Eaton Q1 Profit Jumps 28.7% as Margins Increase

An Eaton power block. (Eaton Corp.)

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Profits at Eaton Corp. soared in the first quarter of 2024 as sales and margins jumped at the electrical, aerospace and automotive component manufacturer’s largest reporting unit — Electrical Americas.

Dublin, Ireland-based Eaton posted Q1 net income of $821 million, up 28.7% compared with $638 million in the year-ago period. The company’s earnings per share came in at $2.04 in Q1, up 28.3% compared with $1.59 in the first quarter of 2023.

Eaton’s Q1 revenue totaled $5.943 billion, a first-quarter record and up 8% from $5.483 billion a year earlier.

Revenue at the Electrical Americas unit totaled a record $2.69 billion, up 17% year-over-year from $2.294 billion. However, what really drove Eaton’s bottom line higher as a company was how much profit was made from those sales. Electrical Americas’ operating profit jumped 50% to $785 million from $525 million a year earlier. The unit’s operating margin in Q1 was a record 29.2%, up 6.3 percentage points compared with the year-ago period. Eaton Q1 2024 earnings

Meantime, the company’s vehicle segment posted sales of $724 million, down 2% from $739 million in the year-ago period. The unit, which manufactures clutches, brakes and transmission systems and more, saw organic sales fall 3%, which was partially offset by favorable foreign exchange rates.

Despite those dips, the unit posted an operating profit of $116 million, up 8% compared with $107 million in the same period a year earlier. Its operating margin in the most recent quarter was 16%, up 1.5 percentage points year over year.

Eaton’s eMobility segment sales totaled $158 million, up 7% compared with $147 million in the year-ago period.

The unit — which supports the electrification of transportation with on-board chargers, inverters, converters, power distribution units, fuses and transmissions — posted an operating loss of $4 million, unchanged year-over-year, which Eaton said reflected the timing of program startup costs to support future volume growth.

“Growth drivers like increased project activity tied to megatrends, reindustrialization and infrastructure spending continue to drive demand for Eaton’s solutions across our markets, and we remain very confident in our teams’ ability to execute on our increased targets for the year,” CEO Craig Arnold said in a statement.

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Arnold 

“We capitalized on strong growth in our business to start the year, resulting in strong order growth in Electrical and Aerospace and first-quarter record segment margins,” he said. Eaton’s overall operating margin was 23.1%, a 3.4 percentage point year-over-year increase.

Battery production and EV plants have been among the first large projects to start construction in the growing U.S. infrastructure buildout, which boosted Electric Americas’ sales, said Arnold.

The company’s top executive also sees bright prospects for the data center market, where Eaton’s orders doubled in the past 12 months, and expects a 25% compound annual growth rate between 2022 and 2025.

Electrical Americas’ 12-month rolling average of orders in Q1 was up 8% organically, with particular strength in data centers, the company noted, adding that its backlog at the end of March remained at record levels, up 31% organically compared with March 2023.

“The bigger and the more complex the project, the more likely they are to pick a company like Eaton,” Arnold said during the company’s analyst earnings call. “I think we’re very well positioned for the future.”

As a result, Eaton raised its full-year earnings guidance. The company’s organic growth guidance was lifted to 7% to 9% from 6.5% to 8.5%. Eaton also expects to make a larger profit, raising its segment margin guidance to 22.8% to 23.2% from 22.4% to 22.8%.