Cooper Matches Estimates - Analyst Blog

Cooper Industries plc (CBE) reported fourth quarter 2010 earnings per share from continuing operations of 85 cents, in line with the Zacks Consensus Estimate. Earnings in the quarter increased by 12% year over year.

For 2010, earnings per share were $3.20, an increase of 30.1% year over year. Earnings for the year were also in line with the Zacks Consensus Estimate.

Revenue

Total revenue in the quarter was $1.26 billion, representing a year-over-year increase of 14.1%, driven by strong industrial markets, improved utility markets and rising demand for energy-efficient lighting equipments. The Electrical segments, on the whole, benefited from  improving global end markets and successful implementation of Cooper's growth programs.

For 2010, total revenue was $4.75 billion, representing an increase of 5.4% year over year.

Segment Details

Revenue in the Energy & Safety Solutions segment increased by 15.0% year over year to $676.7 million. Excluding negative foreign currency impact of 1.2% and positive impact from acquisitions of 1.3%, core segment revenue increased by 14.9%.

Revenue in the Electrical Products Group segment increased by 13.3% year over year to $583.2 million. Excluding positive foreign currency impact of 0.2% and positive impact from acquisitions of 0.1%, core segment revenue increased by 13.0%.

Margins

Operating earnings for the quarter were $180.3 million compared with $160.5 million in the prior-year period. SG&A expense was $249.0 million compared with $254.4 million in the prior-year period.

Energy & Safety Solutions segment margin was 16.8%, up 90 basis points year over year. Electrical Products Group segment margin was 13.8%, down 120 basis points.

Balance Sheet and Cash Flow

Cash and cash equivalents were $1.04 billion with long-term debt of $1.42 billion and shareowners' equity of $3.21 billion.

The company generated $700.5 million of cash from its operating activities in the fourth quarter.

Outlook

The company expects its earnings per share from continuing operations of $3.60 to $3.80 for 2011 and revenue to increase by 6% to 9%. The 2010 comparative figure for revenue excludes Tools segment revenue. 

For the first quarter of 2011, the company expects earnings per share of 80 cents to 84 cents with an increase of 10% to 14% in revenue compared with the first quarter of 2010, excluding Tools revenue.

The company is expected to realize an outsized portion of its growth from developing markets in China, the Middle East and Mexico. Industrial, utility and energy markets are expected to rapidly expand and industrializing economies will help to offset some of the declines in the already developed regions. This will eventually help to support higher growth rates for the current year.

However, heightened global competition, given that Cooper expands its international exposure, can act as a negative catalyst for the company. Major competitors of the company are ABB Ltd. (ABB), General Electric Co. (GE) and Stanley Black & Decker Inc. (SWK). Operations and supply sources located outside the United States, particularly the emerging markets, are subject to increased risks. Operating entities outside the USA contribute significantly to the company's revenue and earnings.

Incorporated in Ireland, headquartered in Houston, Texas, Cooper Industries plc is a diversified manufacturer, marketer, and distributor of electrical products, tools, and hardware.  General industrial manufacturers, such as those in the aerospace and automobile industries, are the main users of Cooper's power tools and assembly systems.  Its brands include Buss, Edison, Crouse Hinds, Weller, DGD, Buckeye, Cooper, and Master Power.

We continue to maintain a Neutral rating on Cooper Industries, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

 
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