Eaton Revises Fourth Quarter Earnings Guidance
December 16 2008 - 8:00AM
Business Wire
Diversified industrial manufacturer Eaton Corporation (NYSE:ETN)
today announced revised earnings guidance for the fourth quarter,
reflecting the impact of the global economic crisis on its end
markets. �We have experienced recent, dramatic deceleration in
global demand in our Automotive, Truck and Hydraulics segments,�
said Alexander M. Cutler, Eaton chairman and chief executive
officer. �The weakness in these segments has been accentuated by
customer decisions to sharply curtail production starting in late
November and continuing into December. We have also begun to see
weakness in certain markets within our Electrical and Aerospace
businesses. �During the course of 2008, we have reduced our
employment by 3,400 employees, in response to the weakening end
markets,� said Cutler. �We continue to evaluate a range of
additional actions to further align our cost structure to the lower
markets. Our current expectation is that these additional actions
will be taken very early in 2009. In total, the actions taken in
2008 and our anticipated 2009 actions are expected to generate a
net pre-tax benefit of approximately $125 million in 2009. �In
addition, as previously discussed, there will be further savings
from ongoing acquisition integration activities that are expected
to occur during 2009,� said Cutler. �We will provide more detailed
information on the cost-reduction actions and their benefits at the
time of our conference call in January to discuss fourth quarter
earnings and our guidance for 2009.� When announcing its third
quarter earnings in mid-October, Eaton had expected its end markets
in the fourth quarter to be flat with the prior year. That market
expectation was partly based on an expectation that GDP in the
United States would decline by 2 percent in the fourth quarter,
with a smaller decline expected for GDP in the European Union.
Recent economic events now suggest that GDP in the U.S. and the
European Union will experience much greater declines. These
declines in output have impacted Eaton�s markets, such that Eaton
now anticipates its end markets in the fourth quarter to decline by
between 3 and 4 percent. As a result, Eaton now anticipates its net
income per share for the fourth quarter will be between $.90 and
$1.00, with operating earnings per share, which exclude charges to
integrate its recent acquisitions, to be between $1.00 and $1.10.
For the full year, the new fourth quarter guidance would result in
net income per share of between $6.44 and $6.54, and operating
earnings per share of between $6.75 and $6.85, both sets of numbers
being approximately even with the earnings per share achieved in
2007. �We expect weak global economic conditions to persist
throughout 2009, with GDP in the United States likely to decline by
between 2 and 3 percent and GDP in the European Union likely to
decline by between 1 and 2 percent,� said Cutler. �We also expect
GDP growth in emerging economies to be approximately 3 percentage
points lower than in recent years, reflecting the impact of lower
demand from the United States and Europe.� In light of this
economic outlook, Eaton�s end markets are expected to face reduced
demand. While Eaton is still evaluating the full impact, its
present view is that its overall end markets in 2009, as measured
in local currencies, are likely to decline by approximately 7
percent. In addition, revenue in 2009 will be impacted by the
decline in most currencies against the dollar. At this point, Eaton
believes the reduction in non-U.S. currencies is likely to reduce
revenues on the order of between 5 and 6 percent, compared to 2008.
�Largely offsetting the decline in revenues from foreign exchange
will be additional revenues from the full year impact of
acquisitions completed in 2008 and our demonstrated ability to grow
more quickly than our end markets -- a key indicator of the
strength of our power management portfolio of products and
services,� said Cutler. Eaton Corporation is a diversified power
management company with 2007 sales of $13 billion. Eaton is a
global technology leader in electrical systems for power quality,
distribution and control; hydraulics components, systems and
services for industrial and mobile equipment; aerospace fuel,
hydraulics and pneumatic systems for commercial and military use;
and truck and automotive drivetrain and powertrain systems for
performance, fuel economy and safety. Eaton has approximately
80,000 employees and sells products to customers in more than 150
countries. For more information, visit www.eaton.com. This news
release contains forward-looking statements concerning the fourth
quarter 2008 and full year 2008 net income per share and operating
earnings per share; the performance of our worldwide markets in
2008 and 2009; sales for the fourth quarter of 2008; the impact of
certain worldwide events and trends on revenue for 2009; and the
expected pre-tax benefits for 2009 of certain actions taken in 2008
and expected to be taken in early 2009. These statements should be
used with caution and are subject to various risks and
uncertainties, many of which are outside the company�s control. The
following factors could cause actual results to differ materially
from those in the forward-looking statements: unanticipated changes
in the markets for the company�s business segments; unanticipated
downturns in business relationships with customers or their
purchases from us; competitive pressures on sales and pricing;
increases in the cost of material, energy and other production
costs, or unexpected costs that cannot be recouped in product
pricing; the introduction of competing technologies; unexpected
technical or marketing difficulties; unexpected claims, charges,
litigation or dispute resolutions; the impact of acquisitions,
divestitures, and joint ventures; new laws and governmental
regulations; interest rate changes; stock market fluctuations; and
unanticipated deterioration of economic and financial conditions in
the United States and around the world. We do not assume any
obligation to update these forward-looking statements.
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