Eaton Stock Gains After Q2 Earnings Beat, Raised FY21 Adjusted EPS Outlook

Eaton Corporation PLC ETN reported second-quarter sales growth of 35.4% year-over-year to $5.22 billion, beating the consensus of $4.91 billion.
Sales increase consisted of 27% growth in organic sales, 5% growth from acquisitions, and 3% positive currency translation.
Sales by segments: Electrical Americas $1.8 billion (+24% Y/Y), Electrical Global $1.4 billion (+28% Y/Y), Hydraulics $560 million (+36.3% Y/Y), Aerospace $625 million (+36% Y/Y), and Vehicle $675 million (+106.4% Y/Y).
For the Electrical Americas segment, orders increased 43% Y/Y, and Backlog at June end was up 43% Y/Y. Electrical Global segment orders were up 46% Y/Y, and Backlog at June end grew 50% Y/Y.
Adjusted EPS improved to $1.72 from $0.87 in 2Q20, beating the consensus of $1.55.
The segment operating profit increased by 71% Y/Y to $971 million, and the margin expanded by 390 bps to 18.6%.
The company says strong segment margins were driven by effectively managing supply chain constraints, increased productivity, and continued benefits from the multi-year restructuring program announced in Q2 of 2020.
Eaton generated cash from operating activities of $637 million, with Free cash flow of $484 million.
Eaton completed the sale of its Hydraulics business to Danfoss A/S, a Danish industrial company, for $3.3 billion.
FY21 Outlook: The company expects adjusted EPS of $6.58 - $6.88, up 37% at the midpoint over 2020 vs. the consensus of $6.22. (Prior view $5.90- $6.30, up 24% at the midpoint over 2020).
It sees an adjusted operating cash flow of $2.6 billion - $2.8 billion, up $200 million at the midpoint over previous guidance.
The company expects Q3 adjusted EPS of $1.72 - $1.82 versus the consensus of $1.59.
Price action: ETN shares traded higher by 1.60% at $159.00 in the premarket session on the last check Tuesday.

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