EPS of $2.04 increased by 28.1% from previous year
Gross margin of 37.3%
Net income of 821.00M
""Given our Q1 results, we're raising our guidance for organic growth, segment margins and adjusted EPS for the year. On balance, we're very pleased with our start to the year."" - Craig Arnold, CEO
Eaton Corporation plc (ETN) Q1 2024 Financial Results: Record Growth and Optimistic Outlook
Executive Summary
Eaton Corporation plc achieved record financial results for Q1 2024, posting revenues of $5.943 billion, an 8% increase year-over-year, alongside a notable 28% rise in diluted earnings per share (EPS) to $2.40. The strong performance was supported by substantial order growth in the Electrical segments, particularly in the Americas, where organic sales grew by 17%. Eaton's management expressed confidence in future growth, raising guidance on organic growth and segment margins due to underlying mega trends in infrastructure and technology. The retention of a robust $14.7 billion backlog across Electrical and Aerospace segments underscores Eaton's favorable position in a dynamic market. Investors are encouraged by these trends as the company pivots towards continued investment in capacity to meet rising demand, particularly in data centers and industrial sectors.
Key Performance Indicators
Revenue
5.94B
QoQ: -0.40% | YoY:8.39%
Gross Profit
2.22B
37.32% margin
QoQ: -5.29% | YoY:17.73%
Operating Income
1.00B
QoQ: -7.24% | YoY:23.30%
Net Income
821.00M
QoQ: -13.12% | YoY:28.68%
EPS
2.05
QoQ: -13.50% | YoY:28.13%
Revenue Trend
Margin Analysis
Key Insights
**Revenue**: $5.943 billion, up 8% YoY (Q1 2023: $5.497 billion)
**Diluted EPS**: $2.40, up 28% YoY (Q1 2023: $1.87)
**Gross Profit Margin**: 37.3%, illustrating a solid profitability profile.
**Operating Income**: $1 billion, up 23.3% YoY.
Financial Highlights
### Key Metrics Analysis
- Revenue: $5.943 billion, up 8% YoY (Q1 2023: $5.497 billion)
- Net Income: $821 million, up 28.68% YoY (Q1 2023: $638 million)
- Diluted EPS: $2.40, up 28% YoY (Q1 2023: $1.87)
- Gross Profit Margin: 37.3%, illustrating a solid profitability profile.
- Operating Income: $1 billion, up 23.3% YoY.
- Free Cash Flow: Recorded at $292 million, a significant 40% improvement YoY.
- Backlog Growth: Electrical backlog increased 31% YoY, highlighting sustained demand flow.
This analysis shows Eaton's consistent performance in maintaining profitable growth while expanding its operational base significantly in response to market demands.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
5.94B
8.39%
-0.40%
Gross Profit
2.22B
17.73%
-5.29%
Operating Income
1.00B
23.30%
-7.24%
Net Income
821.00M
28.68%
-13.12%
EPS
2.05
28.13%
-13.50%
Key Financial Ratios
currentRatio
1.56
grossProfitMargin
37.3%
operatingProfitMargin
16.8%
netProfitMargin
13.8%
returnOnAssets
2.13%
returnOnEquity
4.26%
debtEquityRatio
0.51
operatingCashFlowPerShare
$1.19
freeCashFlowPerShare
$0.73
dividendPayoutRatio
44.8%
priceToBookRatio
6.47
priceEarningsRatio
38
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Transcript Highlights
- Craig Arnold (CEO): "Our adjusted EPS was $2.40 in the quarter, well above our guidance range, our record for the quarter and up 28% from prior year... Our orders came in ahead of expectations with strong order growth..."
- Olivier Leonetti (CFO): "We posted a Q1 sales record of $5.9 billion, up 8% in total and organically... Adjusted EPS of $2.40 increased by 28% yet over the prior year."
Management insights reflect a focused approach towards scaling operations and heralding future growth opportunities stemming from current market trends, especially in electrical and aerospace segments.
"Given our Q1 results, we're raising our guidance for organic growth, segment margins and adjusted EPS for the year. On balance, we're very pleased with our start to the year."
â Craig Arnold, CEO
"We continue to see strong demand for electrical, particularly in the Americas, where organic sales growth was strong at 17%."
â Olivier Leonetti, CFO
Forward Guidance
### Forward Guidance
- **Organic Growth Target**: Increased to 7% - 9% from previous estimates of 6.5% - 8.5%.
- **Electrical Americas Growth Guidance**: Raised to 10% - 12% from 9% - 11%.
- **Adjusted EPS Guidance for 2024**: Set between $10.20 - $10.60, indicating an expected 14% growth YoY.
Eaton is on a trajectory for increased growth fueled by macroeconomic drivers and internal execution strategies, with management indicating confidence through enhanced backlog and negotiations.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ETN Focus
37.32%
16.80%
4.26%
38.00%
ITW
46.00%
28.40%
27.10%
24.20%
DOV
36.80%
14.90%
12.30%
9.65%
CMI
23.90%
9.53%
22.00%
5.22%
PH
36.80%
19.80%
5.42%
29.10%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Eaton Corporation plc presents a compelling investment opportunity driven by its substantial market position and growth strategy. The retained growth in order backlogs, coupled with operational improvements and strategic investments in capacity expansion, positions the company for continued robust performance. Investors should monitor the effectiveness of management's strategies to mitigate labor and supply chain risks, along with the overall market dynamics in the electrical and industrial sectors. Strong EPS growth and upward revisions in guidance reflect a solid growth trajectory that aligns with current economic trends.
Key Investment Factors
Growth Potential
Eaton has demonstrated strong order growth and backlog growth across its segments, indicating significant potential for continued expansion, especially in Electrical Americas and Aerospace.
Profitability Risk
Labor constraints and supply chain bottlenecks present risks to executing growth plans. Additionally, increased competition may pressure margins if not managed effectively.
Financial Position
Eaton shows strong balance sheet strength with a total equity of $19.2 billion and net debt position reducing to $9.315 billion, ensuring operational flexibility and capacity for capital investments.
SWOT Analysis
Strengths
Strong brand presence and reputation in electrical and aerospace markets.
Robust order backlog indicating healthy future revenue visibility.
Diverse product portfolio across multiple sectors.
Weaknesses
Dependence on electrical market growth which may be influenced by external economic factors.
Labor and supply chain constraints may affect operational efficiency.
Opportunities
Growing demand for data centers driven by AI and big data usage.
Expansion in emerging markets and potential new segments.
Increasing infrastructure spending in North America.
Threats
Intensifying competition from both established companies and new entrants.
Economic downturns or unexpected fluctuations in demand could impact sales.