Eaton Earnings: Margin Improvement Continues; Solid Demand Backdrop in 2024

Narrow-moat-rated Eaton posted another impressive quarter of revenue growth and margin expansion to close out 2023, and the market appeared to be pleased, as the stock rallied over 7% on Feb. 1. Revenue of $6.0 billion and adjusted earnings per share of $2.55 both surprised to the upside relative to FactSet consensus estimates and were slightly above what we had originally baked in. Segment operating margin was up a full 200 basis points to 22.8% for the quarter. Given Eaton’s sustained margin performance and healthy growth outlook, we have raised our fair value estimate to $210 per share from $208.