Eaton Q2 Results Miss Estimates, Cuts Full Year EPS View - Update

(RTTNews) - Diversified industrial manufacturer Eaton Corp Plc (ETN) Friday reported higher profit and revenue for the second quarter, driven by the recent acquisition of Cooper Industries. Yet, adjusted earnings and revenues missed Wall Street estimates.

Further, Eaton reduced the top end of its guidance range for full year operating earnings per share by $0.20, reflecting lower expected market growth during 2013. The stock is falling in pre-market activity.

Net income attributable to ordinary shareholders increased to $494 million from last year's $382 million. Earnings per share, however, fell to $1.04 from $1.12 in the prior year due to higher number of shares outstanding as part of the acquisition of Cooper Industries.

The company completed the acquisition of Cooper Industries plc, an Irish electrical components manufacturer, in November 2012.

Alexander Cutler, CEO, said, "Our second quarter operating earnings per share came in just below the midpoint of our guidance, despite softer market conditions than we expected at the start of the quarter. We were able to largely offset the lower revenue by generating higher operating margins.''

Operating earnings, which exclude charges of $39 million to integrate recent acquisitions, was $1.09 per share, while it amounted to $1.15 per share last year. On average, 23 analysts polled by Thomson Reuters expected earnings per share of $1.11 for the quarter. Analysts' estimates typically exclude one-time items.

Net sales jumped 38 percent to $5.61 billion from $4.07 billion. Analysts expected revenues of $5.77 billion.

Sales for the Electrical Products segment surged 95 percent to $1.8 billion, and Electrical Systems and Services segment sales increased 78 percent to $1.6 billion, both reflecting the impact of the Cooper Industries acquisition.

Hydraulics segment sales edged up 1 percent to $772 million and Aerospace segment sales rose 2 percent to $446 million. Vehicle segment sales fell 4 percent to $1.0 billion, amid weak market conditions.

As the Cooper integration progressed, Eaton was able to realize synergy savings at a faster pace than expected. The company now estimates synergy savings in 2013 to be $115 million, up $25 million from the prior estimate. For 2014, synergy savings are now expected to be $210 million, a $30 million increase from the earlier estimate.

Eaton expects operating earnings per share for the third quarter, which exclude an estimated $64 million of charges to integrate recent acquisitions, to be between $1.05 and $1.15. Analysts expect earnings of $1.22 per share for the quarter.

The company now expects full year operating earnings per share to be between $4.05 and $4.25, a 2 percent reduction at the midpoint compared to its previous guidance range of between $4.05 and $4.45. Based on the $4.15 midpoint of its guidance, operating earnings per share in 2013 will grow 5 percent. Analysts expect earnings of $4.35 for the year.

ETN closed at $69.93 on Thursday. The stock slid 2.6 percent in pre-market activity.