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Eaton Corp PLC ETN

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Morningstar’s Analysis

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Eaton’s Strong Showing Prompts Us to Raise our Valuation, but We Think the Stock Is Rich

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

After reviewing narrow-moat-rated Eaton’s second-quarter earnings, we raise our fair value estimate to $132 from $125 previously. The raise is relatively in line with the stock’s price action on the trading day when excluding the catch-up effect of time value of money in our model update. While we were correct in modeling greater than the top end of the EPS guide for the second quarter, we nonetheless still fell short in our assessment and therefore raised our assumptions. The primary source of the variance from our prior projections was greater than expected reported revenue growth, mostly on the inorganic front, though better than expected operating margins were also a contributor.

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Company Profile

Business Description

Eaton is a diversified power management company operating for over 100 years. The company operates through various segments, including electrical products, electrical systems and services, aerospace, vehicle, and most recently, e-mobility. Eaton’s portfolio can broadly be divided into two halves. One part of its portfolio is housed under its industrial sector umbrella, which serves a large variety of end markets like commercial vehicles, general aviation, and trucks, among others. The other portion is Eaton’s electrical sector portfolio, which serves data centers, utilities, and the residential end market, among others. While the company receives favorable tax treatment as a domiciliary of Ireland, most of its operations take place in the U.S.

30 Pembroke Road, Eaton House
Dublin 4, D04 Y0C2, Ireland
T +353 16372900
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type
Employees 85,000