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Eaton Reports Record First Quarter 2024 Results, with Strong Orders and Backlog Growth

  • First quarter earnings per share of $2.04 and adjusted earnings per share of $2.40, both up 28% over 2023 and first quarter records
  • First quarter record segment margins of 23.1%, 340 basis points above the first quarter of 2023
  • 8% organic sales growth, at the high end of guidance, and strong backlog growth of 27% in Electrical and 11% in Aerospace
  • Raised full year 2024 organic sales, segment margin, earnings per share and adjusted earnings per share guidance

Intelligent power management company Eaton Corporation plc (NYSE:ETN) today announced that earnings per share were $2.04 for the first quarter of 2024, a first quarter record and up 28% over the first quarter of 2023. Excluding charges of $0.21 per share related to intangible amortization, $0.12 per share related to a multi-year restructuring program, and $0.03 per share related to acquisitions and divestitures, adjusted earnings per share of $2.40 were also a first quarter record and up 28% over the first quarter of 2023.

Sales in the quarter were $5.9 billion, a first quarter record and up 8% from the first quarter of 2023, driven entirely by organic sales growth.

Segment margins were 23.1%, a first quarter record and a 340-basis point improvement over the first quarter of 2023.

Operating cash flow was $475 million and free cash flow was $292 million, up 42% and 40%, respectively, over the same period in 2023.

Craig Arnold, Eaton chairman and chief executive officer, said, “Growth drivers like increased project activity tied to megatrends, reindustrialization and infrastructure spending continue to drive demand for Eaton’s solutions across our markets, and we remain very confident in our teams' ability to execute on our increased targets for the year. We capitalized on strong growth in our business to start the year, resulting in strong order growth in Electrical and Aerospace and first quarter record segment margins."

Guidance

For the full year 2024, the company is raising:

  • Organic growth guidance from 6.5-8.5% to 7-9%
  • Segment margin guidance from 22.4-22.8% to 22.8-23.2%
  • Earnings per share guidance to between $8.95 and $9.35, up 14% at the midpoint over the prior year
  • Adjusted earnings per share guidance to between $10.20 and $10.60, up 14% at the midpoint over the prior year.

For the second quarter of 2024, the company anticipates:

  • Organic growth of 6.5-8.5%
  • Segment margins of 22.4-22.8%
  • Earnings per share between $2.19 and $2.29
  • Adjusted earnings per share between $2.52 and $2.62.

Business Segment Results

Sales for the Electrical Americas segment were a record $2.7 billion, up 17% from the first quarter of 2023, driven entirely by organic sales growth. Operating profits were a record $785 million, up 50% over the first quarter of 2023. Operating margins in the quarter were a record 29.2%, up 630 basis points over the first quarter of 2023.

The twelve-month rolling average of orders in the first quarter was up 8% organically, with particular strength in the data center market. Backlog at the end of March remained at record levels, up 31% organically over March 2023.

Sales for the Electrical Global segment were $1.5 billion, flat to the first quarter of 2023. Organic sales were up 1%, which was offset by 1% from negative currency translation. Operating profits were $274 million and operating margins in the quarter were 18.3%.

The twelve-month rolling average of orders in the first quarter was up 4% organically, with particular strength in the data center and utility markets. Backlog at the end of March was up 12% organically over March 2023.

On a rolling twelve-month basis, the book-to-bill ratio for the Electrical businesses remained strong at 1.2.

Aerospace segment sales were a first quarter record $871 million, up 9% from the first quarter of 2023, driven entirely by organic sales growth. Operating profits were $201 million, a first quarter record and up 12% from the first quarter of 2023. Operating margins in the quarter were 23.1%, a first quarter record and up 60 basis points over the first quarter of 2023.

The twelve-month rolling average of orders in the first quarter was up 2% organically, with particular strength in commercial OEM, commercial aftermarket and defense aftermarket. The backlog at the end of March was up 11% over March 2023. On a rolling twelve-month basis, the book-to-bill ratio for the Aerospace segment remained strong at 1.1.

The Vehicle segment posted sales of $724 million, down 2% from the first quarter of 2023. Organic sales were down 3%, which was partially offset by 1% from favorable foreign exchange. Operating profits were $116 million, up 8% over the first quarter of 2023. Operating margins in the quarter were 16.0%, up 150 basis points over the first quarter of 2023.

eMobility segment sales were a first quarter record $158 million, up 7% over the first quarter of 2023, driven entirely by organic sales growth. The segment recorded an operating loss of $4 million, reflecting the timing of program start-up costs to support future volume growth.

