It's hard to argue Eaton's suffering from a conglomerate discount but its performance has lagged peers that are more fully focused on the data center theme. https://t.co/Ic5FxBBXgU ...

Core Insights - Eaton is assisting Seattle City Light in modernizing its electrical grid to accommodate record-setting electricity demand driven by electrification and population growth [1][2][4] - The utility has experienced significant increases in peak and average loads, reaching 30-year highs in December 2022 and January 2024 [2] - Eaton's CYME Advanced Project Manager (APM) module is being deployed to enhance project management and infrastructure investment prioritization [3][5] Group 1: Demand and Growth - Seattle City Light is facing unprecedented electricity demand due to a surge in electric vehicle adoption, building electrification, and population growth [2] - The utility's peak and average loads have set new records, indicating a critical need for infrastructure upgrades [2] Group 2: Technology and Solutions - The Eaton CYME APM module enables collaborative planning for grid projects, allowing utilities to analyze and compare different network scenarios [3][6] - This software facilitates the breakdown of large projects into manageable tasks and evaluates the impact of various choices on grid performance and costs [6] Group 3: Future Strategies - Seattle City Light's future resource strategy includes expanding renewable resource integration, increasing energy storage investments, and exploring new generation technologies like geothermal and hydrogen [5] - The Eaton CYME APM module will assist in identifying optimal long-term strategies through detailed analysis and scenario comparisons [5]

Core Viewpoint - The article discusses the performance of Eaton Corporation plc (ETN) following its Q1 earnings call earlier this year, highlighting the stock's trading price and the author's background in investment analysis [1]. Group 1 - Eaton Corporation's stock was trading at approximately $331 per share during the Q1 earnings call [1]. - The author has a master's degree in Analytics and a bachelor's degree in Accounting, with over 10 years of experience in the investment arena [1].

Core Insights - The article discusses Eaton Corporation plc (ETN) following their Q1 earnings call earlier this year, noting that the stock was trading at approximately $331 per share at that time [1]. Company Overview - Eaton Corporation is highlighted as a company of interest in the investment community, particularly in the context of dividend investing [1]. Analyst Background - The author has over 10 years of experience in the investment arena, starting as an analyst and progressing to a management role, with a focus on analytics and accounting [1].

Group 1 - Eaton Corp. reported a record adjusted EPS of $3.07 for Q3 and achieved a segment operating margin of 25.0% [1] - The market appears to have acclimated to these consistent results, indicating a stable performance trend for the company [1] Group 2 - The author has a long position in Eaton Corp. shares, indicating confidence in the company's future performance [2] - The article reflects the author's personal opinions and does not represent any external business relationships [2]

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Greater China Technology Hardware - **Analyst Rating**: In-Line [71] Company Insights - **Eaton's Acquisition**: Eaton announced the acquisition of Boyd Thermal for US$9.5 billion, which implies a valuation of 22.5x 2026 estimated EBITDA. Boyd Thermal is projected to generate US$1.7 billion in revenue in 2026, with US$1.5 billion coming from liquid cooling [2][3] - **Market Expansion**: Eaton aims to enhance its data center portfolio in both power and liquid cooling, addressing the growing power demand effectively [3] Financial Projections - **Delta Electronics (2308.TW)**: Expected to double its liquid cooling revenue to US$3-3.5 billion in 2026 [9] - **Asia Vital Components (AVC, 3017.TW)**: Anticipated to grow its server cooling revenue by 69% year-over-year to US$3.2 billion [9] - **Valuation Multiples**: Delta trades at 16x 2026 estimated EBITDA, while AVC trades at 12x [9] Market Trends - **AI Demand Impact**: The demand for AI is projected to drive the total addressable market (TAM) for power and cooling solutions to a compound annual growth rate (CAGR) of 30%, reaching US$1,729 billion from 2026 to 2030 [9] - **Valuation Expansion**: The acquisition of Boyd Thermal underscores a secular trend that may lead to potential valuation expansion across the related supply chain [9] Risks and Opportunities - **Upside Risks**: - Faster-than-expected global economic growth - Falling raw material prices - Margin improvement due to operational efficiencies [13][14] - **Downside Risks**: - Global economic slowdown - Ongoing component supply tightness - Rising raw material prices leading to margin contraction [13][14] Analyst Ratings and Recommendations - **Current Ratings**: Delta and AVC are rated Overweight (OW) [4][5] - **Investment Banking Relationships**: Morgan Stanley has investment banking relationships with several companies in the technology hardware sector, which may influence research objectivity [7][20][24] Conclusion - The conference call highlighted significant developments in the Greater China Technology Hardware sector, particularly focusing on Eaton's strategic acquisition and the growth potential of Delta and AVC in the cooling solutions market. The insights provided on market trends, financial projections, and associated risks present a comprehensive view for potential investors.

