104 |
|
|
|
37 |
|
Excluding intangible asset amortization expense, after-tax |
|
84 |
|
|
|
84 |
|
|
|
251 |
|
|
|
269 |
|
Adjusted earnings |
$ |
1,132 |
|
|
$ |
994 |
|
|
$ |
3,194 |
|
|
$ |
2,633 |
|
|
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|
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Net income per share attributable to Eaton ordinary shareholders - diluted |
$ |
2.53 |
|
|
$ |
2.22 |
|
|
$ |
7.05 |
|
|
$ |
5.67 |
|
Excluding per share impact of acquisition and divestiture charges (income), after-tax |
|
(0.01 |
) |
|
|
0.03 |
|
|
|
0.04 |
|
|
|
0.14 |
|
Excluding per share impact of restructuring program charges, after-tax |
|
0.11 |
|
|
|
0.01 |
|
|
|
0.26 |
|
|
|
0.09 |
|
Excluding per share impact of intangible asset amortization expense, after-tax |
|
0.21 |
|
|
|
0.21 |
|
|
|
0.62 |
|
|
|
0.67 |
|
Adjusted earnings per ordinary share |
$ |
2.84 |
|
|
$ |
2.47 |
|
|
$ |
7.97 |
|
|
$ |
6.57 |
|
See accompanying notes. |
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BUSINESS SEGMENT INFORMATION |
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Three months ended
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Nine months ended
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(In millions) |
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Net sales |
|
|
|
|
|
|
|
||||||||
Electrical |
$ |
2,963 |
|
|
$ |
2,594 |
|
|
$ |
8,530 |
|
|
$ |
7,426 |
|
Electrical Global |
|
1,573 |
|
|
|
1,503 |
|
|
|
4,678 |
|
|
|
4,572 |
|
Aerospace |
|
946 |
|
|
|
867 |
|
|
|
2,772 |
|
|
|
2,517 |
|
Vehicle |
|
696 |
|
|
|
753 |
|
|
|
2,143 |
|
|
|
2,242 |
|
eMobility |
|
167 |
|
|
|
163 |
|
|
|
514 |
|
|
|
471 |
|
Total net sales |
$ |
6,345 |
|
|
$ |
5,880 |
|
|
$ |
18,638 |
|
|
$ |
17,229 |
|
|
|
|
|
|
|
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Segment operating profit (loss) |
|
|
|
|
|
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|
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Electrical |
$ |
892 |
|
|
$ |
719 |
|
|
$ |
2,537 |
|
|
$ |
1,913 |
|
Electrical Global |
|
294 |
|
|
|
328 |
|
|
|
872 |
|
|
|
892 |
|
Aerospace |
|
230 |
|
|
|
209 |
|
|
|
637 |
|
|
|
580 |
|
Vehicle |
|
135 |
|
|
|
131 |
|
|
|
381 |
|
|
|
353 |
|
eMobility |
|
(7 |
) |
|
|
— |
|
|
|
(9 |
) |
|
|
(5 |
) |
Total segment operating profit |
|
1,544 |
|
|
|
1,386 |
|
|
|
4,417 |
|
|
|
3,732 |
|
|
|
|
|
|
|
|
|
||||||||
Corporate |
|
|
|
|
|
|
|
||||||||
Intangible asset amortization expense |
|
(106 |
) |
|
|
(107 |
) |
|
|
(319 |
) |
|
|
(344 |
) |
Interest expense - net |
|
(29 |
) |
|
|
(33 |
) |
|
|
(88 |
) |
|
|
(124 |
) |
Pension and other postretirement benefits income |
|
9 |
|
|
|
11 |
|
|
|
29 |
|
|
|
33 |
|
Restructuring program charges |
|
(54 |
) |
|
|
(7 |
) |
|
|
(132 |
) |
|
|
(46 |
) |
Other expense - net |
|
(160 |
) |
|
|
(171 |
) |
|
|
(508 |
) |
|
|
(512 |
) |
Income before income taxes |
|
1,204 |
|
|
|
1,079 |
|
|
|
3,399 |
|
|
|
2,739 |
|
Income tax expense |
|
193 |
|
|
|
187 |
|
|
|
573 |
|
|
|
463 |
|
Net income |
|
1,011 |
|
|
|
892 |
|
|
|
2,827 |
|
|
|
2,277 |
|
Less net income for noncontrolling interests |
|
(1 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
Net income attributable to Eaton ordinary shareholders |
$ |
1,009 |
|
|
$ |
891 |
|
|
$ |
2,823 |
|
|
$ |
2,273 |
|
See accompanying notes. |
|
|
|
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CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
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(In millions) |
|
|
|||
Assets |
|
|
|
||
Current assets |
|
|
|
||
Cash |
$ |
473 |
|
$ |
488 |
Short-term investments |
|
1,521 |
|
|
2,121 |
Accounts receivable - net |
|
4,886 |
|
|
4,475 |
Inventory |
|
4,178 |
|
|
3,739 |
Prepaid expenses and other current assets |
|
1,094 |
|
|
851 |
Total current assets |
|
12,152 |
|
|
11,675 |
|
|
|
|
||
Property, plant and equipment - net |
|
3,711 |
|
|
3,530 |
|
|
|
|
||
Other noncurrent assets |
|
|
|
||
|
|
