Eaton Reports Record Fourth Quarter 2021 Results, Guidance on 2022 Outlook
Eaton Corporation reported a solid fourth quarter for 2021, with earnings per share of $1.37, and record adjusted earnings per share at $1.72, reflecting a 19% increase over Q4 2020. Total sales reached $4.8 billion, marking a 2% rise, propelled by 6% organic growth. Segment margins peaked at 19.3%, a 190-basis point improvement year-over-year. For the full year, adjusted earnings per share hit $6.62, up 35% from 2020. For 2022, Eaton anticipates adjusted EPS between $7.30 and $7.70, indicating continued growth.
- Fourth quarter adjusted EPS record at $1.72, up 19% from Q4 2020.
- Sales for 2021 totaled $19.6 billion, a 10% increase from 2020.
- Segment margins reached a record 19.3% in Q4, improving 190 basis points from 2020.
- For 2022, expected adjusted EPS of $7.30 to $7.70, signaling future growth.
- Fourth quarter sales were affected by a 10% decline from the divestiture of the Hydraulics business.
- Operating profits for the Electrical Americas segment increased only 3%, impacted by higher logistics costs.
-
Fourth Quarter Earnings Per Share of
and Record Fourth Quarter Adjusted Earnings Per Share of$1.37 , Up$1.72 19% Over 2020
-
Record Fourth Quarter Segment Margins of
19.3% , 190 Basis Points Above the Fourth Quarter of 2020
-
For Full Year 2021, Earnings Per Share of
and Record Adjusted Earnings Per Share of$5.34 , Up$6.62 35% over 2020
-
Adjusted Earnings Per Share for 2022 Expected to Be Between
and$7.30 $7.70
Sales in the fourth quarter of 2021 were
Fourth quarter segment margins were
Operating cash flow in the fourth quarter of 2021 was
On full year results, Arnold continued, “Amid uncertainties, we’re very pleased with our record performance in 2021 including robust organic growth, record segment margins, transformative portfolio management and outstanding growth in earnings per share.”
For full year 2021, sales were
Segment margins of
Earnings per share for 2021 were
Operating cash flow for 2021 was
For full year 2022, the company expects organic growth of 7
Business Segment Results
Sales for the Electrical Americas segment were
While quarterly sales were constrained by supply availability, order activity remained robust with the twelve-month rolling average of orders in the fourth quarter up
Sales for the Electrical Global segment were
The twelve-month rolling average of orders in the fourth quarter was up
Aerospace segment sales were
The twelve-month rolling average of orders in the fourth quarter was up
The Vehicle segment posted sales of
eMobility segment sales were
Eaton is an intelligent power management company dedicated to improving the quality of life and protecting the environment for people everywhere. We are guided by our commitment to do business right, to operate sustainably and to help our customers manage power ─ today and well into the future. By capitalizing on the global growth trends of electrification and digitalization, we’re accelerating the planet’s transition to renewable energy, helping to solve the world’s most urgent power management challenges, and doing what’s best for our stakeholders and all of society.
