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Eaton Corp PLC ETN

Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Stronger-Than-Expected Margin Performance in Eaton’s Results, yet Our View Remains Unchanged

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

Nothing about narrow-moat rated Eaton’s latest results alters our long-term view nor materially alters our 2021 view for the stock after we last spoke with Eaton’s investor relations team in early December 2020. We are, however, raising our fair value estimate by $1 to $104 from $103 previously, but that’s almost exclusively due to the time value of money. Nonetheless, we plan to revisit our long-term assumptions as we roll our model after Eaton issues its form 10-K filing. Even so, we think the stock has run a bit ahead of its fundamentals, even when accounting for the anticipated appreciable value creation, primarily from the recent sale of lighting and the impending sale of hydraulics to Danfoss. We note that management anticipates this transaction will close at the end of first quarter and potentially slip into the start of the second quarter (we expect the latter given some of the regulatory delays, but that’s speculation).

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Company Profile

Business Description

Eaton is a diversified power management company operating for over 100 years. The company operates through various segments, including electrical products, electrical systems and services, aerospace, vehicle, and most recently, e-mobility. Eaton’s portfolio can broadly be divided into two halves. One part of its portfolio is housed under its industrial sector umbrella, which serves a large variety of end markets like commercial vehicles, general aviation, trucks, and construction markets, among others. The other portion is Eaton’s electrical sector portfolio, which was strengthened with its acquisition of Cooper Industries in 2012. While the company receives favorable tax treatment as a domiciliary of Ireland, most of its operations take place in the U.S.

Contact
30 Pembroke Road, Eaton House
Dublin 4, D04 Y0C2, Ireland
T +353 16372900
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 92,000

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