- Fourth quarter earnings per share of $2.35 and record
adjusted earnings per share of $2.55, up 24% over 2022
- Record quarterly sales with 10% organic growth resulting in
record fourth quarter segment margins of 22.8%, 200 basis points
above the fourth quarter of 2022
- For full year 2023, record earnings per share of $8.02 with
12% organic growth and record adjusted earnings per share of $9.12,
up 20% over 2022
- Adjusted earnings per share for 2024 expected to be between
$9.95 and $10.35, up 11% at midpoint over 2023
Intelligent power management company Eaton Corporation plc
(NYSE:ETN) today announced that earnings per share were $2.35 for
the fourth quarter of 2023. Excluding charges of $0.22 per share
related to intangible amortization, $0.02 per share related to a
multi-year restructuring program, and income of $0.04 per share
related to acquisitions and divestitures, adjusted earnings per
share of $2.55 were a record and up 24% over the fourth quarter of
2022.
Sales in the quarter were $6.0 billion, a record and up 11% from
the fourth quarter of 2022, driven by 10% organic sales growth and
1% foreign exchange.
Segment margins were 22.8%, a fourth quarter record and a
200-basis point improvement over the fourth quarter of 2022.
Operating cash flow was $1.3 billion and free cash flow was $1.1
billion, both records and up 9% and 8%, respectively, over the same
period in 2022.
Craig Arnold, Eaton chairman and chief executive officer, said,
“We’re pleased with our teams’ strong execution in the fourth
quarter, which resulted in record quarterly sales, adjusted
earnings and operating cash flow to close the year. Ongoing
strength in our backlog shows robust demand and gives us continued
confidence in our growth outlook.”
For the full year 2023, sales were a record $23.2 billion, up
12% from 2022, driven entirely by organic sales growth.
Segment margins of 22.0% for 2023 were a record and at the high
end of the latest guidance range. This represents a 180-basis point
improvement over the full year 2022.
Earnings per share for 2023 were a record $8.02. Excluding
charges of $0.89 per share related to intangible amortization,
$0.11 per share related to a multi-year restructuring program, and
$0.10 per share related to acquisitions and divestitures, adjusted
earnings per share were a record $9.12, up 20% over 2022.
Operating cash flow for 2023 was $3.6 billion and free cash flow
was $2.9 billion, both records and up 43% and 48%, respectively,
over the same period in 2022.
On full year results, Arnold continued, “With our strong
performance in 2023, we’ve continued to deliver on our commitments.
And we’re not finished yet – we’re investing to position the
company for ongoing growth and performance over the long term.
That’s why we’re announcing a $375 million multi-year restructuring
program, which we expect to deliver $325 million of mature year
benefits. We’re confident with these proactive steps – growing the
company while also reducing costs – we’ll be able to generate
strong shareholder returns for years to come.”
For the full year 2024, the company expects organic growth of
6.5-8.5% and adjusted earnings per share to be between $9.95 and
$10.35, up 11% at the midpoint over 2023. For the first quarter of
2024, the company anticipates organic growth of 6-8% and adjusted
earnings per share to be between $2.21 and $2.31.
Business Segment Results
Sales for the Electrical Americas segment were a record $2.7
billion, up 16% from the fourth quarter of 2022, driven entirely by
organic sales growth. Operating profits were a record $763 million,
up 40% over the fourth quarter of 2022. Operating margins in the
quarter were a record 28.5%, up 480 basis points over the fourth
quarter of 2022.
The twelve-month rolling average of orders in the fourth quarter
was down 4% organically from high levels in 2022, with growth in
the data center, machinery OEM and institutional markets. Backlog
at the end of December remains at record levels, up 18% organically
over December 2022.
Sales for the Electrical Global segment were a fourth quarter
record $1.5 billion, up 6% from the fourth quarter of 2022, driven
by organic sales growth of 4% and foreign exchange of 2%. Operating
profits were $284 million, a fourth quarter record, and operating
margins in the quarter were 18.8%.
The twelve-month rolling average of orders in the fourth quarter
was up 1% organically, with strength in the data center and utility
markets.
On a rolling twelve-month basis, the book-to-bill ratio for the
Electrical businesses remained strong at over 1.1.
Aerospace segment sales were a record $895 million, up 10% from
the fourth quarter of 2022. Organic sales increased 8%, and
currency translation added 2%. Operating profits were $200 million,
a fourth quarter record and up 1% from the fourth quarter of 2022.
Operating margins in the quarter were 22.4%.
