Eaton Reports Record Quarterly Results With 23% Backlog Growth and 1.2 Book-to-Bill Ratio
- Eaton Corporation reports record second quarter earnings per share of $1.86 and adjusted earnings per share of $2.21, up 18% over 2022. Sales in the quarter were $5.9 billion, a quarterly record and up 13% from the second quarter of 2022. The company raised its full-year adjusted earnings per share guidance to between $8.65 and $8.85.
- None.
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Record second quarter earnings per share of
and record quarterly adjusted earnings per share of$1.86 , up$2.21 18% over 2022
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13% organic sales growth, above the high end of guidance, record quarterly segment margins of21.6% , 150 basis points above the second quarter of 2022 and a33% incremental margin
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Robust operating cash flow of
, up$851 million 150% , and free cash flow of , up$691 million 244% versus prior year
-
Raised adjusted earnings per share guidance midpoint to
reflecting$8.75 16% growth over 2022
Sales in the quarter were
Segment margins were
Operating cash flow in the quarter was
The company raised its full year adjusted earnings per share guidance to between
Craig Arnold, Eaton chairman and chief executive officer, said, "Achieving quarterly record adjusted earnings marked the end of a very strong first half of the year. Demand across our markets continues to be strong, propelling backlogs to record levels. We’re confident we can achieve our increased guidance for the year and that we remain well positioned to capitalize on reindustrialization in
Business Segment Results
Sales for the Electrical Americas segment were a record
The twelve-month rolling average of orders in the second quarter was up
Sales for the Electrical Global segment were a record
The twelve-month rolling average of orders in the second quarter was up
On a rolling twelve-month basis, book-to-bill ratio for the Electrical businesses remains very strong at 1.2.
Aerospace segment sales were a record
The twelve-month rolling average of orders in the second quarter was up
The Vehicle segment posted sales of
eMobility segment sales were a record
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 is marking its 100th anniversary of being listed on the New York Stock Exchange. We reported revenues of
Notice of conference call: Eaton’s conference call to discuss its second quarter results is available to all interested parties today as a live audio webcast at 11 a.m. United States Eastern time via a link on Eaton’s home page. This news release can be accessed under its headline on the home page. Also available on the website before the call will be a presentation on second quarter results, which will be covered during the call.
This news release contains forward-looking statements concerning third quarter and full year 2023 adjusted earnings per share, third quarter 2023 organic sales growth, and anticipated restructuring program charges and savings. 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; geopolitical tensions, 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 three months ended June 30, 2023, are available on the company’s website, www.eaton.com.
EATON CORPORATION plc |
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CONSOLIDATED STATEMENTS OF INCOME |
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Three months ended June 30 |
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Six months ended June 30 |
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(In millions except for per share data) |
2023 |
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2022 |
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2023 |
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2022 |
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Net sales |
$ |
5,866 |
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$ |
5,212 |
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$ |
11,349 |
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$ |
10,054 |
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Cost of products sold |
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3,747 |
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3,505 |
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7,346 |
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6,774 |
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Selling and administrative expense |
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986 |
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828 |
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|
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1,890 |
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1,618 |
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Research and development expense |
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187 |
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|
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168 |
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|
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366 |
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333 |
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Interest expense - net |
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42 |
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31 |
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|
91 |
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63 |
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Gain on sale of business |
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— |
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— |
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|
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— |
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24 |
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Other expense (income) - net |
|
7 |
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(41 |
) |
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(4 |
) |
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(50 |
) |
Income before income taxes |
|
898 |
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|
|
720 |
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|
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1,660 |
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|
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1,339 |
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Income tax expense |
|
153 |
|
|
|
119 |
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|
|
276 |
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|
|
205 |
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Net income |
|
745 |
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|
|
601 |
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|
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1,384 |
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|
1,135 |
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Less net income for noncontrolling interests |
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(1 |
) |
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|
— |
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(3 |
) |
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(1 |
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Net income attributable to Eaton ordinary shareholders |
$ |
744 |
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$ |
601 |
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$ |
