Diversified industrial manufacturer Eaton Corp Plc (ETN) Monday reported higher profit for the first quarter, driven by the acquisition of Cooper Industries last year. Earnings per share topped estimates, while revenue fell short of expectations.
Eaton noted that its markets in the quarter were weaker, reflecting a continuation of the sluggish economic conditions experienced in many parts of the world during the second half of 2012.
Alexander Cutler, CEO, said, "Our first quarter results are a solid start to the year, coming in above the high end of our guidance despite markets being slightly weaker than our expectations. We were able to generate attractive operating margins, reflecting our enhanced portfolio as a result of the Cooper Industries acquisition and our continued focus on productivity improvements.''
It was in November 2012 that Eaton completed the acquisition of Cooper Industries, an Irish electrical components manufacturer.
Net income attributable to Eaton ordinary shareholders increased to $378 million from $311 million in the prior year. Earnings per share decreased to $0.79 from $0.91.
Operating earnings per share, excluding charges of $0.05 per share to integrate recent acquisitions, were $0.84, while it totaled $0.92 last year. The decline reflected the shares issued as part of the acquisition of Cooper Industries and the purchase price accounting charges resulting from the transaction.
On average, 20 analysts polled by Thomson Reuters expected earnings of $0.79 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales climbed 34 percent to $5.31 billion from $3.96 billion in the prior year, but fell short of Street expectation of $5.43 billion. The sales growth consisted of a decline of 5 percent in core sales and a 1 percent decline from currency translation, offset by 40 percent growth from acquisitions. Sales for the Electrical Products segment surged 87 percent to $1.7 billion. The segment's bookings were down 3 percent from the combined bookings of Eaton and legacy Cooper in the first quarter last year.
Sales for the Electrical Systems and Services segment climbed 79 percent to $1.5 billion. Combined bookings in the quarter increased 2 percent from last year.
Both Electrical segments benefited from the purchase of Cooper. In both these segments, end markets were strongest in the U.S., the Middle East and Latin America, with mixed conditions in Asia Pacific and weakness in Europe. Hydraulics segment sales rose 3 percent to $756 million, driven by revenues from acquisitions completed last year.
The company continues to believe that its markets will grow 2 to 3 percent in 2013, most likely toward the lower end of the range.
Eaton expects operating earnings per share for the second quarter, which exclude an estimated $25 million of charges to integrate recent acquisitions, to be between $1.05 and $1.15. Analysts expect second-quarter earnings of $1.12.
Further, Eaton maintained its guidance for full year operating earnings per share of between $4.05 and $4.45. Analysts expect annual earnings of $4.35 per share.
ETN closed at $58.65 on Friday.
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