Eaton Reports Strong Q3 Backlog Growth Across Electrical, Aerospace Sectors, Raises FY23 Guidance

Eaton Corporation PLC ETN reported a third-quarter FY23 net sales gain of 10.7% year-over-year to $5.88 billion, +9 on an organic basis, missing the consensus of $5.89 billion.

Adjusted EPS improved 22% Y/Y to $2.47, beating the consensus of $2.34.

Sales by segments: Electrical Americas $2.6 billion (+19% Y/Y), Electrical Global $1.5 billion (+1% Y/Y), Aerospace $867 million (+13% Y/Y), Vehicle $753 million (+1% Y/Y) and eMobility $163 million (+19% Y/Y).

ETN reported strong growth in the Electrical sector backlog, up 15% with a book-to-bill ratio of 1.1, and the Aerospace backlog, up 22% with book-to-bill ratio of 1.2.

Total segment operating profit increased by 23.3% Y/Y to $1.39 billion, and the margin expanded by 242 bps to 23.6%.

Eaton's operating cash flow in the quarter was $1.1 billion, up 18% Y/Y, and free cash flow was $913 million (+10% Y/Y).

Total backlog was up 18% YoY and +4% sequentially.

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"To meet that demand, we are investing more than $1 billion of capital in manufacturing to support the growth driven by electrification, energy transition, and digitalization," said Craig Arnold, Eaton chairman and chief executive officer.

"Given our strong performance and these capacity additions, we continue to look ahead with confidence in our ability to deliver on our growth and margin expansion outlook into 2024 and beyond."

FY23 Guidance, raised: Eaton expected Adjusted EPS of $8.95-$9.05 (prior $8.65-$8.85) versus $8.8 consensus and sees organic revenue growth of 11 –12%.

ETN expects segment operating margins of 21.6% –22.0% (prior 21.1% –21.5%) and Operating cash flow of $3.3 billion-$3.7 billion (prior $3.2 billion-$3.6 billion), with FCF of $2.7 billion-$3.1 billion (prior $2.6 billion-$3 billion).

Q423 Outlook: The company expected Adjusted EPS of $2.39-$2.49 versus $2.37 consensus and organic revenue growth of 8 –10%. Sees segment operating margins of 22.3%-22.7%.

Price Action: ETN shares were trading higher by 4.16% at $206.13 on the last check Tuesday.

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