01—Abstract
Summary
Summary of the 8-K filed August 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Eaton reported record second-quarter 2024 results on August 1, 2024, with GAAP diluted EPS of $2.48a (up 33% year over year) and adjusted EPS of $2.73 (up 24%).
Sales reached a record $6.35 billionb, up 8% reported and 9% organically, with segment margins of 23.7%, up 210 basis points. Operating cash flow was $946 million and free cash flow was $759 million, both second-quarter records. Demand was driven by electrification, energy transition and reindustrialization, and backlog grew 27% in Electrical and 14% in Aerospace.
Management raised full-year 2024 guidance across organic growth (now 8-9%), segment margins (23.3-23.7%), EPS ($9.38c-$9.48), adjusted EPS ($10.65-$10.75), and free cash flow ($3.4-$3.6 billion). Third-quarter guidance calls for 8-9% organic growth and adjusted EPS of $2.73-$2.83. The Electrical Americas segment was the standout, with record sales of $2.9 billion, a 29.9% operating margin, and a 29% organic backlog increase.
The main watch items are the Vehicle segment, where sales fell 4% and organic sales declined 3%, and eMobility, which remains near breakeven at a 1.3% margin. Restructuring charges rose to $78 milliond in the first half under a new program expected to cost $375 million in total and yield $325 million in mature annual benefits. Investors should also note that GAAP EPS is consistently lower than adjusted EPS because of intangible amortization, which is excluded from the non-GAAP figures.
02—Key points
Key Highlights
- Record Q2 2024 GAAP diluted EPS of $2.48, up 33% year over year; adjusted EPS of $2.73, a record and up 24%
- Record quarterly sales of $6.35 billion, up 8% reported and 9% organic, above the high end of guidance
- Record segment margin of 23.7%, up 210 bps year over year; Electrical Americas operating margin reached a record 29.9%
- Strong order momentum: Electrical backlog up 27% and Aerospace backlog up 14%; Electrical book-to-bill of 1.1
- Full-year 2024 guidance raised: organic growth 8-9%, adjusted EPS $10.65-$10.75, free cash flow $3.4-$3.6 billion
- Q2 operating cash flow of $946 million and free cash flow of $759 million, both second-quarter records
- Vehicle sales declined 4% and eMobility margins stayed at 1.3%, the main soft spots in the portfolio
03—Questions
Frequently Asked Questions
Why did Eaton raise its full-year 2024 guidance?
Eaton delivered record Q2 results with 9% organic growth, above the high end of its guidance, and continued strong demand in electrification, energy transition and reindustrialization. Management also cited growing backlog, particularly in Electrical (up 27%). As a result, it raised organic growth, segment margin, EPS, adjusted EPS and cash flow guidance.
What is the difference between GAAP EPS and adjusted EPS?
Adjusted EPS excludes intangible asset amortization, restructuring program charges, and acquisition and divestiture charges. In Q2 2024, the adjustments were $0.20 for amortization, $0.03 for restructuring and $0.02 for acquisitions, bringing GAAP diluted EPS of $2.48 to adjusted EPS of $2.73. Amortization is the largest adjustment and is tied to past acquisitions, so it is a non-cash charge.
Which segments are driving growth and which are lagging?
Electrical Americas was the strongest performer, with sales up 13% to a record $2.9 billion, operating profit up 28%, and backlog up 29% organically. Aerospace sales rose 13%. Vehicle sales fell 4% and eMobility, though sales rose 18%, earned only a $2 million operating profit. Electrical Global grew 2%, with margins improving to 19.0%.
What restructuring costs should investors expect?
Eaton launched a new multi-year restructuring program in Q1 2024. It has incurred $78 million in charges through the first half of 2024 and expects total charges of $375 million, with completion in 2026. Management expects $325 million in mature annual benefits once the program is fully implemented.
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