Eaton Corp.'s (ETN) second-quarter earnings soared as the
diversified manufacturer's continued to recover from last year's
slumping demand, especially in its automotive segments.
The result beat expectations and Eaton projected third-quarter
earnings of $1.30 to $1.40 a share. Analysts polled by Thomson
Reuters recently projected $1.17.
The maker of components for autos, trucks, hydraulic systems and
electrical products, also boosted its 2010 earnings guidance again,
this time to $4.90 to $5.10 from $4.30 to $4.60.
Also as a result of the strong second quarter, Eaton raised its
quarterly dividend by 16% to 58 cents a share.
Chairman and Chief Executive Alexander M. Cutler said sales rose
9% sequentially, reflecting the company's global expansion. Eaton
expects solid growth continuing in the second half of the year
despite Europe's debt woes and moderating economic growth in
China.
Manufacturing has strengthened in recent quarters by the
rebuilding of inventories that were cut sharply during the
recession. But the momentum began to weaken last month, adding to
worries about the economic recovery's strength. Consumers in recent
months also became more cautious about big ticket purchases, adding
further to the uncertainty.
Eaton reported a profit of $226 million, or $1.33 a share, up
from $29 million, or 17 cents, a year earlier. Excluding
acquisition and other charges, earnings rose to $1.36 from 23
cents. The company in April projected $1.10 to $1.20.
Revenue climbed 16% to $3.38 billion. Analysts recently expected
$3.23 billion.
Gross margin rose to 29.3% from 24.5% amid the sales gains.
Eaton's automotive-segment returned to the black as sales rose
44% after dropping 51% in the prior-year period. The company
expects U.S. production will decline slightly in the second half as
inventory levels have returned to near-normal levels.
The truck segment also swung to a profit as sales climbed 53%
after plunging 49% a year earlier. Production jumped 18%, including
a 32% rise in the U.S. The company expects production to rise 23%
for the year.
Shares closed Tuesday at $69.06 and were inactive premarket. The
stock is up 41% in the past year.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com;