Core Insights - Eaton Corporation plc (ETN) is experiencing significant growth driven by a focus on electrification and digitization, along with aggressive mergers and acquisitions (M&A) strategies [1] Group 1: Company Performance - The company has been recognized for its superior growth due to its strategic initiatives in electrification and digitization [1] - Eaton's aggressive M&A efforts are contributing positively to its business expansion [1] Group 2: Market Position - The market has been rewarding companies like Eaton that are actively pursuing growth through innovative strategies [1]

Financial Performance - Eaton Corporation reported revenues of nearly $25 billion for 2024, serving customers in over 160 countries[86]. - Net sales for the third quarter of 2025 reached $6,988 million, a 10% increase compared to $6,345 million in the same period of 2024[98]. - Adjusted earnings for the third quarter of 2025 were $1,199 million, reflecting a 6% increase from $1,132 million in the third quarter of 2024[98]. - The gross profit for the first nine months of 2025 was $7,719 million, a 9% increase from $7,074 million in the same period of 2024[98]. - Net income attributable to Eaton ordinary shareholders for Q3 2025 was $1,010 million, up from $1,009 million in Q3 2024, with diluted earnings per share increasing from $2.53 to $2.59[105]. - Net sales for the nine months ended September 30, 2025, totaled $12,087 million, with sales to non-issuer and non-guarantor subsidiaries amounting to $725 million[148]. - Cost of products sold for the same period was $8,458 million, leading to a net income of $900 million[148]. Segment Performance - Electrical Americas segment net sales increased by 15% to $3,410 million in Q3 2025, with operating profit rising 16% to $1,034 million[107]. - Electrical Global segment net sales grew by 10% to $1,724 million in Q3 2025, with operating profit increasing by 12% to $330 million[110]. - Aerospace segment net sales rose by 14% to $1,079 million in Q3 2025, with operating profit up 22% to $280 million[112]. - Vehicle segment net sales decreased by 8% to $639 million in Q3 2025, with operating profit declining 16% to $114 million[115]. - eMobility segment net sales fell by 19% to $136 million in Q3 2025, with an operating loss of $9 million compared to a loss of $7 million in Q3 2024[117]. Margins and Expenses - The gross profit margin decreased from 38.6% in Q3 2024 to 38.3% in Q3 2025, primarily due to higher commodity and wage inflation[101]. - The operating margin for Electrical Americas improved from 30.1% in Q3 2024 to 30.3% in Q3 2025, driven by higher sales and operational efficiencies[108]. - The operating margin for Aerospace increased from 24.4% in Q3 2024 to 25.9% in Q3 2025, influenced by higher sales despite inflationary pressures[113]. - The operating margin for Vehicle decreased from 19.4% in Q3 2024 to 17.8% in Q3 2025, primarily due to higher commodity and wage inflation[116]. - Total corporate expense increased from $340 million in Q3 2024 to $474 million in Q3 2025, and from $1,018 million in the first nine months of 2024 to $1,316 million in