1,382 |
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$ |
1,133 |
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Net income per share attributable to Eaton ordinary shareholders |
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Diluted |
$ |
1.86 |
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$ |
1.50 |
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$ |
3.45 |
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$ |
2.82 |
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Basic |
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1.86 |
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1.51 |
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3.47 |
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2.84 |
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Weighted-average number of ordinary shares outstanding |
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Diluted |
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400.7 |
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400.7 |
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400.6 |
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401.2 |
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Basic |
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398.9 |
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399.0 |
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398.7 |
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399.1 |
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Cash dividends declared per ordinary share |
$ |
0.86 |
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$ |
0.81 |
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$ |
1.72 |
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$ |
1.62 |
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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 |
$ |
744 |
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|
$ |
601 |
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$ |
1,382 |
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$ |
1,133 |
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Excluding acquisition and divestiture charges, after-tax |
|
30 |
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|
|
44 |
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|
|
41 |
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|
|
47 |
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Excluding restructuring program charges, after-tax |
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24 |
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|
|
8 |
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31 |
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|
22 |
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Excluding intangible asset amortization expense, after-tax |
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88 |
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99 |
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186 |
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198 |
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Adjusted earnings |
$ |
886 |
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$ |
751 |
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$ |
1,639 |
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$ |
1,400 |
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Net income per share attributable to Eaton ordinary shareholders - diluted |
$ |
1.86 |
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$ |
1.50 |
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$ |
3.45 |
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$ |
2.82 |
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Excluding per share impact of acquisition and divestiture charges, after-tax |
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0.08 |
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0.11 |
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0.10 |
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0.12 |
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Excluding per share impact of restructuring program charges, after-tax |
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0.06 |
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0.02 |
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0.08 |
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0.05 |
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Excluding per share impact of intangible asset amortization expense, after-tax |
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0.21 |
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0.24 |
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0.46 |
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0.50 |
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Adjusted earnings per ordinary share |
$ |
2.21 |
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$ |
1.87 |
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$ |
4.09 |
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$ |
3.49 |
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See accompanying notes. |
EATON CORPORATION plc |
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BUSINESS SEGMENT INFORMATION |
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Three months ended June 30 |
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Six months ended June 30 |
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(In millions) |
2023 |
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2022 |
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2023 |
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2022 |
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Net sales |
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Electrical |
$ |
2,538 |
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$ |
2,131 |
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$ |
4,832 |
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$ |
4,022 |
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Electrical Global |
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1,569 |
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1,495 |
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3,069 |
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2,932 |
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Aerospace |
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848 |
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742 |
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1,650 |
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1,459 |
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Vehicle |
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751 |
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|
708 |
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1,490 |
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1,379 |
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eMobility |
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161 |
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136 |
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308 |
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|
262 |
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Total net sales |
$ |
5,866 |
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$ |
5,212 |
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$ |
11,349 |
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$ |
10,054 |
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Segment operating profit (loss) |
