UPDATE: Nomura Initiates Coverage on Eaton Corporation with Buy Rating, $87 PT Following Cooper Acquisition

In a report published Friday, Nomura analyst Shannon O'Callaghan initiated coverage on

with a Buy rating and $87.00 price target. In the report, Nomura noted, “We initiate coverage with a Buy rating and an $87 target price. Following its $13bn transformative acquisition of Cooper (December 2012), Eaton is a leading diversified power management company with both cyclical and operational earnings drivers. Over 60% of segment profit now comes from Eaton's leading electrical businesses, while the balance comes from quality (though more cyclical) Vehicle and Hydraulics businesses and a solid Aerospace business. The electrical businesses bring premier brands, attractive exposures (non-residential, residential, oil & gas, industrial, datacenter, utility markets), and significant synergies from the Cooper deal (adding 5% EPS/yr). The company's low tax rate (8-10% for 2015+) provides a valuation challenge, given lower visibility into that earnings stream, but our TAP/E (tax-adjusted P/E) valuation adjusts for this by valuing the tax differential at a lower multiple.” Eaton Corporation closed on Thursday at $72.97.