Eaton is an intelligent power management company dedicated to protecting the environment and improving the quality of life for people everywhere. We make products for the data center, utility, industrial, commercial, machine building, residential, aerospace and mobility markets. We are guided by our commitment to do business right, to operate sustainably and to help our customers manage power ─ today and well into the future. By capitalizing on the global growth trends of electrification and digitalization, we’re accelerating the planet’s transition to renewable energy sources, helping to solve the world’s most urgent power management challenges, and building a more sustainable society for people today and generations to come.

Eaton was founded in 1911 and has been listed on the New York Stock Exchange for more than a century. We reported revenues of $23.2 billion in 2023 and serve customers in more than 160 countries. For more information, visit www.eaton.com. Follow us on LinkedIn.

Notice of conference call: Eaton’s conference call to discuss its first quarter results is available to all interested parties today as a live audio webcast 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 before the call will be a presentation on first quarter results, which will be covered during the call.

This news release contains forward-looking statements concerning second quarter and full year 2024 earnings per share, adjusted earnings per share, segment margins and organic sales growth, as well as anticipated multi-year restructuring program charges and savings. 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: a global pandemic such as COVID-19; geopolitical tensions or war, 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; supply chain disruptions, unanticipated changes in the cost of material, labor, 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 at Eaton or at our customers or suppliers; 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.

Financial Results

The company’s comparative financial results for the three months ended March 31, 2024, are available on the company’s website, www.eaton.com.

EATON CORPORATION plc

 

 

 

CONSOLIDATED STATEMENTS OF INCOME

 

 

 

 

 

 

 

 

Three months ended

March 31

 

(In millions except for per share data)

 

2024

 

 

 

2023

 

Net sales

$

5,943

 

 

$

5,483

 

 

 

 

 

Cost of products sold

 

3,725

 

 

 

3,599

 

Selling and administrative expense

 

1,025

 

 

 

904

 

Research and development expense

 

189

 

 

 

179

 

Interest expense - net

 

30

 

 

 

50

 

Other income - net

 

(26

)

 

 

(11

)

Income before income taxes

 

1,001

 

 

 

762

 

Income tax expense

 

179

 

 

 

123

 

Net income

 

822

 

 

 

639

 

Less net income for noncontrolling interests

 

(1

)

 

 

(1

)

Net income attributable to Eaton ordinary shareholders

$

821

 

 

$

638

 

 

 

 

 

Net income per share attributable to Eaton ordinary shareholders

 

 

 

Diluted

$

2.04

 

 

$

1.59

 

Basic

 

2.05

 

 

 

1.60

 

 

 

 

 

Weighted-average number of ordinary shares outstanding

 

 

 

Diluted

 

401.9

 

 

 

400.5

 

Basic

 

399.9

 

 

 

398.5

 

 

 

 

 

Reconciliation of net income attributable to Eaton ordinary shareholders to adjusted earnings

 

 

 

Net income attributable to Eaton ordinary shareholders

$

821

 

 

$

638

 

Excluding acquisition and divestiture charges, after-tax

 

13

 

 

 

11

 

Excluding restructuring program charges, after-tax

 

49

 

 

 

8

 

Excluding intangible asset amortization expense, after-tax

 

84

 

 

 

97

 

Adjusted earnings

$

966

 

 

$

753

 

 

 

 

 

Net income per share attributable to Eaton ordinary shareholders - diluted

$

2.04

 

 

$

1.59

 

Excluding per share impact of acquisition and divestiture charges, after-tax

 

0.03

 

 

 

0.03

 

Excluding per share impact of restructuring program charges, after-tax

 

0.12

 

 

 

0.02

 

Excluding per share impact of intangible asset amortization expense, after-tax

 

0.21

 

 

 

0.24

 

Adjusted earnings per ordinary share

$

2.40

 

 

$

1.88

 

 

See accompanying notes.