the first nine months of 2025, driven by higher Other expense - net, Interest expense - net, and Intangible asset amortization expense[119]. Cash Flow and Investments - Net cash provided by operating activities decreased by $223 million to $2,507 million in the first nine months of 2025 compared to $2,730 million in 2024, primarily due to working capital balances being $656 million higher[130]. - Net cash used in investing activities increased by $783 million to $783 million in the first nine months of 2025, largely due to an increase in cash paid for business acquisitions of $1,504 million compared to $50 million in 2024[131]. - Net cash used in financing activities decreased by $880 million to $1,812 million in the first nine months of 2025, influenced by net proceeds of short-term debt of $761 million compared to net payments of $6 million in 2024[132]. - Capital expenditures were $527 million in the first nine months of 2025, with plans to increase to approximately $900 million in 2025 to expand production capacity[133]. - Cash dividend payments increased to $1,222 million in the first nine months of 2025 from $1,130 million in 2024, with intentions to continue quarterly dividends[134]. - The company paid $1,504 million for business acquisitions in the first nine months of 2025, compared to $50 million in 2024, focusing on higher growth opportunities[136]. Debt and Liquidity - As of September 30, 2025, the company had short-term debt of $761 million and long-term debt of $8,756 million, with a belief in sufficient liquidity to meet scheduled payments[137]. - A new $3,000 million five-year revolving credit agreement was established on September 29, 2025, replacing previous agreements, with no borrowings outstanding at that date[122]. - The company repurchased 5.2 million ordinary shares at a total cost of $1,661 million in the first nine months of 2025 under its share repurchase programs[135]. Current Assets and Liabilities - Current assets as of September 30, 2025, are $4,307 million, down from $5,027 million on December 31, 2024, representing a decrease of approximately 14.3%[148]. - Current liabilities increased to $5,119 million as of September 30, 2025, compared to $3,738 million at the end of 2024, indicating a rise of approximately 37%[148]. - Noncurrent liabilities remained relatively stable, with a slight increase from $10,564 million at the end of 2024 to $10,749 million[148]. Strategic Outlook - The company anticipates future capital expenditures and potential share repurchases, reflecting ongoing strategic financial planning[149]. - Forward-looking statements highlight risks including supply chain disruptions and competitive pressures, which could impact future performance[149]. - There have been no material changes in market risk exposures since December 31, 2024, indicating stability in this area[150]. - The company is focused on integrating acquisitions and managing potential adverse impacts from legal and regulatory changes[149]. - Overall, the financial outlook remains cautious due to various external factors that could affect operations and market conditions[149].