The twelve-month rolling average of orders in the fourth quarter
was up 7% organically, with particular strength in commercial OEM,
commercial aftermarket and defense aftermarket. The backlog at the
end of December was up 13% over December 2022. 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 $723 million, up 2% from the
fourth quarter of 2022, driven entirely by favorable foreign
exchange. Operating profits were $129 million, up 21% over the
fourth quarter of 2022. Operating margins in the quarter were
17.9%, up 270 basis points over the fourth quarter of 2022.
eMobility segment sales were a record $165 million, up 19% over
the fourth quarter of 2022, driven by organic sales growth of 18%
and foreign exchange of 1%. The segment recorded an operating loss
of $16 million, reflecting the timing of program start-up costs
associated with new program wins.
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 fourth 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 fourth quarter results,
which will be covered during the call.
This news release contains forward-looking statements concerning
first quarter and full year 2024 adjusted earnings per share 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 December 31, 2023, are available on the company’s website,
www.eaton.com.
EATON CORPORATION plc
CONSOLIDATED STATEMENTS OF
INCOME
Three months ended December
31
Year ended December 31
(In millions except for per share
data)
2023
2022
2023
2022
Net sales
$
5,967
$
5,384
$
23,196
$
20,752
Cost of products sold
3,732
3,547
14,762
13,865
Selling and administrative expense
956
796
3,795
3,227
Research and development expense
201
167
754
665
Interest expense - net
27
44
151
144
Gain on sale of business
—
—
—
24
Other income - net
(37
)
(20
)
(93
)
(36
)
Income before income taxes
1,088
851
3,827
2,911
Income tax expense
141
129
604
445
Net income
947
722
3,223
2,465
Less net income for noncontrolling
interests
(1
)
(1
)
(5
)
(4
)
Net income attributable to Eaton
ordinary shareholders
$
946
$
721
$
3,218
$
2,462
Net income per share attributable to
Eaton ordinary shareholders
Diluted
$
2.35
$
1.80
$
8.02
$
6.14
Basic
2.37
1.81
8.06
6.17
Weighted-average number of ordinary
shares outstanding
Diluted
401.8
400.3
401.1
400.8
Basic
399.6
398.0
399.1
398.7
Reconciliation of net income
attributable to Eaton ordinary shareholders
to adjusted earnings
Net income attributable to Eaton ordinary
shareholders
$
946
$
721
$
3,218
$
2,462
Excluding acquisition and divestiture
charges (income), after-tax
(15
)
14
39
147
Excluding restructuring program charges
(income), after-tax
9
(10
)
46
29
Excluding intangible asset amortization
expense, after-tax
83
99
353
394
Adjusted earnings
$
1,024
$
825
$
3,657
$
3,032
Net income per share attributable to Eaton
ordinary shareholders - diluted
$
2.35
$
1.80
$
8.02
$
6.14
Excluding per share impact of acquisition
and divestiture charges (income), after-tax
(0.04
)
0.04
0.10
0.37
Excluding per share impact of
restructuring program charges (income), after-tax
0.02
(0.02
)
0.11
0.07
Excluding per share impact of intangible
asset amortization expense, after-tax
0.22
0.24
0.89
0.99
Adjusted earnings per ordinary
share
$
2.55
$
2.06
$
9.12
$
7.57
See accompanying notes.
EATON CORPORATION plc
BUSINESS SEGMENT INFORMATION
Three months ended December
31
Year ended December 31
(In millions)
2023
2022
2023
2022
Net sales
Electrical Americas
$
2,672
$
2,296
$
10,098
$
8,497
Electrical Global
1,512
1,430
6,084
5,848
Aerospace
895
812
3,413
3,039
Vehicle
723
707
2,965
2,830
eMobility
165
139
636
538
Total net sales
$
5,967
$
5,384
$
23,196
$
20,752
Segment operating profit (loss)
Electrical Americas
$
763
$
545
$
2,675
$
1,913
Electrical Global
284
268
1,176
1,134
Aerospace
200
199
780
705
Vehicle
129
107
482
453
eMobility
(16
)
(2
)
(21
)
(9
)
Total segment operating profit
1,360
1,117
5,093
4,196
Corporate
Intangible asset amortization expense
(107
)
(124
)
(450
)
(499
)
Interest expense - net
(27
)
(44
)
(151
)
(144
)
Pension and other postretirement benefits
income
13
8
46
43
Restructuring program income (charges)
(11
)
16
(57
)
(33
)
Other expense - net
(141
)
(122
)
(654
)
(653
)
Income before income taxes
1,088
851
3,827
2,911
Income tax expense
141
129
604
445
Net income
947
722
3,223
2,465
Less net income for noncontrolling
interests
(1
)
(1
)
(5
)
(4
)
Net income attributable to Eaton
ordinary shareholders
$
946
$
721
$
3,218
$
2,462
See accompanying notes.
