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Eaton Reports Fourth Quarter Earnings per Share of $1.46, Up 13 Percent Over the Fourth Quarter of 2017, Excluding 2017 Income Related to the U.S. Tax Bill

 

January 31, 2019

 

Fourth Quarter Organic Sales Growth of 7 Percent

Earnings Per Share for 2019 Expected to be Between $5.70 and $6.00, Reflecting

9 Percent Growth at Midpoint of Range Excluding the Impact of the 2018 Arbitration Decision

 

DUBLIN, Ireland … Power management company Eaton Corporation plc (NYSE:ETN) today announced that earnings per share were $1.46 for the fourth quarter of 2018. This represents an increase of 13 percent over the fourth quarter of 2017, excluding the $62 million of income in the fourth quarter of 2017 related to the U.S. tax bill.

Sales in the fourth quarter of 2018 were $5.5 billion, up 5 percent over the same period in 2017. The sales increase consisted of 7 percent growth in organic sales, partially offset by 2 percent negative currency translation.

Craig Arnold, Eaton chairman and chief executive officer, said, “We had a very strong fourth quarter, with better-than-expected organic revenue growth and margins. Organic growth came in at 7 percent, 1 percent higher than our guidance. Our segment margins in the fourth quarter were 17.4 percent, 20 basis points above the midpoint of our margin guidance and 100 basis points over the fourth quarter of 2017.

“Operating cash flow in the fourth quarter, excluding the $300 million payment for the arbitration decision related to the legacy Cooper business, was $1.1 billion,” said Arnold. “We took advantage of the significant pullback in financial markets in December and repurchased $700 million of our shares in the fourth quarter. This represents 2.3 percent of our shares outstanding at the start of the quarter. We intend to continue taking advantage of any periods of share price weakness to buy our shares back.”

For full year 2018, sales were $21.6 billion, 6 percent higher than 2017. Segment margins were 16.8 percent, up 100 basis points over 2017. Earnings per share were $4.91, and excluding the impact of the arbitration decision, earnings per share were $5.39. This represents an increase of 16 percent over 2017, excluding the 2017 gain on the Eaton Cummins joint venture and the 2017 income related to the U.S tax bill. Operating cash flow in 2018 was $3.0 billion, excluding the $300 million arbitration payment related to the legacy Cooper business. During 2018, share repurchases totaled 17.5 million shares, at a cost of $1.3 billion, representing 4.0 percent of shares outstanding at the beginning of the year.

“Looking at 2019, we expect our organic revenues to grow between 4 and 5 percent, partially offset by approximately 1 percent from negative currency translation,” said Arnold. “We anticipate segment margins to be between 17.0 percent and 17.4 percent, representing at the midpoint a 40 basis point improvement over 2018.

“We expect 2019 earnings per share to be between $5.70 and $6.00, representing at the midpoint a 9 percent increase over 2018 excluding the 2018 arbitration decision,” said Arnold. “We anticipate earnings per share for the first quarter of 2019 to be between $1.18 and $1.28, a 12 percent increase at the midpoint over the first quarter of 2018.”

Business Segment Results

Sales for the Electrical Products segment were $1.8 billion, up 3 percent over the fourth quarter of 2017. Organic sales were up 5 percent, partially offset by 2 percent from negative currency translation. Operating profits were $327 million, up 3 percent over the fourth quarter of 2017.

“Operating margins in the fourth quarter were 18.2 percent, flat with 2017,” said Arnold. “Orders in the fourth quarter were up 3 percent over the fourth quarter of 2017, driven by solid growth in both industrial and residential markets in the Americas.”

Sales for the Electrical Systems and Services segment were $1.6 billion, up 8 percent over the fourth quarter of 2017. Organic sales were up 10 percent, currency translation was negative 1 percent, and the sale in 2017 of our stake in a small joint venture reduced sales by 1 percent. Operating profits were a record $268 million, up 19 percent over the fourth quarter of 2017.

“Operating margins were 16.6 percent, an improvement of 160 basis points over 2017 and an all-time record,” said Arnold. “Orders in the fourth quarter were up 12 percent over the fourth quarter of 2017, led by strong growth in all major end markets in the Americas and in EMEA.”

Hydraulics segment sales were $653 million, up 6 percent over the fourth quarter of 2017. Organic sales were up 8 percent, partially offset by 2 percent from negative currency translation. Operating profits in the fourth quarter were $85 million, up 15 percent over the fourth quarter of 2017.

“Operating margins in the quarter were 13.0 percent, an improvement of 90 basis points over 2017,” said Arnold. “Orders in the fourth quarter decreased 4 percent from the fourth quarter of 2017, driven by a decline in EMEA similar to what we saw in the second and third quarters.”

Aerospace segment sales were $497 million, up 13 percent over the fourth quarter of 2017, all coming from organic sales growth. Operating profits in the fourth quarter were an all-time record $114 million, up 30 percent over the fourth quarter of 2017.

“Operating margins in the quarter were 22.9 percent, 290 basis points over 2017, an all-time record,” said Arnold. “Orders in the quarter were up 17 percent over the fourth quarter of 2017. We saw particular strength in orders for commercial transports, military fighters, and both commercial and military aftermarkets.”

The Vehicle segment posted sales of $821 million, down 2 percent from the fourth quarter of 2017, entirely driven by negative currency translation. Operating profits in the fourth quarter were $147 million, up 4 percent over the fourth quarter of 2017.

“Our revenue growth in Vehicle was affected by revenues transferring over to the Eaton Cummins joint venture. The joint venture’s revenues grew 45 percent in the fourth quarter of 2018,” said Arnold. “Operating margins for Vehicle in the quarter were 17.9 percent, an improvement of 90 basis points over 2017.”  

eMobility segment sales were $80 million, up 10 percent over the fourth quarter of 2017. Organic sales were up 11 percent, partially offset by 1 percent from negative currency translation. Operating profits in the fourth quarter were $9 million, down 10 percent from the fourth quarter of 2017 due to increased R&D investments.

“Operating margins in the quarter were 11.3 percent,” said Arnold. “We continue to make good progress in new product development and we are ahead of most of the 2018 year-end objectives we had set for eMobility.”

Eaton is a power management company with 2018 sales of $21.6 billion. We provide energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton is dedicated to improving the quality of life and the environment through the use of power management technologies and services. Eaton has approximately 99,000 employees and sells products to customers in more than 175 countries.

Notice of conference call: Eaton’s conference call to discuss its fourth quarter results is available to all interested parties as a live audio webcast today at 10 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 prior to the call will be a presentation on fourth quarter results, which will be covered during the call.

This news release contains forward-looking statements concerning first quarter and full-year 2019 earnings per share, organic revenue growth, and segment margins, as well as anticipated share repurchases. 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: 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; unanticipated changes in the cost of material 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 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 the United States and around the world. We do not assume any obligation to update these forward-looking statements.

Financial Results

The company’s comparative financial results for the twelve months ended December 31, 2018.

 

Contact:

Kelly Jasko, Media Relations, +1 (440) 523-5304

Don Bullock, Investor Relations, +1 (440) 523-5127