UPDATE: J.P. Morgan Reiterates Overweight Rating, Raises PT on Eaton Corp.
In a report published Friday, J.P. Morgan & Co. reiterated its Overweight rating on Eaton Corp. (NYSE: ETN), and raised its price target from $55.00 to $60.00.
J.P. Morgan noted, “We are updating our estimates and price target following Eaton's acquisition of Cooper Industries. While management originally guided to EPS dilution of $0.10 in 2013, we believe the cheap financing secured by the company and the 2012 close will likely result inslight accretion. The financing package consisted of $600MM of 0.95% notes due 2015, $1.0B of 1.70% notes due 2017, $1.6B of 2.75% notes due 2022, $700MM of 4.0% notes due 2032, and $1.0B of 4.15% notes due 2042. This represents a weighted average cost of debt of 2.74%, which is well below previous debt offerings by the company, which carried interest rates in the mid-to-high single digits. The capital raise was both smaller and cheaper than our expectations and what we believe to be Street expectations as well, and results in significantly lower interest expense than previously forecast. Additionally, the early close of the deal allows the company to pull forward integration costs into Q4. We reiterate our OW rating as we continue to believe the stock will be re-rated to a diversified multiple now that the deal is complete.”
Eaton Corp. closed on Thursday at $54.12.
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