Eaton's Turkish Deal to Ramp Portfolio - Analyst Blog
February 27 2012 - 11:35AM
Zacks
Industrial manufacturing giant Eaton
Corporation (ETN) announced its decision to acquire
Istanbul-based Polimer Kauçuk Sanayi ve Pazarlama A.S. The company
expects the deal to be closed during the second quarter of
2012.
This Turkish company, Polimer Kauçuk Sanayi ve Pazarlama A.S,
primarily engages in the manufacture of industrial and hydraulic
hoses. Apart from that, its other line of businesses includes
mining, manufacturing, construction, agriculture, food and
beverage, oil and gas, and chemicals. Several Polimer Kauçuk's
products are sold around the globe under the SEL Hose brand
name.
Eaton expects that this acquisition will be immediately
accretive to its 2012 earnings, and hence increased its 2012
guidance by 3 cents to a range of $4.13–$4.53 per share. The
company also increased its 2012 operating earnings guidance by 5
cents, in a range of $4.20–$4.60 per share, excluding acquisition
integration charges. The acquisition is likely to bolster Eaton’s
presence in the emerging markets and also expand its global
coverage, with respect to its hose product segment.
In view of Eaton’s last few deals, it is quite evident that the
company is intent on diversifying its portfolio and expand its line
of business by taking the inorganic route. In December last year,
Eaton completed the acquisition of E.A. Pedersen Company, a
manufacturer of medium voltage switchgear catering primarily to
electrical utilities. This transaction will strengthen Eaton’s
footprint in medium voltage assembly businesses, with the addition
of utility-based power products.
The company has made some significant deals in 2011. These
include the acquisition of high power inverter provider, IE Power,
Inc; Germany-based advanced liquid filtration solutions provider E.
Begerow GmbH & Co KG, and, ACTOM Low Voltage, a motor control
components, engineered electrical distribution systems and
uninterruptible power supply systems manufacturer and supplier
based in South Africa.
As of December 31, 2011 the company had a cash balance of $385
million. We believe that the company can comfortably utilize its
surplus cash balance for meeting the acquisition costs.
Cleveland, Ohio-based diversified power management company Eaton
Corporation itself provides an array of products to its customers.
These include powertrain, truck and automotive systems, electrical
components and systems, hydraulics and pneumatic systems for
commercial and military use. Eaton has approximately 73,000
employees and a strong customer base in more than 150
countries.
Eaton Corporation currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating. The company competes with
ITT Corporation (ITT) and Parker Hannifin
Corporation (PH).
EATON CORP (ETN): Free Stock Analysis Report
ITT CORP (ITT): Free Stock Analysis Report
PARKER HANNIFIN (PH): Free Stock Analysis Report
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