RBC Capital Highlights Eaton (ETN) Beat-and-Raise Potential Despite Conservative 2026 Guidance

Core Viewpoint - Eaton Corporation (NYSE:ETN) is identified as a promising investment opportunity in the AI sector, with recent price target increases from RBC Capital and Morgan Stanley indicating strong market confidence despite conservative guidance for 2026 [1][2]. Group 1: Price Target Adjustments - RBC Capital raised Eaton's price target to $407 from $399, maintaining an Outperform rating, citing a strong Q4 2025 earnings performance and potential for exceeding 2026 guidance [1]. - Morgan Stanley increased the price target for Eaton to $425 from $405, with an Overweight rating, highlighting that Q4 orders surpassed expectations despite skepticism around the company's narrative [2]. Group 2: Demand and Growth Potential - Demand for Eaton's products is at an all-time high, yet the stock's relative valuation has dropped to multi-year lows, which has led to increased confidence in the company's ability to sustain high-single-digit organic growth over several years [3]. - The underlying momentum in orders and backlog suggests that Eaton's 2026 guidance has significant beat-and-raise potential, indicating a strong operational outlook [1]. Group 3: Company Overview - Eaton Corporation operates as a power management company across various regions including the US, Canada, Latin America, Europe, and the Asia Pacific, with segments in Electrical Americas, Electrical Global, Aerospace, Vehicle, and eMobility [4].