Eaton 3Q profit jumps 39 pct, boosts view

AP News
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Posted: Oct 20, 2010 8:01 PM
Eaton 3Q profit jumps 39 pct, boosts view

Diversified manufacturer Eaton Corp. reported a 39 percent surge in its third-quarter profit Wednesday as global revenue increased almost 18 percent over the same period last year, when the entire industry was hammered by the recession.

Its results beat Wall Street expectations and it raised its forecast for the year.

Eaton shares climbed $3.41, or 4.1 percent, to $86.82 Wednesday after rising to a 52-week high of $86.96 earlier in the day.

Chairman and CEO Alexander M. Cutler said the results reflect the continued rebound in the markets that Eaton serves as well as "the benefits of the substantial changes in our cost structure implemented over the past two years."

Eaton makes drivetrain and powertrain systems for the auto industry, electrical components for power systems and fuel, hydraulics and pneumatic systems for the aviation industry.

The company, based in Cleveland, said its net income rose to $268 million, or $1.57 per share, in the July-September period, up from $193 million, or $1.14 per share, a year ago.

"Our confidence is building," Cutler said.

Cutler said the company is running ahead of original performance forecasting despite the fact that nonresidential construction is still down significantly.

Revenue rose to $3.57 billion from $3.03 billion a year ago.

Excluding acquisition integration charges, operating earnings were $1.60 per share in the third quarter. That was well ahead of analysts' expectations for adjusted earnings of $1.38 a share on $3.4 billion in revenue.

The quarterly revenue increase was due entirely to an increase in core sales, Cutler said. Twenty-five percent of quarterly revenue came from developing countries, including China, India and parts of South America, the Middle East and Eastern Europe, Cutler said. The company had set a goal of having 30 percent of sales in developing countries by 2014.

The company said revenue from its electrical systems operations rose almost 15 percent to $967 million in the Americas division and 9.4 percent to $707 million for the rest of the world.

The biggest revenue gains in other businesses were 39 percent to $583 million for hydraulics and 33 percent to $534 million for trucks.

Cutler said the company has also benefitted from its work in stimulus-funded wastewater treatment and solar programs. The company believes the aerospace industry has bottomed out and will continue to improve, and the hydraulics and trucking markets are strengthening, he said.

"The trucking number is a key number for next year," Cutler said.

Reflecting the rosier outlook, the company raised its full-year earnings guidance by 10 percent. Eaton expects fourth-quarter income per share of $1.50 to $1.60. For the year, Eaton expects earnings of $5.30 to $5.40.

Analysts expected earnings of $1.37 for the fourth quarter and $5.09 a share for the year.