15,044 |
|
|
14,977 |
Other intangible assets |
|
4,809 |
|
|
5,091 |
Operating lease assets |
|
817 |
|
|
648 |
Deferred income taxes |
|
549 |
|
|
458 |
Other assets |
|
2,154 |
|
|
2,052 |
Total assets |
$ |
39,236 |
|
$ |
38,432 |
|
|
|
|
||
Liabilities and shareholders’ equity |
|
|
|
||
Current liabilities |
|
|
|
||
Short-term debt |
$ |
3 |
|
$ |
8 |
Current portion of long-term debt |
|
714 |
|
|
1,017 |
Accounts payable |
|
3,609 |
|
|
3,365 |
Accrued compensation |
|
687 |
|
|
676 |
Other current liabilities |
|
2,928 |
|
|
2,680 |
Total current liabilities |
|
7,941 |
|
|
7,747 |
|
|
|
|
||
Noncurrent liabilities |
|
|
|
||
Long-term debt |
|
8,678 |
|
|
8,244 |
Pension liabilities |
|
709 |
|
|
768 |
Other postretirement benefits liabilities |
|
174 |
|
|
180 |
Operating lease liabilities |
|
681 |
|
|
533 |
Deferred income taxes |
|
387 |
|
|
402 |
Other noncurrent liabilities |
|
1,503 |
|
|
1,489 |
Total noncurrent liabilities |
|
12,132 |
|
|
11,616 |
|
|
|
|
||
Shareholders’ equity |
|
|
|
||
Eaton shareholders’ equity |
|
19,117 |
|
|
19,036 |
Noncontrolling interests |
|
45 |
|
|
33 |
Total equity |
|
19,162 |
|
|
19,069 |
Total liabilities and equity |
$ |
39,236 |
|
$ |
38,432 |
See accompanying notes. |
NOTES TO THE THIRD QUARTER 2024 EARNINGS RELEASE
Amounts are in millions of dollars unless indicated otherwise (per share data assume dilution). Columns and rows may not add and the sum of components may not equal total amounts reported due to rounding.
Note 1. NON-GAAP FINANCIAL INFORMATION
This earnings release includes certain non-GAAP financial measures. These financial measures include adjusted earnings, adjusted earnings per ordinary share, and free cash flow, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of each of these financial measures to the most directly comparable GAAP measure is included in this earnings release. Management believes that these financial measures are useful to investors because they provide additional meaningful financial information that should be considered when assessing our business performance and trends, and they allow investors to more easily compare
The Company's fourth quarter and full year net income per ordinary share and adjusted earnings per ordinary share guidance for 2024 is as follows:
|
Three months ended
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|
Year ended
|
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Net income per share attributable to Eaton ordinary shareholders - diluted |
|
|
|
||
Excluding per share impact of acquisition and divestiture charges, after tax |
0.03 |
|
0.07 |
||
Excluding per share impact of restructuring program charges, after tax |
0.11 |
|
0.37 |
||
Excluding per share impact of intangible asset amortization expense, after tax |
0.22 |
|
0.84 |
||
Adjusted earnings per ordinary share |
|
|
|
A reconciliation of net income attributable to Eaton ordinary shareholders per share to adjusted earnings per ordinary share is as follows:
|
Year ended
|
||
Net income per share attributable to Eaton ordinary shareholders - diluted |
$ |
8.02 |
|
Excluding per share impact of acquisition and divestiture charges, after tax |
|
0.10 |
|
Excluding per share impact of restructuring program charges, after tax |
|
0.11 |
|
Excluding per share impact of intangible asset amortization expense, after tax |
|
0.89 |
|
Adjusted earnings per ordinary share |
$ |
9.12 |
A reconciliation of operating cash flow to free cash flow is as follows:
|
Three months ended
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(In millions) |
|
2024 |
|
|
|
2023 |
|
Operating cash flow |
$ |
1,308 |
|
|
$ |
1,140 |
|
Capital expenditures for property, plant and equipment |
|
(183 |
) |
|
|
(227 |
) |
Free cash flow |
$ |
1,126 |
|
|
$ |
913 |
|
Note 2. ACQUISITIONS OF BUSINESSES
Acquisition of a 49% stake in NordicEPOD AS
On
Acquisition of Exertherm
On
Acquisition of a 49%
stake in
On
Acquisition of
On