 

EATON CORPORATION plc

 

 

 

BUSINESS SEGMENT INFORMATION

 

 

 

 

 

 

 

 

Three months ended

March 31

 

(In millions)

 

2024

 

 

 

2023

 

Net sales

 

 

 

Electrical Americas

$

2,690

 

 

$

2,294

 

Electrical Global

 

1,500

 

 

 

1,500

 

Aerospace

 

871

 

 

 

803

 

Vehicle

 

724

 

 

 

739

 

eMobility

 

158

 

 

 

147

 

Total net sales

$

5,943

 

 

$

5,483

 

 

 

 

 

Segment operating profit (loss)

 

 

 

Electrical Americas

$

785

 

 

$

525

 

Electrical Global

 

274

 

 

 

274

 

Aerospace

 

201

 

 

 

180

 

Vehicle

 

116

 

 

 

107

 

eMobility

 

(4

)

 

 

(4

)

Total segment operating profit

 

1,371

 

 

 

1,082

 

 

 

 

 

Corporate

 

 

 

Intangible asset amortization expense

 

(106

)

 

 

(124

)

Interest expense - net

 

(30

)

 

 

(50

)

Pension and other postretirement benefits income

 

12

 

 

 

11

 

Restructuring program charges

 

(63

)

 

 

(10

)

Other expense - net

 

(184

)

 

 

(148

)

Income before income taxes

 

1,001

 

 

 

762

 

Income tax expense

 

179

 

 

 

123

 

Net income

 

822

 

 

 

639

 

Less net income for noncontrolling interests

 

(1

)

 

 

(1

)

Net income attributable to Eaton ordinary shareholders

$

821

 

 

$

638

 

 

See accompanying notes.

 

EATON CORPORATION plc

 

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

(In millions)

March 31, 2024

December 31, 2023

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash

$

473

 

 

$

488

 

Short-term investments

 

1,969

 

 

 

2,121

 

Accounts receivable - net

 

4,674

 

 

 

4,475

 

Inventory

 

3,868

 

 

 

3,739

 

Prepaid expenses and other current assets

 

870

 

 

 

851

 

Total current assets

 

11,853

 

 

 

11,675

 

 

 

 

 

 

 

Property, plant and equipment - net

 

3,558

 

 

 

3,530

 

 

 

 

 

 

 

Other noncurrent assets

 

 

 

 

 

Goodwill

 

14,877

 

 

 

14,977

 

Other intangible assets

 

4,975

 

 

 

5,091

 

Operating lease assets

 

722

 

 

 

648

 

Deferred income taxes

 

481

 

 

 

458

 

Other assets

 

2,070

 

 

 

2,052

 

Total assets

$

38,535

 

 

$

38,432

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Short-term debt

$

1

 

 

$

8

 

Current portion of long-term debt

 

994

 

 

 

1,017

 

Accounts payable

 

3,400

 

 

 

3,365

 

Accrued compensation

 

492

 

 

 

676

 

Other current liabilities

 

2,726

 

 

 

2,680

 

Total current liabilities

 

7,613

 

 

 

7,747

 

 

 

 

 

 

 

Noncurrent liabilities

 

 

 

 

 

Long-term debt

 

8,192

 

 

 

8,244

 

Pension liabilities

 

730

 

 

 

768

 

Other postretirement benefits liabilities

 

177

 

 

 

180

 

Operating lease liabilities

 

601

 

 

 

533

 

Deferred income taxes

 

419

 

 

 

402

 

Other noncurrent liabilities

 

1,478

 

 

 

1,489

 

Total noncurrent liabilities

 

11,597

 

 

 

11,616

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Eaton shareholders’ equity

 

19,292

 

 

 

19,036

 

Noncontrolling interests

 

34

 

 

 

33

 

Total equity

 

19,326

 

 

 

19,069

 

Total liabilities and equity

$

38,535

 

 

$

38,432

 
 

See accompanying notes.

 

EATON CORPORATION plc

NOTES TO THE FIRST QUARTER 2024 EARNINGS RELEASE

Amounts are in millions of dollars unless indicated otherwise (per share data assume dilution). Columns and rows may not add and the sum of components may not equal total amounts reported due to rounding.

Note 1. NON-GAAP FINANCIAL INFORMATION

This earnings release includes certain non-GAAP financial measures. These financial measures include adjusted earnings, adjusted earnings per ordinary share, and free cash flow, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of each of these financial measures to the most directly comparable GAAP measure is included in this earnings release. Management believes that these financial measures are useful to investors because they provide additional meaningful financial information that should be considered when assessing our business performance and trends, and they allow investors to more easily compare Eaton Corporation plc's (Eaton or the Company) financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton and each business segment.