Core Insights - Eaton Corporation (ETN) reported Q3 2025 earnings of $3.07 per share, exceeding the Zacks Consensus Estimate by 0.3% and reflecting an 8.09% year-over-year increase, driven by improved organic sales volumes and sustained demand [1][8] - Total revenues for the quarter reached $6.98 billion, a 10% increase from the previous year, attributed to a 7% rise in organic sales and a 3% contribution from acquired assets, although slightly below the Zacks Consensus Estimate of $7.05 billion [3][8] Financial Performance - GAAP earnings for the quarter were $2.59 per share, up 2.4% from $2.53 in the same quarter last year, with differences attributed to charges related to intangible assets, restructuring, and acquisitions [2] - Selling and administrative expenses rose to $1.1 billion, a 7.5% increase year-over-year, while research and development expenses decreased by 1.9% to $203 million [7] Segment Performance - Electrical Americas reported sales of $3.4 billion, a 15% increase year-over-year, with operating profit at $987 million, also up 15% [4] - Electrical Global's sales were $1.72 billion, up 9.6% year-over-year, with operating profit increasing 16% to $353 million [4] - Aerospace sales reached $1.08 billion, a 14.1% increase, with operating profit at $240 million, up 17% [5] - Vehicle segment sales declined to $639 million, down 8.2% year-over-year, with operating profit decreasing 13% to $113 million [5] - eMobility segment sales fell to $136 million, an 18.6% decrease, resulting in an operating loss of $10 million [6] Backlog and Future Outlook - Eaton's backlog increased by 20% in Electrical Americas, 15% in Aerospace, and 7% in Electrical Global on a rolling 12-month basis [7] - For Q4 2025, Eaton expects earnings in the range of $2.75-$2.95 per share and anticipates organic growth of 10-12% [11] - The company projects adjusted earnings per share for 2025 to be between $11.97-$12.17, with organic sales growth expected to be 8.5-9.5% [11] Strategic Developments - Eaton has signed an agreement to acquire Boyd Thermal business for $9.5 billion, aimed at expanding its data center portfolio and aerospace capabilities [10]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share (EPS) of $3.07, an increase of 8% year-over-year, and segment margins reached a record 25%, up 70 basis points from the previous year [6][21][24] - Quarterly revenue was $7 billion, with organic growth of 7%, driven by strength in aerospace and Electrical Americas [20][21] - The backlog grew by $2 billion, or 20%, to $12 billion, providing strong visibility for future growth [22][89] Business Line Data and Key Metrics Changes - **Electrical Americas**: Organic sales growth of 9%, primarily driven by data centers, which saw a 40% increase. Operating margin was 30.3%, up 20 basis points year-over-year [21][22] - **Electrical Global**: Total growth of 10%, with organic growth of 8%. Operating margin increased to 19.1%, up 40 basis points from the prior year [22][23] - **Aerospace**: Organic sales growth of 13%, with operating margin expanding by 150 basis points to 25.9%. Orders increased by 11% on a rolling 12-month basis [24] - **Vehicle Segment**: Experienced a decline of 9% on an organic basis, primarily due to weaknesses in the North American truck and light vehicle markets [25] - **E-Mobility**: Revenue decreased by 20% on an organic basis, with an operating loss of $9 million in the quarter [25] Market Data and Key Metrics Changes - Orders in Latin America accelerated by 7% on a rolling 12-month basis, with a backlog growth of 20% year-over-year [5][16] - The global Liquid Cooling market is expected to grow around 35% annually through 2028, driven by increasing power demands from AI chips [12][70] Company Strategy and Development Direction - The company is focused on a strategy with three pillars: lead, invest, and execute for growth, aiming to capitalize on key megatrends [8][29] - The acquisition of Boyd's thermal business is aligned with the strategy to invest for growth, particularly in the high-growth Liquid Cooling market [9][70] - The company aims to enhance its data center portfolio, providing comprehensive solutions from power distribution to cooling systems [13][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustained growth due to strong demand across various sectors, particularly in data centers and aerospace [5][6] - The company reaffirmed its 2025 guidance, expecting continued order acceleration and strong backlog growth [26][89] - Management highlighted the importance of integrating power and cooling technologies to meet evolving customer needs in data centers [70][72] Other Important Information - The company is experiencing unprecedented demand, reflected in continued order acceleration and growing backlogs [28][29] - The outlook for Q4 includes EPS guidance of $3.23-$3.43, representing 18% year-over-year growth, with organic growth projected at 10%-12% [27][28] Q&A Session Summary Question: Outlook for Electrical Americas LTM orders - Management remains bullish about order growth in Q4, supported by strong momentum and a growing negotiations pipeline [36][37] Question: Quarterly orders estimation for Electrical Americas - Management indicated that external estimates are in the ballpark, leaning towards the higher end of expectations for quarterly orders [39][40] Question: Data center sales per MW expectations - The company expects to reach close to $3 million per MW at the high end of the guide with the recent acquisitions enhancing their portfolio [53][57] Question: Factors affecting organic revenue growth in Electrical Americas - Slower residential sales and some order delays impacted Q3 performance, but management is confident in catching up in Q4 [58][60] Question: Drivers of aerospace performance and margins - Aerospace is on track to meet long-term margin goals, driven by historical wins in defense platforms and operational improvements [94][96]