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Electrical |
$ |
669 |
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$ |
495 |
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$ |
1,194 |
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$ |
857 |
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Electrical Global |
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290 |
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282 |
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|
564 |
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|
561 |
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Aerospace |
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191 |
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163 |
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371 |
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321 |
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Vehicle |
|
115 |
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|
108 |
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|
222 |
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|
221 |
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eMobility |
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(1 |
) |
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(2 |
) |
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(5 |
) |
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(5 |
) |
Total segment operating profit |
|
1,264 |
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|
1,046 |
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2,346 |
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|
1,955 |
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Corporate |
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Intangible asset amortization expense |
|
(113 |
) |
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|
(122 |
) |
|
|
(237 |
) |
|
|
(250 |
) |
Interest expense - net |
|
(42 |
) |
|
|
(31 |
) |
|
|
(91 |
) |
|
|
(63 |
) |
Pension and other postretirement benefits income |
|
11 |
|
|
|
9 |
|
|
|
22 |
|
|
|
28 |
|
Restructuring program charges |
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(29 |
) |
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|
(10 |
) |
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|
(39 |
) |
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|
(28 |
) |
Other expense - net |
|
(192 |
) |
|
|
(171 |
) |
|
|
(340 |
) |
|
|
(302 |
) |
Income before income taxes |
|
898 |
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|
|
720 |
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|
|
1,660 |
|
|
|
1,339 |
|
Income tax expense |
|
153 |
|
|
|
119 |
|
|
|
276 |
|
|
|
205 |
|
Net income |
|
745 |
|
|
|
601 |
|
|
|
1,384 |
|
|
|
1,135 |
|
Less net income for noncontrolling interests |
|
(1 |
) |
|
|
— |
|
|
|
(3 |
) |
|
|
(1 |
) |
Net income attributable to Eaton ordinary shareholders |
$ |
744 |
|
|
$ |
601 |
|
|
$ |
1,382 |
|
|
$ |
1,133 |
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See accompanying notes. |
EATON CORPORATION plc |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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June 30, |
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December 31, |
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(In millions) |
2023 |
2022 |
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Assets |
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Current assets |
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Cash |
$ |
353 |
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$ |
294 |
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Short-term investments |
|
977 |
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|
261 |
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Accounts receivable - net |
|
4,399 |
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|
4,076 |
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Inventory |
|
3,670 |
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|
3,430 |
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Prepaid expenses and other current assets |
|
904 |
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|
685 |
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Total current assets |
|
10,303 |
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|
8,746 |
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Property, plant and equipment - net |
|
3,267 |
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|
3,146 |
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Other noncurrent assets |
|
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Goodwill |
|
14,914 |
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|
14,796 |
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Other intangible assets |
|
5,285 |
|
|
5,485 |
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Operating lease assets |
|
594 |
|
|
570 |
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Deferred income taxes |
|
354 |
|
|
330 |
||
Other assets |
|
2,056 |
|
|
1,940 |
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Total assets |
$ |
36,772 |
|
$ |
35,014 |
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Liabilities and shareholders’ equity |
|
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Current liabilities |
|
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|
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Short-term debt |
$ |
94 |
|
$ |
324 |
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Current portion of long-term debt |
|
402 |
|
|
10 |
||
Accounts payable |
|
3,192 |
|
|
3,072 |
||
Accrued compensation |
|
465 |
|
|
467 |
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Other current liabilities |
|
2,571 |
|
|
2,488 |
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Total current liabilities |
|
6,725 |
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|
6,360 |
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Noncurrent liabilities |
|
|
|
||||
Long-term debt |
|
8,804 |
|
|
8,321 |
||
Pension liabilities |
|
642 |
|
|
649 |
||
Other postretirement benefits liabilities |
|
173 |
|
|
177 |
||
Operating lease liabilities |
|
482 |
|
|
459 |
||
Deferred income taxes |
|
531 |
|
|
530 |
||
Other noncurrent liabilities |
|
1,428 |
|
|
1,444 |
||
Total noncurrent liabilities |
|
12,060 |
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|
11,580 |
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Shareholders’ equity |
|
|
|
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Eaton shareholders’ equity |
|
17,953 |
|
|
17,038 |
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Noncontrolling interests |
|
36 |
|
|
38 |
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Total equity |
|
17,988 |
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|
17,075 |
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Total liabilities and equity |
$ |
36,772 |
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$ |
35,014 |
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See accompanying notes. |
EATON CORPORATION plc
NOTES TO THE SECOND QUARTER 2023 EARNINGS RELEASE
Amounts are in millions of dollars unless indicated otherwise (per share data assume dilution). Columns and rows may not add and the sum of components may not equal total amounts reported due to rounding.
