Eaton Reports All-Time Record Quarterly Results
Nov 15, 2021
Third Quarter Earnings Per Share of $1.57 All-Time Record Quarterly
Adjusted Earnings Per Share of $1.75, Up 30% Over the Third Quarter of 2020
All-Time Record Segment Margins of 19.9%, 230 Basis Points Above the Third Quarter of 2020
Power management company Eaton Corporation plc (NYSE:ETN) today announced that earnings per share were $1.57 for the third quarter of 2021. Excluding income of $0.13 per share related to acquisitions and divestitures and charges of $0.25 per share related to intangible amortization and $0.06 per share related to a multi-year restructuring program, adjusted earnings per share were an all-time record of $1.75, up 30% over the third quarter of 2020.
Sales in the third quarter of 2021 were $4.9 billion, up 9% from the third quarter of 2020. The sales increase consisted of 8% growth in organic sales, 7% growth from acquisitions, and 1% from positive currency translation, which was partially offset by 7% from the divestiture of the Hydraulics business that was completed on August 2.
Craig Arnold, Eaton chairman and chief executive officer, said, “We had a record third quarter, driven by strong operational performance despite supply constraints that impacted our organic sales growth. Still, we saw encouraging signs, including robust order growth of 17% on a rolling 12-month basis and record backlogs up more than 50% in our combined Electrical Americas and Electrical Global segments. Our segment margins in the third quarter were 19.9%, an all-time record and above the high end of our guidance. This represents a 230-basis point improvement over the third quarter of 2020.”
Operating cash flow in the third quarter of 2021 was $471 million. Excluding $279 million of taxes paid on the Hydraulics sale, adjusted operating cash flow was $750 million and adjusted free cash flow was $610 million.
For full year 2021, the company now expects organic growth of 9-11%, compared to a previous estimate of 11-13%, due to supply constraints that are expected to continue into the fourth quarter. For the fourth quarter of 2021, the company anticipates adjusted earnings per share to be between $1.68 and $1.78.
Business Segment Results
Sales for the Electrical Americas segment were $1.9 billion, up 9% from the third quarter of 2020. Organic sales were up 1% and the acquisition of Tripp Lite added 8%. Operating profits were $402 million, up 7% from the third quarter of 2020. Operating margins of 21.7% were down 50 basis points from the third quarter of 2020, driven by commodity and logistics pressures.
While quarterly sales were constrained by supply availability, order activity remained robust with the twelve-month rolling average of orders in the third quarter up 17%, with particular strength in residential and data center markets. Backlog at the end of September continues to remain strong, up 50% organically over September 2020 and a new record.
Sales for the Electrical Global segment were $1.4 billion, up 19% over the third quarter of 2020. Organic sales were up 18% and positive currency translation added 1%. Operating profits were $285 million, up 44% over the third quarter of 2020. Operating margins of 20.1% were an all-time record and up 350 basis points over the third quarter of 2020.
The twelve-month rolling average of orders in the third quarter was up 17%, driven by data center, residential and utility markets. The September backlog was also strong, up 55% organically over September 2020 and also a new record.
Aerospace segment sales were $745 million, up 38% from the third quarter of 2020. Organic sales were up 4%, the acquisition of Cobham Mission Systems added 33%, and positive currency translation added 1%. Operating profits were $164 million, up 64% from the third quarter of 2020. Operating margins in the quarter were 22.0%, up 350 basis points over the third quarter of 2020.
The twelve-month rolling average of orders in the third quarter was up 4%, driven by strength in the business jet market. On an organic basis, backlog at the end of September was up 5% versus September 2020.
The Vehicle segment posted sales of $640 million, up 12% over the third quarter of 2020. Organic sales were up 11% and positive currency translation added 1%. Operating profits were $115 million, up 44% from the third quarter of 2020. Operating margins in the quarter were 18.0%, up 400 basis points over the third quarter of 2020.
eMobility segment sales were $84 million, up 6% over the third quarter of 2020, driven by organic sales growth of 6%. The segment recorded an operating loss of $8 million reflecting continued investment in research and development and ramp up costs associated with new program wins.
Eaton’s mission is to improve the quality of life and the environment through the use of power management technologies and services. We provide sustainable solutions that help our customers effectively manage electrical, hydraulic, and mechanical power – more safely, more efficiently, and more reliably. Eaton’s 2020 revenues were $17.9 billion, and we sell products to customers in more than 175 countries. We have approximately 85,000 employees. For more information, visit www.eaton.com.
Notice of conference call: Eaton’s conference call to discuss its third quarter results is available to all interested parties as a live audio webcast today at 11 a.m. United States Eastern time via a link on Eaton’s home page. This news release can be accessed under its headline on the home page. Also available on the website prior to the call will be a presentation on third quarter results, which will be covered during the call.
This news release contains forward-looking statements concerning fourth quarter 2021 adjusted earnings per share, expected costs and benefits associated with restructuring actions and full year 2021 organic sales. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: the course of the COVID-19 pandemic globally and government actions related thereto; unanticipated changes in the markets for the company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; competitive pressures on sales and pricing; unanticipated changes in the cost of material and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; strikes or other labor unrest; natural disasters; the performance of recent acquisitions; unanticipated difficulties completing or integrating acquisitions; new laws and governmental regulations; interest rate changes; changes in tax laws or tax regulations; stock market and currency fluctuations; and unanticipated deterioration of economic and financial conditions in the United States and around the world. We do not assume any obligation to update these forward-looking statements.
The company’s comparative financial results for the six months ended September 30, 2021.
