Power management company Eaton Corporation plc has announced that operating earnings per share, which exclude charges of $0.03 per share to integrate recent acquisitions, were a record $1.29 for the third quarter of 2014, up 15 percent over the third quarter of 2013. Sales in the third quarter of 2014 were $5.7 billion, 2 percent above the same period in 2013. Sales growth consisted of 3 percent growth in core sales offset by 1 percent of negative foreign exchange. Operating earnings for the third quarter of 2014, excluding pre-tax charges of $19 million to integrate recent acquisitions, were $616 million, an increase of 15 percent over 2013.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, “We had a very strong quarter, setting numerous performance records at both the segment and corporate level. Third quarter results came in near the high end of our guidance for the quarter. Our segment operating margins, which exclude acquisition integration charges, were a record 16.0 percent as productivity gains and effective cost control more than offset the impact of modestly lower-than-expected revenues.
“Our third quarter bookings in both of our Electrical segments again showed good growth, as did orders in our Aerospace segment,” said Cutler. “Reflecting the continued slower growth in our markets outside North America, we now estimate our markets in 2014 are likely to grow 2 percent, down from our prior estimate of 3 percent.
“Excluding the payments made to resolve the litigation we settled in the second quarter, our operating cash flow in the third quarter was $943 million, a quarterly record,” said Cutler. “During the quarter we repurchased $225 million of our shares. We have spent $324 million on share repurchases this year.
“We anticipate operating earnings per share for the fourth quarter of 2014, which exclude an estimated $32 million of charges to integrate our recent acquisitions, to be between $1.15 and $1.25,” said Cutler. “We are maintaining the midpoint of our full year 2014 guidance. Strong productivity growth and tight expense control are offsetting the impact of negative foreign exchange and lower market growth. Our updated guidance for 2014 operating earnings per share, which exclude an estimated $154 million in acquisition integration charges, and which are also adjusted for the impact of the Aerospace divestitures and the legal settlements, is between $4.55 and $4.65, an increase of 11 percent compared to last year.”
Business Segment Results
Sales for the Electrical Products segment were a record $1.9 billion, up 3 percent over 2013. Operating profits were $330 million. Excluding acquisition integration charges of $8 million during the quarter, operating profits were a record $338 million, up 9 percent over the third quarter of 2013.
“Electrical Products had strong operating margins, coming in at 18.0 percent,” said Cutler. “Our bookings in the third quarter were up 5 percent over the third quarter a year ago, continuing our strong momentum this year.”
Sales for the Electrical Systems and Services segment were a record $1.7 billion, up 1 percent over third quarter of 2013. The segment reported operating profits of $238 million. Excluding acquisition integration charges of $4 million during the quarter, operating profits were $242 million.
“The rebound in Electrical Systems and Services operating margins to 14.6 percent reflects significant progress on the initiatives we laid out at the beginning of the quarter,” said Cutler. “Bookings in the third quarter were up 3 percent over the third quarter of 2013.”
Hydraulics segment sales were $733 million, down 1 percent from the third quarter of 2013. Operating profits in the third quarter were $84 million. Excluding acquisition integration charges of $2 million, operating profits were $86 million, a decrease of 11 percent.
“The Hydraulics markets in the third quarter of 2014 were about the same as in the second quarter of 2014, with pockets of strength in industrial applications offset by weakness in agricultural equipment globally and construction equipment in China,” said Cutler. “Our bookings in the quarter decreased 6 percent compared to the third quarter of 2013.”
Aerospace segment sales were $454 million, up 1 percent over the third quarter of 2013. Sales growth consisted of 6 percent core growth and 1 percent growth from foreign exchange, offset by a 6 percent reduction from the second quarter divestitures. Operating profits in the third quarter were $72 million, up 13 percent over the third quarter of 2013.
“Our Aerospace margins of 15.9 percent in the third quarter reflected strong operating performance and the benefits of higher aftermarket shipments,” said Cutler. “Bookings in the quarter rose 12 percent, driven by increased OEM orders.”
The Vehicle segment posted sales of $1.0 billion, up 5 percent compared to the third quarter of 2013. The segment reported operating profits in the third quarter of $176 million, up 9 percent compared to the third quarter of 2013.
“North American markets were particularly strong in the quarter while South American markets continued to be weak,” said Cutler. “We now expect the NAFTA Class 8 truck market to be 295,000 in 2014, up from our prior estimate of 290,000.”