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, and 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. Management believes that these financial measures are useful to investors because they provide additional meaningful financial information that should be considered when assessing our business performance and trends, and they allow investors to more easily compare Eaton Corporation plc's (Eaton or the Company) financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton and each business segment.
The Company's third quarter and full year adjusted earnings guidance for 2023 is as follows:
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Three months ended September 30, 2023 |
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Year ended December 31, 2023 |
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Net income per share attributable to Eaton ordinary shareholders - diluted |
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Excluding per share impact of acquisition and divestiture charges, after tax |
0.05 |
|
0.20 |
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Excluding per share impact of restructuring program charges, after tax |
0.02 |
|
0.11 |
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Excluding per share impact of intangible asset amortization expense, after tax |
0.20 |
|
0.88 |
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Adjusted earnings per ordinary share |
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A reconciliation of net income attributable to Eaton ordinary shareholders per share to adjusted earnings per ordinary share is as follows:
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Year ended December 31, 2022 |
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Net income per share attributable to Eaton ordinary shareholders - diluted |
$ |
6.14 |
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Excluding per share impact of acquisition and divestiture charges, after tax |
|
0.37 |
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Excluding per share impact of restructuring program charges, after tax |
|
0.07 |
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Excluding per share impact of intangible asset amortization expense, after tax |
|
0.99 |
|
Adjusted earnings per ordinary share |
$ |
7.57 |
A reconciliation of operating cash flow to free cash flow is as follows:
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Three months ended June 30 |
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(In millions) |
2023 |
|
2022 |
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Operating cash flow |
$ |
851 |
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|
$ |
340 |
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Capital expenditures for property, plant and equipment |
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(160 |
) |
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|
(139 |
) |
Free cash flow |
$ |
691 |
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|
$ |
201 |
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Note 2. ACQUISITIONS AND DIVESTITURE OF BUSINESSES
Acquisition of a
On April 23, 2023, Eaton acquired a 49 percent stake in Jiangsu Ryan Electrical Co. Ltd., a manufacturer of power distribution and sub-transmission transformers in
Acquisition of a
On July 1, 2022, Eaton acquired a 50 percent stake in Jiangsu Huineng Electric Co., Ltd’s circuit breaker business, which manufactures and markets low-voltage circuit breakers in
During the second quarter of 2022, in light of the ongoing war with
Acquisition of Royal Power Solutions
On January 5, 2022, Eaton acquired Royal Power Solutions for
Sale of Hydraulics business
On August 2, 2021, Eaton completed the sale of the Hydraulics business to Danfoss A/S and recognized a pre-tax gain of
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 is as follows:
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Three months ended
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Six months ended
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(In millions except for per share data) |
2023 |
|
2022 |
|
2023 |
|
2022 |
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Acquisition integration, divestiture charges and transaction costs |
$ |
38 |
|
$ |
51 |
|
$ |
51 |
|
$ |
79 |
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Gain on the sale of the Hydraulics business |
|
— |
|
|
— |
|
|
— |
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|
(24 |
) |
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Total before income taxes |
|
38 |
|
|
51 |
|
|
51 |
|
|
55 |
|
|||
Income tax benefit |
|
7 |
|
|
7 |
|
|
10 |
|
|
8 |
|
|||
Total after income taxes |
$ |
30 |
|
$ |
44 |
|
$ |
41 |
|
$ |
47 |
|
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Per ordinary share - diluted |
$ |
0.08 |
|
$ |
0.11 |
|
$ |
0.10 |
|
$ |
0.12 |
|
Acquisition integration, divestiture charges and transaction costs in 2023 and 2022 are related to the acquisition of Royal Power Solutions and other acquisitions completed prior to 2022, including other charges and income to acquire and exit businesses. Costs in 2023 also included certain indemnity claims associated with the sale of
Note 4. RESTRUCTURING CHARGES
In the second quarter of 2020, Eaton initiated a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to initially respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company has incurred charges of
A summary of restructuring program charges is as follows:
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Three months ended June 30 |
|
Six months ended June 30 |
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(In millions except for per share data) |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Workforce reductions |
$ |
15 |
|
$ |
2 |
|
$ |
17 |
|
$ |
7 |
||||
Plant closing and other |
|
15 |
|
|
8 |
|
|
22 |
|
|
21 |
||||
Total before income taxes |
|
29 |
|
|
10 |
|
|
39 |
|
|
28 |
||||
Income tax benefit |
|
6 |
|
|
2 |
|
|
8 |
|
|
6 |
||||
Total after income taxes |
$ |
24 |
|
$ |
8 |
|
$ |
31 |
|
$ |
22 |
||||
Per ordinary share - diluted |
$ |
0.06 |
|
$ |
0.02 |
|
$ |
0.08 |
|
$ |
0.05 |
Restructuring program charges related to the following segments:
|
Three months ended June 30 |
|
Six months ended June 30 |
||||||||||||
(In millions) |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Electrical |
$ |
1 |
|
$ |
5 |
|
$ |
3 |
|
$ |
10 |
||||
Electrical Global |
|
14 |
|
|
1 |
|
|
18 |
|
|
6 |
||||
Aerospace |
|
2 |
|
|
2 |
|
|
3 |
|
|
5 |
||||
Vehicle |
|
1 |
|
|
3 |
|
|
3 |
|
|
6 |
||||
eMobility |
|
6 |
|
|
— |
|
|
7 |
|
|
— |
||||
Corporate |
|
5 |
|
|
— |
|
|
6 |
|
|
2 |
||||
Total |
$ |
29 |
|
$ |
10 |
|
$ |
39 |
|
$ |
28 |
These restructuring program charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other expense (income) - net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items.
Note 5. INTANGIBLE ASSET AMORTIZATION EXPENSE
Intangible asset amortization expense is as follows:
|
Three months ended June 30 |
|
Six months ended June 30 |
||||||||||||
(In millions except for per share data) |
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Intangible asset amortization expense |
$ |
113 |
|
$ |
122 |
|
$ |
237 |
|
$ |
250 |
||||
Income tax benefit |
|
24 |
|
|
23 |
|
|
51 |
|
|
52 |
||||
Total after income taxes |
$ |
88 |
|
$ |
99 |
|
$ |
186 |
|
$ |
198 |
||||
Per ordinary share - diluted |
$ |
0.21 |
|
$ |
0.24 |
|
$ |
0.46 |
|
$ |
0.50 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230731451773/en/
Eaton Corporation plc
Jennifer Tolhurst
Media Relations
+1 (440) 523-4006
jennifertolhurst@eaton.com
Yan Jin
Investor Relations
+1 (440) 523-7558
Source: Eaton Corporation plc
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