UPDATE: Eaton 2Q Profit Soars On Stronger Demand
July 21 2010 - 10:51AM
Dow Jones News
Eaton Corp.'s (ETN) second-quarter earnings soared as increased
demand for the company's truck, auto and hydraulic components
provided a tailwind for sales and profit growth. The diversified
manufacturer beat expectations for the quarter and raised its
outlook for 2010.
The Cleveland company also raised its quarterly stock dividend
by 16% to 58 cents a share.
"Our markets were considerably stronger than we thought they
would be," said Chairman and Chief Executive Alexander Cutler
during a conference call with Wall Street analysts on Wednesday.
"As we survey our end markets, the year is shaping up better than
we forecast in April."
Eaton's strong second-quarter results and Cutler's confidence
about the company's prospects for the rest of the year counter the
recent sentiments that the manufacturing sector is weakening as
consumers and businesses grow more cautious about purchases.
Eaton's stock was recently trading up 4.4% at $72.10 a
share.
Eaton's truck segment was among the business lines showing
better-than-expected performance in the quarter. Eaton makes
transmission, clutches and hybrid power systems for heavy-duty
commercial trucks. Second-quarter truck segment sales rose 53% from
a year ago with the U.S. market alone up 32%. Operating profit from
the truck segment totaled $59 million, following a $3 million loss
a year ago.
Eaton's automotive segment, one of the company's weakest
businesses last year, reported a 44% increase in second-quarter
sales. U.S. auto industry sales surged 73% from a year ago as
production volumes of passenger vehicles continued to expand off
depressed levels a year ago. Eaton supplies auto makers with gears,
superchargers engine valves and other power train components.
Operating income from the segment swung to $39 million profit after
a $19-million loss a year ago.
Sales of hydraulic components increased 34% on improving demand
from construction machinery manufacturers. Operating profit from
the segment increased to $77 million, compared with $14 million a
year ago.
Eaton projected third-quarter earning of $1.30 to $1.40 a share,
well ahead of Wall Street analysts' estimate of $1.17 a share. The
company also raised its 2010 earnings forecast to $4.90 to $5.10
from $4.30 to $4.60.
For the second quarter, 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 during quarter climbed 16% to $3.38 billion. Analysts
polled by Thomson Reuters projected earnings of $1.17 a share on
revenue of $3.23 billion.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
(Tess Stynes constributed to this report)
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