Note 3. ACQUISITION AND DIVESTITURE CHARGES
Eaton incurs integration charges and transaction costs to acquire and integrate businesses, and transaction, separation and other costs to divest and exit businesses. Eaton also recognizes gains and losses on the sale of businesses. A summary of these Corporate items is as follows:
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Three months ended
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Nine months ended
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(In millions except for per share data) |
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Acquisition integration, divestiture charges and transaction costs (income) |
$ |
(4 |
) |
|
$ |
18 |
|
$ |
23 |
|
$ |
69 |
|||
Income tax benefit |
|
— |
|
|
|
4 |
|
|
7 |
|
|
14 |
|||
Total charges (income) after income taxes |
$ |
(4 |
) |
|
$ |
14 |
|
$ |
17 |
|
$ |
54 |
|||
Per ordinary share - diluted |
$ |
(0.01 |
) |
|
$ |
0.03 |
|
$ |
0.04 |
|
$ |
0.14 |
Acquisition integration, divestiture charges and transaction costs (income) in 2024 and 2023 are primarily related to acquisitions completed prior to 2023, including other charges and income to acquire and exit businesses. 2024 also included the reduction in fair value of contingent future consideration from the
Note 4. RESTRUCTURING CHARGES
In the second quarter of 2020, Eaton initiated a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to initially respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company incurred expenses of
During the first quarter of 2024, Eaton implemented a new multi-year restructuring program to accelerate opportunities to optimize its operations and global support structure. These actions will better align the Company's functions to support anticipated growth and drive greater effectiveness throughout the Company. Restructuring charges incurred under this program were
A summary of restructuring program charges is as follows:
|
Three months ended
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|
Nine months ended
|
||||||||||||
(In millions except for per share data) |
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Workforce reductions |
$ |
10 |
|
$ |
— |
|
$ |
78 |
|
$ |
17 |
||||
Plant closing and other |
|
44 |
|
|
7 |
|
|
55 |
|
|
29 |
||||
Total before income taxes |
|
54 |
|
|
7 |
|
|
132 |
|
|
46 |
||||
Income tax benefit |
|
11 |
|
|
1 |
|
|
28 |
|
|
8 |
||||
Total after income taxes |
$ |
43 |
|
$ |
5 |
|
$ |
104 |
|
$ |
37 |
||||
Per ordinary share - diluted |
$ |
0.11 |
|
$ |
0.01 |
|
$ |
0.26 |
|
$ |
0.09 |
Restructuring program charges (income) related to the following segments:
|
Three months ended
|
|
Nine months ended
|
||||||||||||
(In millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Electrical |
$ |
— |
|
|
$ |
— |
|
$ |
9 |
|
$ |
4 |
|||
Electrical Global |
|
42 |
|
|
|
5 |
|
|
70 |
|
|
22 |
|||
Aerospace |
|
(1 |
) |
|
|
1 |
|
|
7 |
|
|
4 |
|||
Vehicle |
|
4 |
|
|
|
1 |
|
|
32 |
|
|
4 |
|||
eMobility |
|
2 |
|
|
|
— |
|
|
2 |
|
|
6 |
|||
Corporate |
|
6 |
|
|
|
— |
|
|
13 |
|
|
6 |
|||
Total charges |
$ |
54 |
|
|
$ |
7 |
|
$ |
132 |
|
$ |
46 |
These restructuring program charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income – net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items.
Note 5. INTANGIBLE ASSET AMORTIZATION EXPENSE
Intangible asset amortization expense is as follows:
|
Three months ended
|
|
Nine months ended
|
||||||||||||
(In millions except for per share data) |
2024 |
|
2023 |
|
2024 |
|
2023 |
||||||||
Intangible asset amortization expense |
$ |
106 |
|
$ |
107 |
|
$ |
319 |
|
$ |
344 |
||||
Income tax benefit |
|
23 |
|
|
23 |
|
|
68 |
|
|
74 |
||||
Total after income taxes |
$ |
84 |
|
$ |
84 |
|
$ |
251 |
|
$ |
269 |
||||
Per ordinary share - diluted |
$ |
0.21 |
|
$ |
0.21 |
|
$ |
0.62 |
|
$ |
0.67 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20241030417725/en/
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