Eaton Is Poised To Benefit From 'Ongoing Electrical Super-Cycle,' Says Bullish Analyst

Shares of Eaton Corporation PLC ETN were climbing in early trading on Friday, despite concerns around stocks with high valuations.

With multi-year catalysts ahead, the company appears to be the “best large-cap way to play the current electrical supercycle,” according to RBC Capital Markets.

The Eaton Analyst: Deane Dray upgraded the rating for Eaton from Sector Perform to Outperform, while raising the price target from $286 to $371.

The Eaton Thesis: Even after the rally in 2023, the company’s shares have room for upside with “multi-year secular tailwinds driving the ongoing electrical super-cycle,” Dray said in the upgrade note.

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“We expect a +5-yr runway for many of these drivers, including the electrification of everything, grid hardening, datacenters, energy transition, EV, and reshoring,” the analyst wrote.

Eaton has more than 330 mega projects, each of which represent over $1 billion in spending, totaling an incremental TAM (total addressable market) of $37 billion, Dray stated. “The earnings boost from this burst of project spending is still to come, with just 3% of its Electrical Americas sales coming from these megaprojects in 2023,” he added.

ETN Price Action: Shares of Eaton had risen by 2.5% to $328.50 at the time of publication on Friday.

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