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).