Founded in 1911, Eaton has been listed on the NYSE for nearly a century. We reported revenues of
Notice of conference call: Eaton’s conference call to discuss its fourth quarter results is available to all interested parties as a live audio webcast today at
This news release contains forward-looking statements concerning first quarter and full year 2022 adjusted earnings per share and organic sales growth, and 2022 anticipated restructuring charges. 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: the course of the COVID-19 pandemic globally and government actions related thereto; 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; supply chain disruptions, unanticipated changes in the cost of material, labor, 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; strikes or other labor unrest; natural disasters; the performance of recent acquisitions; unanticipated difficulties completing or integrating acquisitions; new laws and governmental regulations; interest rate changes; changes in tax laws or tax regulations; stock market and currency fluctuations; and unanticipated deterioration of economic and financial conditions in
Financial Results
The company’s comparative financial results for the twelve months ended
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CONSOLIDATED STATEMENTS OF INCOME |
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Three months ended
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Year ended
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(In millions except for per share data) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||||
Net sales |
$ |
4,798 |
|
$ |
4,687 |
|
|
$ |
19,628 |
|
|
$ |
17,858 |
|
|
|
|
|
|
|
|
|
|||||||
Cost of products sold |
|
3,226 |
|
|
3,178 |
|
|
|
13,293 |
|
|
|
12,408 |
|
Selling and administrative expense |
|
751 |
|
|
765 |
|
|
|
3,256 |
|
|
|
3,075 |
|
Research and development expense |
|
162 |
|
|
140 |
|
|
|
616 |
|
|
|
551 |
|
Interest expense - net |
|
32 |
|
|
36 |
|
|
|
144 |
|
|
|
149 |
|
Gain on sale of businesses |
|
— |
|
|
— |
|
|
|
617 |
|
|
|
221 |
|
Other expense - net |
|
2 |
|
|
15 |
|
|
|
40 |
|
|
|
150 |
|
Income before income taxes |
|
625 |
|
|
553 |
|
|
|
2,896 |
|
|
|
1,746 |
|
Income tax expense |
|
74 |
|
|
77 |
|
|
|
750 |
|
|
|
331 |
|
Net income |
|
551 |
|
|
476 |
|
|
|
2,146 |
|
|
|
1,415 |
|
Less net income for noncontrolling interests |
|
— |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
Net income attributable to Eaton ordinary shareholders |
$ |
551 |
|
$ |
475 |
|
|
$ |
2,144 |
|
|
$ |
1,410 |
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|
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Net income per share attributable to Eaton ordinary shareholders |
|
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|
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|
|
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|||||||
Diluted |
$ |
1.37 |
|
$ |
1.18 |
|
|
$ |
5.34 |
|
|
$ |
3.49 |
|
Basic |
|
1.38 |
|
|
1.19 |
|
|
|
5.38 |
|
|
|
3.51 |
|
|
|
|
|
|
|
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|||||||
Weighted-average number of ordinary shares outstanding |
|
|
|
|
|
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|||||||
Diluted |
|
402.1 |
|
|
401.3 |
|
|
|
401.6 |
|
|
|
404.0 |
|
Basic |
|
398.9 |
|
|
398.7 |
|
|
|
398.7 |
|
|
|
402.2 |
|
|
|
|
|
|
|
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|||||||
Reconciliation of net income attributable to Eaton ordinary shareholders to adjusted earnings |
|
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Net income attributable to Eaton ordinary shareholders |
$ |
551 |
|
$ |
475 |
|
|
$ |
2,144 |
|
|
$ |
1,410 |
|
Excluding acquisition and divestiture charges, after-tax |
|
37 |
|
|
23 |
|
|
|
94 |
|
|
|
133 |
|
