01—Abstract
Summary
Summary of the 8-K filed April 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Eaton Corporation plc (NYSE: ETN) reported first quarter 2024 results on April 30, 2024 that were a first-quarter record across most key measures.
GAAP diluted EPS rose 28% to $2.04a (from $1.59), and adjusted EPS rose 28% to $2.40 (from $1.88). Net sales grew 8% to $5.9 billion (from $5.5 billion), driven entirely by organic growth, and segment margins expanded 340 basis points to 23.1%. Free cash flow reached $292 million, up 40% year over year, on operating cash flow of $475 million.
Strength was concentrated in Electrical Americas, where sales rose 17%, operating margins hit a record 29.2%, and backlog was up 31% organically, driven by data center demand. Management raised full-year 2024 guidance across organic growth (now 7-9%, from 6.5-8.5%), segment margin (now 22.8-23.2%, from 22.4-22.8%), GAAP EPS ($8.95b-$9.35), and adjusted EPS ($10.20-$10.60). Both EPS ranges imply roughly 14% growth at the midpoint.
Q2 2024 guidance was also issued, calling for adjusted EPS of $2.52c-$2.62. The company launched a new multi-year restructuring program with total estimated charges of $375 million and expected mature-year savings of $325 million, which management expects to be completed in 2026. Investors should weigh the strong orders and backlog momentum in Electrical and Aerospace against several watch items.
The Vehicle segment's sales declined 2% with organic sales down 3%, Electrical Global grew only 1% organically, eMobility remained loss-making with a $4 milliond operating loss, and the new restructuring program adds near-term charges. Free cash flow also rose on a relatively small base, so cash conversion over the full year remains the key item to monitor.
02—Key points
Key Highlights
- GAAP diluted EPS of $2.04 and adjusted EPS of $2.40, both up 28% year over year and both first-quarter records.
- Net sales of $5.94 billion, up 8% organically with no contribution from acquisitions or currency, at the high end of guidance.
- Segment margin of 23.1%, a first-quarter record and up 340 basis points year over year.
- Electrical Americas delivered record sales of $2.69 billion (+17%), operating profit of $785 million (+50%), and a 29.2% margin, with backlog up 31% organically.
- Full-year 2024 guidance raised: organic growth 7-9%, segment margin 22.8-23.2%, adjusted EPS $10.20-$10.60.
- Free cash flow of $292 million, up 40%, on operating cash flow of $475 million.
- New multi-year restructuring program with $375 million in estimated charges (only $63 million incurred in Q1) and $325 million in targeted mature-year savings.
03—Questions
Frequently Asked Questions
How did Eaton perform in the first quarter of 2024?
Eaton reported diluted GAAP EPS of $2.04 and adjusted EPS of $2.40, both up 28% from the prior year. Sales rose 8% organically to $5.9 billion, and segment margins reached a first-quarter record of 23.1%.
What changed in Eaton's full-year 2024 guidance?
Eaton raised organic growth guidance to 7-9% (from 6.5-8.5%), segment margin guidance to 22.8-23.2% (from 22.4-22.8%), GAAP EPS to $8.95-$9.35, and adjusted EPS to $10.20-$10.60. Both EPS ranges are up about 14% at the midpoint over 2023.
Which business segments drove results, and which lagged?
Electrical Americas was the standout, with sales up 17%, a 29.2% operating margin, and backlog up 31% organically, driven by data center demand. Aerospace grew 9% with a 23.1% margin. Vehicle sales fell 2%, and eMobility posted a $4 million operating loss as it prepares for future volume growth.
What is the new restructuring program, and what will it cost?
In Q1 2024 Eaton launched a new multi-year restructuring program to optimize operations and its global support structure. It is expected to be completed in 2026, with total estimated charges of $375 million (workforce reductions of $216 million and plant closing and other costs of $96 million, plus other amounts), and management expects $325 million in mature-year benefits. Q1 charges were $63 million.
What should investors watch going forward?
Key watch items include whether the strong Electrical and Aerospace orders and backlog convert into sales as guided, the trajectory of Vehicle and eMobility, the cost and execution of the new restructuring program, and whether free cash flow keeps pace with earnings growth. The Q2 2024 guidance calls for adjusted EPS of $2.52-$2.62.
04—Continue