Eaton Q2 Profit Jumps 23.8%
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Eaton Corp. posted net income of $744 million in the second quarter of 2023, a 23.8% increase compared with a $601 million profit in the same period a year earlier, citing a stronger-than-expected global economy.
Dublin-based Eaton — which manufactures clutches, brakes and transmission systems among other things — reported diluted earnings per share of $1.86 for the quarter, compared with $1.50 in the year-ago period.
Sales in the most recent quarter totaled $5.9 billion, a quarterly record and up 13% from Q2 2022, driven entirely by organic growth, the company said Aug. 1. For Q3, Eaton anticipates organic growth of 9% to 11%.
Eaton’s Q2 results topped analysts’ expectations, according to Zacks Equity Research. The consensus revenue forecast was $5.74 billion.
Arnold
“We, like so many others, had anticipated a mild recession this year, and our thinking around recession continues to be pushed out — as it does for, I think, most of the economists in the world,” Eaton CEO Craig Arnold said during the company’s quarterly earnings call for analysts Aug. 1. “At this juncture ... we’re feeling pretty good about the year.”
More broadly, Arnold believes Eaton is in a good position to handle a downturn should one arrive. “Even in the event of a mild recession, given the mega-trends and the stimulus spending and the strength of our end-markets, we don’t believe it’s going to have a material impact at all on Eaton’s growth,” he said.
Eaton’s vehicle segment posted Q2 sales of $751 million, up 6% from $708 million in Q2 2022, it said. The segment’s operating profit was $115 million, up 6% compared with $108 million in Q2 2022. The unit’s operating margin in the quarter was 15.3%, unchanged from the year-ago period.
Eaton’s eMobility segment saw Q2 sales rise 18% year-over-year to a record $161 million from $136 million a year earlier. The segment recorded an operating loss of $1 million, however, as higher sales volumes were partially offset by wage and commodity inflation.
“Overall, we remain very encouraged by the growth prospects of the eMobility segment,” Chief Financial Officer Thomas Okray said. “So far in 2023, we have won new programs with more than $450 million of mature year revenues, positioning us very well to exceed our 2025 target of $1.2 billion of revenue. Through these wins, we continue to find opportunities to leverage expertise across all segments.”
Arnold in a statement offered specifics. “We reached an agreement with a major OEM to supply power electronics control units for an electrically heated catalyst to meet emissions regulations,” he said. “Demand across our markets continues to be strong, propelling backlogs to record levels.”
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“We remain well-positioned to capitalize on re-industrialization in North America and Europe as well as the secular growth drivers of electrification, energy transition and digitalization,” Arnold added.
Eaton is eyeing infrastructure mega-projects as a major driver of profitability, from downstream oil and gas construction to battery plants supplying electric vehicles, he said. Since the start of 2021, some $686 billion in infrastructure mega-projects have been announced in the U.S. and Canada, the company said. Eaton includes projects costing more than $1 billion in this assessment.
The value of announced mega-projects has increased by $116 billion or 20% between March and June, Arnold said.
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