The Company's second quarter and full year adjusted earnings guidance for 2024 is as follows:

 

Three months ended

June 30, 2024

 

Year ended

December 31, 2024

Net income per share attributable to Eaton ordinary shareholders - diluted

$2.19 - $2.29

 

 

$8.95 - $9.35

 

Excluding per share impact of acquisition and divestiture charges, after tax

0.02

 

 

0.09

 

Excluding per share impact of restructuring program charges, after tax

0.10

 

 

0.33

 

Excluding per share impact of intangible asset amortization expense, after tax

0.21

 

 

0.83

 

Adjusted earnings per ordinary share

$2.52 - $2.62

 

 

$10.20 - $10.60

 

A reconciliation of net income attributable to Eaton ordinary shareholders per share to adjusted earnings per ordinary share is as follows:

 

Year ended

December 31, 2023

Net income per share attributable to Eaton ordinary shareholders - diluted

$

8.02

 

Excluding per share impact of acquisition and divestiture charges, after tax

 

0.10

 

Excluding per share impact of restructuring program charges, after tax

 

0.11

 

Excluding per share impact of intangible asset amortization expense, after tax

 

0.89

 

Adjusted earnings per ordinary share

$

9.12

 

A reconciliation of operating cash flow to free cash flow is as follows:

 

Three months ended

March 31

(In millions)

 

2024

 

 

 

2023

 

Operating cash flow

$

475

 

 

$

335

 

Capital expenditures for property, plant and equipment

 

(183

)

 

 

(126

)

Free cash flow

$

292

 

 

$

209

 

Note 2. ACQUISITION AND DIVESTITURE CHARGES

Eaton incurs integration charges and transaction costs to acquire and integrate businesses, and transaction, separation and other costs to divest and exit businesses. Eaton also recognizes gains and losses on the sale of businesses. A summary of these Corporate items is as follows:

 

Three months ended

March 31

(In millions except for per share data)

 

2024

 

 

 

2023

 

Acquisition integration, divestiture charges and transaction costs

$

17

 

 

$

13

 

Income tax benefit

 

4

 

 

 

3

 

Total after income taxes

$

13

 

 

$

11

 

Per ordinary share - diluted

$

0.03

 

 

$

0.03

 

Acquisition integration, divestiture charges and transaction costs in 2024 and 2023 are primarily related to acquisitions completed prior to 2023, including other charges and income to acquire and exit businesses. These charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income - net. In Business Segment Information, the charges were included in Other expense - net.

Note 3. RESTRUCTURING CHARGES

In the second quarter of 2020, Eaton initiated a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to initially respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company incurred expenses of $199 million for workforce reductions and $184 million for plant closing and other costs, resulting in total charges of $382 million through December 31, 2023. This multi-year restructuring program was substantially complete at the end of 2023, with final payments expected to be made in 2024.

During the first quarter of 2024, Eaton implemented a new multi-year restructuring program to accelerate opportunities to optimize its operations and global support structure. These actions will better align the Company's functions to support anticipated growth and drive greater effectiveness throughout the Company. Restructuring charges incurred under this program were $63 million in the first quarter of 2024. This restructuring program is expected to be completed in 2026 and is expected to incur additional expenses related to workforce reductions of $216 million and plant closing and other costs of $96 million, resulting in total estimated charges of $375 million for the entire program. The Company expects mature year benefits of $325 million when the multi-year program is fully implemented.

A summary of restructuring program charges is as follows:

 

Three months ended

March 31

(In millions except for per share data)

 

2024

 

 

 

2023

 

Workforce reductions

$

59

 

 

$

2

 

Plant closing and other

 

4

 

 

 

7

 

Total before income taxes

 

63

 

 

 

10

 

Income tax benefit

 

14

 

 

 

2

 

Total after income taxes

$

49

 

 

$

8

 

Per ordinary share - diluted

$

0.12

 

 

$

0.02

 

Restructuring program charges related to the following segments:

 

Three months ended

March 31

(In millions)

 

2024

 

 

 

2023

 

Electrical Americas

$

7

 

 

$

2

 

Electrical Global

 

24

 

 

 

3

 

Aerospace

 

8

 

 

 

1

 

Vehicle

 

24

 

 

 

2

 

Corporate

 

 

 

 

1

 

Total charges

$

63

 

 

$

10

 

These restructuring program charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income – net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items.

Note 4. INTANGIBLE ASSET AMORTIZATION EXPENSE

Intangible asset amortization expense is as follows:

 

Three months ended

March 31

(In millions except for per share data)

 

2024

 

 

 

2023

 

Intangible asset amortization expense

$

106

 

 

$

124

 

Income tax benefit

 

23

 

 

 

27

 

Total after income taxes

$

84

 

 

$

97

 

Per ordinary share - diluted

$

0.21

 

 

$

0.24

 

 

Contacts

Eaton Corporation plc

Jennifer Tolhurst

Media Relations

+1 (440) 523-4006

jennifertolhurst@eaton.com

Yan Jin

Investor Relations

+1 (440) 523-7558

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