Eaton Corporation plc (ETN) concluded Q4 2024 with a record revenue of $6.24 billion, marking a 6% organic growth year-over-year. A remarkable adjusted EPS of $2.83 was achieved, reflecting an 11% increase over the previous year, underpinned by strong performance in Electrical Americas and robust market conditions despite setbacks from industry strikes and natural disasters. Management anticipates continued strength driven by megatrends such as data centers, which have seen a 29% increase in backlog, critical for sustaining growth momentum into 2025. Management reinforced this sentiment during the earnings call, with CEO Craig Arnold highlighting, "We expect another year of healthy end markets, strong organic growth, margin expansion, improving free cash flow and double-digit increases in adjusted EPS."
- Q4 2024 Revenue: $6.24B, +6% YoY
- Adjusted EPS: $2.83, +11% YoY
- Operating Margin: 24.7%, +190 bps YoY
- Free Cash Flow: $1.3B, +27% YoY
- Revenue Growth Drivers: Data Centers, Electrical Americas, Aerospace (despite strike impact)
- Backlog Growth: Electrical increasing by 29% YoY.
Year-over-year performance indicates a transition to a robust growth phase, driven by strategic investments and recovery from prior disruptions.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
6.24B
4.58%
-1.65%
Gross Profit
2.43B
3.71%
-0.70%
Operating Income
1.23B
13.64%
-2.70%
Net Income
971.00M
2.75%
-3.77%
EPS
2.46
3.80%
-3.15%
Key Financial Ratios
currentRatio
1.5
grossProfitMargin
38.9%
operatingProfitMargin
19.6%
netProfitMargin
15.6%
returnOnAssets
2.53%
returnOnEquity
5.25%
debtEquityRatio
0.53
operatingCashFlowPerShare
$4.05
freeCashFlowPerShare
$3.41
dividendPayoutRatio
38.1%
priceToBookRatio
7.07
priceEarningsRatio
33.67
Net Income vs. Revenue
Expense Breakdown
Management Commentary
1. End-market Resilience: Craig Arnold stated, "We generated a Q4 record... despite the impacts of strikes in the Aerospace industry and lingering effects from Hurricane Helene," illustrating the company's ability to navigate adverse conditions.
2. Strong Backlogs and Future Growth: Increased Electrical orders, particularly in data centers, were emphasized by Paulo Ruiz who noted, "Electrical Americas backlog increased 29% year-over-year," indicating sustained demand.
3. Profit and Cash Flow Performance: Olivier Leonetti remarked, "Operating profit grew 13%, and segment margin expanded to an all-time record 24.7%," underscoring operational efficiency.
"We generated a Q4 record for adjusted EPS of $2.83, up 11% from prior year," - Craig Arnold
— Craig Arnold
"Electrical Americas backlog increased 29% year-over-year, demonstrating continued tailwinds from the various megatrends," - Paulo Ruiz
— Paulo Ruiz
Forward Guidance
Management anticipates organic revenue growth for 2025 to be between 7% and 9%. Strength in Electrical Americas is projected at a midpoint of 11.5%, underpinned by a strong backlog and robust demand from data center projects. CEO Craig Arnold stressed a cautious outlook regarding potential headwinds, notably on skilled labor shortages, stating, 'We think labor continues to be somewhat constrained.' Overall expectations include another year of double-digit adjusted EPS growth and an improvement in segment margins to approximately 24.4-24.8%.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ETN Focus
38.93%
19.60%
5.25%
33.67%
ITW
43.50%
26.20%
22.60%
24.91%
DOV
38.60%
15.30%
20.60%
4.50%
CMI
24.10%
8.67%
4.07%
28.65%
PH
36.20%
20.70%
6.50%
20.52%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Eaton’s future outlook appears promising, characterized by strong growth in its core Electrical and Aerospace segments aided by positive market trends driven by data center expansions. The management's commitment to maintaining operational efficiencies and robust strategies for capitalizing on market needs reinforce the stock's investment attractiveness. However, potential labor shortages and supply chain constraints warrant ongoing monitoring. Overall, with expected double-digit growth in adjusted EPS and reaffirmed strategic leadership, Eaton represents a compelling investment opportunity in the industrials sector.
Key Investment Factors
Growth Potential
- Strong demand projected in data centers and Electrical Americas could drive significant organic growth. Management expects favorable secular trends for sustained growth including data centers for cloud computing and AI technologies, which remain key drivers of capital investments.
Profitability Risk
- Potential constraints related to labor availability and supply chain issues could hinder growth trajectory. Management indicated ongoing concerns over labor shortages in skilled trades and supplier capacity which could affect operational performance.
Financial Position
- With total assets at $38.38 billion and a total debt of $9.82 billion, Eaton maintains a healthy balance sheet reflected by a debt-to-equity ratio of 0.53, showcasing financial flexibility for strategic investments.
SWOT Analysis
Strengths
Strong market position in Electrical and Aerospace sectors