EATON CORPORATION plc
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
December 31, 2023
December 31, 2022
Assets
Current assets
Cash
$
488
$
294
Short-term investments
2,121
261
Accounts receivable - net
4,475
4,076
Inventory
3,739
3,430
Prepaid expenses and other current
assets
851
685
Total current assets
11,675
8,746
Property, plant and equipment - net
3,530
3,146
Other noncurrent assets
Goodwill
14,977
14,796
Other intangible assets
5,091
5,485
Operating lease assets
648
570
Deferred income taxes
458
330
Other assets
2,052
1,940
Total assets
$
38,432
$
35,014
Liabilities and shareholders’
equity
Current liabilities
Short-term debt
$
8
$
324
Current portion of long-term debt
1,017
10
Accounts payable
3,365
3,072
Accrued compensation
676
467
Other current liabilities
2,680
2,488
Total current liabilities
7,747
6,360
Noncurrent liabilities
Long-term debt
8,244
8,321
Pension liabilities
768
649
Other postretirement benefits
liabilities
180
177
Operating lease liabilities
533
459
Deferred income taxes
402
530
Other noncurrent liabilities
1,489
1,444
Total noncurrent liabilities
11,616
11,580
Shareholders’ equity
Eaton shareholders’ equity
19,036
17,038
Noncontrolling interests
33
38
Total equity
19,069
17,075
Total liabilities and equity
$
38,432
$
35,014
See accompanying notes.
EATON CORPORATION plc
NOTES TO THE FOURTH QUARTER 2023 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 first quarter and full year adjusted earnings
guidance for 2024 is as follows:
Three months ended March 31,
2024
Year ended December 31, 2024
Net income per share attributable to Eaton
ordinary shareholders - diluted
$1.80 - $1.90
$8.69 - $9.09
Excluding per share impact of acquisition
and divestiture charges, after tax
0.03
0.08
Excluding per share impact of
restructuring program charges, after tax
0.17
0.34
Excluding per share impact of intangible
asset amortization expense, after tax
0.21
0.84
Adjusted earnings per ordinary share
$2.21 - $2.31
$9.95 - $10.35
A reconciliation of operating cash flow to free cash flow is as
follows:
Three months ended December
31
(In millions)
2023
2022
Operating cash flow
$
1,298
$
1,186
Capital expenditures for property, plant
and equipment
(243
)
(209
)
Free cash flow
$
1,055
$
977
Year ended December 31
(In millions)
2023
2022
Operating cash flow
$
3,624
$
2,533
Capital expenditures for property, plant
and equipment
(757
)
(598
)
Free cash flow
$
2,867
$
1,935
Note 2. ACQUISITIONS AND DIVESTITURE OF BUSINESSES
Acquisition of a 49% stake in Jiangsu Ryan Electrical Co.
Ltd.
On April 23, 2023, Eaton acquired a 49 percent stake in Jiangsu
Ryan Electrical Co. Ltd., a manufacturer of power distribution and
sub-transmission transformers in China. Eaton accounts for this
investment on the equity method of accounting and is reported
within the Electrical Global business segment.
Acquisition of a 50% stake in Jiangsu Huineng Electric Co.,
Ltd’s circuit breaker business
On July 1, 2022, Eaton acquired a 50 percent stake in Jiangsu
Huineng Electric Co., Ltd’s circuit breaker business, which
manufactures and markets low-voltage circuit breakers in China.
Eaton accounts for this investment on the equity method of
accounting and is reported within the Electrical Global business
segment.
Russia
During the second quarter of 2022, in light of the ongoing war
with Ukraine, the Company decided to exit its business operations
in Russia and recorded charges of $29 million presented in Other
income - net on the Consolidated Statements of Income. The charges
consisted primarily of write-downs of accounts receivable,
inventory and other assets, and accruals for severance.
Acquisition of Royal Power Solutions
On January 5, 2022, Eaton acquired Royal Power Solutions for
$610 million, net of cash received. Royal Power Solutions is a U.S.
based manufacturer of high-precision electrical connectivity
components used in electric vehicle, energy management, industrial
and mobility markets. Royal Power Solutions is reported within the
eMobility business segment.