Excluding restructuring program charges, after-tax |
|
12 |
|
|
14 |
|
|
|
60 |
|
|
|
170 |
|
Excluding intangible asset amortization expense, after-tax |
|
91 |
|
|
69 |
|
|
|
361 |
|
|
|
272 |
|
Adjusted earnings |
$ |
691 |
|
$ |
581 |
|
|
$ |
2,659 |
|
|
$ |
1,985 |
|
|
|
|
|
|
|
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Net income per share attributable to Eaton ordinary shareholders - diluted |
$ |
1.37 |
|
$ |
1.18 |
|
|
$ |
5.34 |
|
|
$ |
3.49 |
|
Excluding per share impact of acquisition and divestiture charges, after-tax |
|
0.09 |
|
|
0.06 |
|
|
|
0.23 |
|
|
|
0.33 |
|
Excluding per share impact of restructuring program charges, after-tax |
|
0.03 |
|
|
0.04 |
|
|
|
0.15 |
|
|
|
0.42 |
|
Excluding per share impact of intangible asset amortization expense, after-tax |
|
0.23 |
|
|
0.17 |
|
|
|
0.90 |
|
|
|
0.67 |
|
Adjusted earnings per ordinary share |
$ |
1.72 |
|
$ |
1.45 |
|
|
$ |
6.62 |
|
|
$ |
4.91 |
|
See accompanying notes. |
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BUSINESS SEGMENT INFORMATION |
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Three months ended
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Year ended
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(In millions) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||||||
Net sales |
|
|
|
|
|
|
|
|||||||||
Electrical |
$ |
1,917 |
|
|
$ |
1,703 |
|
|
$ |
7,242 |
|
|
$ |
6,680 |
|
|
Electrical Global |
|
1,424 |
|
|
|
1,252 |
|
|
|
5,516 |
|
|
|
4,703 |
|
|
Hydraulics |
|
— |
|
|
|
485 |
|
|
|
1,300 |
|
|
|
1,842 |
|
|
Aerospace |
|
759 |
|
|
|
542 |
|
|
|
2,648 |
|
|
|
2,223 |
|
|
Vehicle |
|
610 |
|
|
|
620 |
|
|
|
2,579 |
|
|
|
2,118 |
|
|
eMobility |
|
88 |
|
|
|
85 |
|
|
|
343 |
|
|
|
292 |
|
|
Total net sales |
$ |
4,798 |
|
|
$ |
4,687 |
|
|
$ |
19,628 |
|
|
$ |
17,858 |
|
|
|
|
|
|
|
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|
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Segment operating profit (loss) |
|
|
|
|
|
|
|
|||||||||
Electrical |
$ |
368 |
|
|
$ |
359 |
|
|
$ |
1,495 |
|
|
$ |
1,352 |
|
|
Electrical Global |
|
277 |
|
|
|
208 |
|
|
|
1,034 |
|
|
|
750 |
|
|
Hydraulics |
|
— |
|
|
|
51 |
|
|
|
177 |
|
|
|
186 |
|
|
Aerospace |
|
189 |
|
|
|
99 |
|
|
|
580 |
|
|
|
414 |
|
|
Vehicle |
|
100 |
|
|
|
103 |
|
|
|
449 |
|
|
|
243 |
|
|
eMobility |
|
(8 |
) |
|
|
(5 |
) |
|
|
(29 |
) |
|
|
(8 |
) |
|
Total segment operating profit |
|
926 |
|
|
|
815 |
|
|
|
3,706 |
|
|
|
2,937 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Corporate |
|
|
|
|
|
|
|
|||||||||
Intangible asset amortization expense |
|
(118 |
) |
|
|
(89 |
) |
|
|
(444 |
) |
|
|
(354 |
) |
|
Interest expense - net |
|
(32 |
) |
|
|
(36 |
) |
|
|
(144 |
) |
|
|
(149 |
) |
|
Pension and other postretirement benefits income (expense) |
|
21 |
|
|
|
(11 |
) |
|
|
65 |
|
|
|
(40 |
) |
|
Restructuring program charges |
|
(15 |
) |
|
|
(17 |
) |
|
|
(78 |
) |
|
|
(214 |
) |
|
Other expense - net |
|
(157 |
) |
|
|
(109 |
) |
|
|
(209 |
) |
|
|
(434 |
) |
|
Income before income taxes |
|
625 |
|
|
|
553 |
|
|
|
2,896 |
|
|
|
1,746 |
|
|
Income tax expense |
|
74 |
|
|
|
77 |
|
|
|
750 |
|
|
|
331 |
|
|
Net income |
|
551 |
|
|
|
476 |
|
|
|
2,146 |
|
|
|
1,415 |
|
|
Less net income for noncontrolling interests |
|
— |
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
|
Net income attributable to Eaton ordinary shareholders |
$ |
551 |
|
|
$ |
475 |
|
|
$ |
2,144 |
|
|
$ |
1,410 |
|
See accompanying notes. |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
|
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(In millions) |
|
||||
Assets |
|
|
|
||
Current assets |
|
|
|
||
Cash |
$ |
297 |
|
$ |
438 |
Short-term investments |
|
271 |
|
|
664 |
Accounts receivable - net |
|
3,297 |
|
|
2,904 |
Inventory |
|
2,969 |
|
|
2,109 |
Assets held for sale |
|
