01—Abstract
Summary
Summary of the 8-K filed July 31, 2026. Cited figures are marked; the original filing is the authoritative source.
Eaton reported record second-quarter 2026 results, with sales of $8.5 billiona, up 21% year over year, including 14% organic growth and 7% from acquisitions.
GAAP diluted EPS was $2.11b, down from $2.51 a year earlier, while adjusted EPS was $3.15, a second-quarter record and up about 7% from $2.95. Segment margins were 23.1%, 80 basis points below the prior-year quarter but 10 basis points above the top of guidance. Operating cash flow was $1.1 billion and free cash flow was $874 million, up 22%.
Order momentum was strong, with twelve-month rolling average orders up 41% in Electrical Americas, 33% in Electrical Global, and 17% in Aerospace. Electrical backlog rose 43% year over year and Aerospace backlog rose 28%. Eaton raised its full-year organic growth guidance to 11-13% and expects adjusted EPS of $13.40c-$13.60, but GAAP EPS guidance of $10.36-$10.56 is roughly flat with 2025.
The gap between GAAP and adjusted EPS is driven by intangible amortization, acquisition and divestiture charges, and restructuring costs. Interest expense rose sharply to $201 milliond from $71 million, reflecting acquisition financing. Long-term debt climbed to $18.5 billion from $8.8 billion at year-end 2025, after the Boyd Thermal acquisition for $9.55 billion and the Ultra PCS acquisition for $1.53 billion.
Goodwill and intangibles also increased substantially. Eaton also agreed to separate its Mobility business through a Reverse Morris Trust transaction with Dana Incorporated. Eaton shareholders are expected to own at least 50.1% of the combined company, and Eaton expects about $1.1 billion in cash before closing, which it plans to use largely to repay debt.
The transaction is expected to close in the first quarter of 2027, subject to Dana stockholder approval and regulatory clearances. Until then, Mobility remains in continuing operations. Investors should weigh the strong top-line and order trends against the higher leverage, the dilution from acquisition-related amortization, and the execution risk of the pending separation.
02—Key points
Key Highlights
- Q2 2026 sales of $8.5B, a record and up 21% YoY (14% organic, 7% acquisitions); Electrical Global sales rose 44%, driven by Boyd Thermal.
- GAAP diluted EPS of $2.11 vs. $2.51 a year ago; adjusted EPS of $3.15, a second-quarter record and up about 7%.
- Segment margin of 23.1%, above the top of guidance but down 80 bps YoY; Electrical Americas margin reached 27.5%, up 190 bps sequentially.
- Strong orders and backlog: twelve-month rolling orders up 41% in Electrical Americas, 33% in Electrical Global, and 17% in Aerospace; Electrical backlog up 43% YoY.
- Full-year 2026 organic growth guidance raised to 11-13%; adjusted EPS guidance of $13.40-$13.60 (up ~12% at midpoint); GAAP EPS guidance of $10.36-$10.56.
- Interest expense more than doubled to $201M in Q2 from $71M; long-term debt rose to $18.5B from $8.8B at year-end 2025, reflecting acquisition financing.
- Mobility business to be separated via a Reverse Morris Trust with Dana Inc., with Eaton holders owning at least 50.1% and ~$1.1B cash to Eaton, targeted to close in Q1 2027.
03—Questions
Frequently Asked Questions
Why is GAAP EPS down while adjusted EPS is up?
Q2 GAAP diluted EPS was $2.11 versus $2.51 a year earlier. The difference from adjusted EPS of $3.15 comes mainly from $0.50 per share of intangible amortization, $0.49 per share of acquisition and divestiture charges, and $0.05 per share of restructuring costs. Acquisition-related amortization and integration costs have grown with the Boyd Thermal, Ultra PCS, and Fibrebond deals, which widens the gap.
How much did Eaton's debt increase, and does it create risk?
Long-term debt rose to $18.5B at June 30, 2026, from $8.8B at December 31, 2025, and short-term debt reached $2.1B. Quarterly interest expense of $201M was nearly triple the prior-year level. Eaton plans to use the roughly $1.1B cash distribution from the Mobility separation to repay debt, which should reduce leverage after the transaction closes. Investors should monitor deleveraging and interest coverage.
What is the Mobility separation, and what will Eaton receive?
Eaton will combine its Mobility business with Dana Incorporated through a Reverse Morris Trust. Eaton shareholders will exchange shares for Mobility (USA) Corporation through a split-off and will own at least 50.1% of the combined company. Eaton will also receive about $1.1B in cash before closing, subject to adjustments and taxes. The deal is expected to close in Q1 2027, pending Dana stockholder approval and regulatory clearances. If it does not close, Eaton intends to pursue a spin-off instead.
Is the outlook for Eaton's growth and profitability improving?
Yes, in organic terms. Full-year organic growth guidance was raised to 11-13%, and Q3 organic growth is guided to 13.5-15.5%. Strong orders and backlog support the outlook. Full-year segment margin guidance of 24.1-24.5% and Q3 guidance of 24.6-25.0% point to continued improvement. GAAP EPS guidance of $10.36-$10.56 is roughly flat with 2025, so the gains are largely offset by amortization, restructuring, and acquisition costs.
What is driving the strong demand in Eaton's Electrical segments?
Management attributes the growth mainly to data centers, which it calls a key growth driver, but also cites robust demand across its end markets. Electrical Americas orders rose 41% on a twelve-month rolling basis, and total Electrical book-to-bill was 1.2. The Boyd Thermal acquisition, which contributed 25% to Electrical Global sales growth, also strengthens Eaton's position in data center thermal management.
04—Continue