Sale of Hydraulics business
On August 2, 2021, Eaton completed the sale of the Hydraulics
business to Danfoss A/S and recognized a pre-tax gain of $617
million in 2021. The Company finalized negotiations of post-closing
adjustments with Danfoss A/S and recognized an additional pre-tax
gain of $24 million in the first quarter of 2022 and received cash
of $22 million in the second quarter of 2022 from Danfoss A/S to
fully settle all post-closing adjustments.
Acquisition of Green Motion SA
On March 22, 2021, Eaton acquired Green Motion SA, a leading
designer and manufacturer of electric vehicle charging hardware and
related software based in Switzerland. Green Motion SA was acquired
for $106 million, including $49 million of cash paid at closing and
an initial estimate of $57 million for the fair value of contingent
future consideration based on 2023 and 2024 revenue performance.
The fair value of contingent consideration liabilities is estimated
by discounting contingent payments expected to be made, and may
increase or decrease based on changes in revenue estimates and
discount rates, with a maximum possible undiscounted value of $122
million. As of December 31, 2023, the fair value of the contingent
future payments has been reduced to $18 million based primarily on
lower revenue in 2023 and anticipated reductions in projected 2024
revenue compared to the initial estimates at closing. This
reduction is presented in Other income - net on the Consolidated
Statements of Income.
Note 3. 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 December
31
Year ended December 31
(In millions except for per share
data)
2023
2022
2023
2022
Acquisition integration, divestiture
charges and transaction costs (income)
$
(14
)
$
12
$
54
$
194
Gain on the sale of the Hydraulics
business
—
—
—
(24
)
Total charges (income) before income
taxes
(14
)
12
54
170
Income tax expense (benefit)
(1
)
2
(15
)
(23
)
Total after income taxes
$
(15
)
$
14
$
39
$
147
Per ordinary share - diluted
$
(0.04
)
$
0.04
$
0.10
$
0.37
Acquisition integration, divestiture charges and transaction
costs in 2023 and 2022 are related to the acquisition of Royal
Power Solutions and other acquisitions completed prior to 2022,
including other charges and income to acquire and exit businesses.
Costs in 2023 and 2022 also included certain indemnity claims
associated with the sale of 50% interest in the commercial vehicle
automated transmission business in 2017. 2023 and 2022 also
included reductions in the fair value of contingent future
consideration from the Green Motion SA acquisition. Costs in 2022
also included charges of $29 million presented in Other income -
net on the Consolidated Statements of Income related to the
decision in the second quarter of 2022 to exit the Company's
business operations in Russia. These charges consisted primarily of
write-downs of accounts receivable, inventory and other assets, and
accruals for severance. 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 4. 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 charges of $382 million. The multi-year program was
substantially complete at the end of 2023 and mature year benefits
from the program are estimated to be $265 million and will be
largely realized by the end of 2024.
A summary of restructuring program charges (income) is as
follows:
Three months ended December
31
Year ended December 31
(In millions except for per share
data)
2023
2022
2023
2022
Workforce reductions
$
2
$
(25
)
$
19
$
(13
)
Plant closing and other
9
9
38
47
Total charges (income) before income
taxes1
11
(16
)
57
33
Income tax expense (benefit)
(2
)
6
(11
)
(4
)
Total after income taxes
$
9
$
(10
)
$
46
$
29
Per ordinary share - diluted
$
0.02
$
(0.02
)
$
0.11
$
0.07
Restructuring program charges (income) related to the following
segments:
Three months ended December
31
Year ended December 31
(In millions)
2023
2022
2023
2022
Electrical Americas
$
2
$
4
$
5
$
17
Electrical Global
4
(1
)
26
14
Aerospace
2
2
5
8
Vehicle
2
(23
)
6
(15
)
eMobility
—
1
7
1
Corporate
2
1
8
8
Total charges (income)1
$
11
$
(16
)
$
57
$
33
1The restructuring program liability was
adjusted by $30 million in 2022 related to true-ups for completed
workforce reductions and the decision not to close a facility in
the Vehicle segment that was previously included in the
program.
These restructuring program charges (income) 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.
On February 1, 2024, the Company announced 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. This
restructuring program is expected to be completed in 2026 with
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.
Note 5. INTANGIBLE ASSET AMORTIZATION EXPENSE
Intangible asset amortization expense is as follows:
Three months ended December
31
Year ended December 31
(In millions except for per share
data)
2023
2022
2023
2022
Intangible asset amortization expense
$
107
$
124
$
450
$
499
Income tax benefit
23
25
98
105
Total after income taxes
$
83
$
99
$
353
$
394
Per ordinary share - diluted
$
0.22
$
0.24
$
0.89
$
0.99
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240131158825/en/
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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