— |
|
|
2,487 |
Prepaid expenses and other current assets |
|
677 |
|
|
576 |
Total current assets |
|
7,511 |
|
|
9,178 |
|
|
|
|
||
Property, plant and equipment - net |
|
3,064 |
|
|
2,964 |
|
|
|
|
||
Other noncurrent assets |
|
|
|
||
|
|
14,751 |
|
|
12,903 |
Other intangible assets |
|
5,855 |
|
|
4,175 |
Operating lease assets |
|
442 |
|
|
428 |
Deferred income taxes |
|
392 |
|
|
426 |
Other assets |
|
2,012 |
|
|
1,750 |
Total assets |
$ |
34,027 |
|
$ |
31,824 |
|
|
|
|
||
Liabilities and shareholders’ equity |
|
|
|
||
Current liabilities |
|
|
|
||
Short-term debt |
$ |
13 |
|
$ |
1 |
Current portion of long-term debt |
|
1,735 |
|
|
1,047 |
Accounts payable |
|
2,797 |
|
|
1,987 |
Accrued compensation |
|
501 |
|
|
351 |
Liabilities held for sale |
|
— |
|
|
468 |
Other current liabilities |
|
2,166 |
|
|
2,027 |
Total current liabilities |
|
7,212 |
|
|
5,881 |
|
|
|
|
||
Noncurrent liabilities |
|
|
|
||
Long-term debt |
|
6,831 |
|
|
7,010 |
Pension liabilities |
|
872 |
|
|
1,588 |
Other postretirement benefits liabilities |
|
263 |
|
|
330 |
Operating lease liabilities |
|
337 |
|
|
326 |
Deferred income taxes |
|
559 |
|
|
277 |
Other noncurrent liabilities |
|
1,502 |
|
|
1,439 |
Total noncurrent liabilities |
|
10,364 |
|
|
10,970 |
|
|
|
|
||
Shareholders’ equity |
|
|
|
||
Eaton shareholders’ equity |
|
16,413 |
|
|
14,930 |
Noncontrolling interests |
|
38 |
|
|
43 |
Total equity |
|
16,451 |
|
|
14,973 |
Total liabilities and equity |
$ |
34,027 |
|
$ |
31,824 |
See accompanying notes. |
NOTES TO THE FOURTH QUARTER 2021 EARNINGS RELEASE
Amounts are in millions of dollars unless indicated otherwise (per share data assume dilution).
Note 1. NON-GAAP FINANCIAL INFORMATION
This earnings release includes certain non-GAAP financial measures. These financial measures include adjusted earnings, adjusted earnings per ordinary share, adjusted operating cash flow, and adjusted free cash flow, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of each of these financial measures to the most directly comparable GAAP measure is included in this earnings release. During the first quarter of 2021, the Company revised its definition of adjusted earnings to exclude intangible asset amortization expense and prior periods have been retrospectively adjusted to apply this change. Management believes that these financial measures are useful to investors because they exclude certain transactions, allowing investors to more easily compare
The Company's first quarter and full year adjusted earnings guidance for 2022, follows:
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Three months
|
|
Year ended
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|
2022 |
|
2022 |
|
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Guidance |
|
Guidance |
Net income per share attributable to Eaton ordinary shareholders - diluted |
|
|
|
|
Excluding per share impact of acquisition and divestiture charges (after-tax) |
|
0.06 |
|
0.25 |
Excluding per share impact of restructuring program charges (after-tax) |
|
0.01 |
|
0.05 |
Excluding per share impact of intangible amortization expense (after-tax) |
|
0.24 |
|
0.95 |
Adjusted earnings per ordinary share |
|
|
|
|
A reconciliation of operating cash flow to adjusted operating cash flow and adjusted free cash flow follows:
(In millions) |
Three months ended
|
|
Year ended
|
|||||
Operating cash flow |
$ |
795 |
|
|
$ |
2,163 |
|
|
Taxes paid on the Hydraulics sale |
|
61 |
|
|
|
340 |
|
|
|
|
— |
|
|
|
200 |
|
|
Adjusted operating cash flow |
|
856 |
|
|
|
2,703 |
|
|
Capital expenditures for property, plant and equipment |
|
(163 |
) |
|
|
(575 |
) |
|
Adjusted free cash flow |
$ |
693 |
|
|
$ |
2,128 |
|
Note 2. ACQUISITIONS AND DIVESTITURES OF BUSINESSES
Acquisition of Royal Power Solutions
On
Sale of Hydraulics business
