Goldman Sachs Suggests Buying Calls on Eaton Corporation (ETN)

Goldman Sachs is out with a research report this morning, where its analysts suggest that traders buy calls on Eaton Corporation ETN ahead of the company's analyst day. Goldman Sachs Multi-Industry analyst, Terry Darling, rates ETN as a Conviction Buy and sees 21% upside to his $132 12-month price target. He notes that ETN management guidance tends to be conservative; in the last cycle (2004-2007), ETN beat the high end of initial guidance by an average of 10%. If 2011 is similar to the last cycle, this would imply 14% upside to current consensus EPS, They suggest buying the March $110.00 calls for $4.00. Eaton Corporation is a diversified power management company.