Eaton Q3 Profit Climbs 13.2% Behind Data Center Growth
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Eaton Corp.’s profit climbed 13.2% in the third quarter as revenue growth from data center expansions around the globe trumped job action at Boeing, plant shutdowns due to Hurricane Helene and ongoing North American freight market weakness.
Dublin-based component manufacturer Eaton reported a profit of $1.009 billion or $2.53 per diluted share in the three months that ended Sept. 30, compared with $891 million, $2.22, in the year-ago period.
The company’s sales in the most recent quarter totaled $6.345 billion, a third-quarter record and up 8% from $5.88 billion in Q3 2023.
However, Helene and Boeing’s latest woes cut sales by about $50 million, or 50 basis points, the company said.
Sales at Eaton’s Electrical Americas unit — bolstered by the ever-increasing need for cloud computing capacity at data centers — totaled $2.963 billion, up 14% from $2.594 billion a year earlier. In addition, the division’s operating margin in Q3 was a record 30.1%, up 240 basis points year over year.
“The data center market just continues to perform much better than even we imagined,” CEO Craig Arnold told analysts during the company’s quarterly earnings call.
“In [Q3], our data center sales were up 35% …. from 27% in the prior quarter. So, the rate of growth is accelerating. Our orders were up some 55% on a rolling 12-month basis, and negotiations are up 90%,” said Arnold.
Arnold
“As you can tell from this data, we just continue to build a strong momentum in the data center market. And as we’ve said, we think that market is going to be very strong for years to come,” he added.
The Electrical Americas unit employs more than 3,000 people in North and South Carolina at nine facilities and Chief Financial Officer Olivier Leonetti told analysts all of the sites were back up and running after Helene.
Sales at Eaton’s Electrical Global unit totaled $1.573 billion, up 5% from $1.503 billion a year earlier.
Aerospace segment sales totaled $946 million, up 9% year on year from $867 million.
Leonetti
Eaton’s Vehicle unit — which manufactures clutches, brakes, transmission systems and more for trucks — posted sales of $696 million, down 7% from $753 million. However, the unit’s operating margin was a record 19.4%, up 200 basis points year over year.
“We have worked hard in our vehicle business to first of all, run our business better and drive a better operational execution in our business,” Arnold told analysts. “And we went through a period of time in our own vehicle business through supply chain disruptions and some other operational challenges inside of the business where we weren’t executing as well as we know we can.
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“Every business has a head, every business has a tail, every business has a piece of it where you’d say, we don’t have a competitive advantage here. We don’t make great margins. It’s not a growth piece of the business and we got to have a plan to address it and fix it,” the company’s top executive said.
“And so, we have been very active in managing the portfolio in terms of the things that we control in our vehicle business as well. The margins that we posted this quarter I think are a reflection of the fact that our team is executing extremely well, and we would expect them to continue to execute well as we move forward,” he added.
Analysts applauded the results but noted the ongoing weakness for the commercial vehicle and electric vehicle operations.
“It’s been nothing but ‘up and to the right’ for ETN for some time now with little drama. [The Oct. 31] results were solid/strong but did showcase the realities around Aerospace OE right now and incremental weakness in auto, EVs and truck,” Melius Research’s Scott Davis said in a research note.
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