On
Acquisition of a
On
Acquisition of
On
Acquisition of a
On
Acquisition of
On
Acquisition of Tripp Lite
On
Sale of Lighting business
On
Acquisition of
On
Note 3. ACQUISITION AND DIVESTITURE CHARGES
Eaton incurs integration charges and transaction costs to acquire and integrate businesses, and transaction, separation and other costs to divest and exit businesses. Eaton also recognizes gains and losses on the sale of businesses. A summary of these Corporate items follows:
|
Three months ended |
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Year ended |
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(In millions except for per share data) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||||
Acquisition integration, divestiture charges and transaction costs |
$ |
37 |
|
$ |
25 |
|
|
$ |
349 |
|
|
$ |
288 |
|
Gain on the sale of the Hydraulics and Lighting businesses |
|
— |
|
|
— |
|
|
|
(617 |
) |
|
|
(221 |
) |
Total charges (income) before income taxes |
|
37 |
|
|
25 |
|
|
|
(268 |
) |
|
|
67 |
|
Income tax expense (benefit) |
|
— |
|
|
(2 |
) |
|
|
362 |
|
|
|
66 |
|
Total after income taxes |
$ |
37 |
|
$ |
23 |
|
|
$ |
94 |
|
|
$ |
133 |
|
Per ordinary share - diluted |
$ |
0.09 |
|
$ |
0.06 |
|
|
$ |
0.23 |
|
|
$ |
0.33 |
|
Acquisition integration, divestiture charges and transaction costs in 2021 are primarily related to the divestiture of the Hydraulics business, the acquisitions of Tripp Lite,
Note 4. RESTRUCTURING CHARGES
In the second quarter of 2020, Eaton decided to undertake a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to respond to declining market conditions. Restructuring charges incurred under this program were
A summary of restructuring program charges follows:
|
Three months ended
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|
Year ended December
|
|||||||||
(In millions except for per share data) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||
Workforce reductions |
$ |
2 |
|
$ |
3 |
|
$ |
21 |
|
$ |
172 |
|
Plant closing and other |
|
13 |
|
|
14 |
|
|
57 |
|
|
42 |
|
Total before income taxes |
|
15 |
|
|
17 |
|
|
78 |
|
|
214 |
|
Income tax benefit |
|
3 |
|
|
3 |
|
|
18 |
|
|
44 |
|
Total after income taxes |
$ |
12 |
|
$ |
14 |
|
$ |
60 |
|
$ |
170 |
|
Per ordinary share - diluted |
$ |
0.03 |
|
$ |
0.04 |
|
$ |
0.15 |
|
$ |
0.42 |
Restructuring program charges related to the following segments:
|
Three months ended
|
|
Year ended December
|
|||||||||
(In millions) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||
Electrical |
$ |
1 |
|
$ |
2 |
|
$ |
14 |
|
$ |
18 |
|
Electrical Global |
|
5 |
|
|
2 |
|
|
18 |
|
|
55 |
|
Aerospace |
|
4 |
|
|
2 |
|
|
8 |
|
|
34 |
|
Vehicle |
|
5 |
|
|
9 |
|
|
21 |
|
|
102 |
|
eMobility |
|
— |
|
|
— |
|
|
1 |
|
|
1 |
|
Corporate |
|
— |
|
|
2 |
|
|
16 |
|
|
4 |
|
Total |
$ |
15 |
|
$ |
17 |
|
$ |
78 |
|
$ |
214 |
These restructuring program charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other expense - net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items. The projected mature year savings from these restructuring actions are expected to be
Note 5. INTANGIBLE ASSET AMORTIZATION EXPENSE
Intangible asset amortization expense follows:
|
Three months ended
|
|
Year ended December
|
|||||||||
(In millions except for per share data) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||
Intangible asset amortization expense |
$ |
118 |
|
$ |
89 |
|
$ |
444 |
|
$ |
354 |
|
Income tax benefit |
|
27 |
|
|
20 |
|
|
83 |
|
|
82 |
|
Total after income taxes |
$ |
91 |
|
$ |
69 |
|
$ |
361 |
|
$ |
272 |
|
Per ordinary share - diluted |
$ |
0.23 |
|
$ |
0.17 |
|
$ |
0.90 |
|
$ |
0.67 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20220203005956/en/
JenniferTolhurst@eaton.com
or
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