Goldman Sachs Suggest Buying Calls on Eaton (ETN)

Goldman Sachs is out with a research note this morning, where it suggests that traders buy calls on Eaton Corporation ETN ahead of its analyst day. Goldman Sachs Multi-Industry analyst, Terry Darling, rates ETN as a Buy (on Conviction List) and sees 25% 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. The analysts suggest buying the March $110.00 call for $1.25. Eaton Corporation is a diversified power management company. The company is engaged in the manufacturing of electrical components and systems for power quality, distribution and control; hydraulics components, systems and services for industrial and mobile equipment; aerospace fuel, hydraulics and pneumatic systems for commercial and military use, and truck and automotive drivetrain and powertrain systems for performance, fuel economy and safety.