Eaton Corporation plc’s (ETN) fourth-quarter 2014 operating earnings per share of $1.27 beat the Zacks Consensus Estimate by 5.8%. Quarterly earnings also surged 17.6% year over year primarily on the back of lower selling and administrative, and research and development expenses, and cost of products sold, and a decline in shares outstanding.
Including acquisition integration charge of 4 cents, GAAP earnings were $1.23 per share in the fourth quarter compared with $1.00 per share in the year-ago quarter.
For 2014, the company posted operating earnings of $3.97 per share, missing the Zacks Consensus Estimate of $4.61 by 13.9% and down 3.9% year over year.
On a GAAP basis, annual earnings per share stood at $3.76 versus $3.90 a year ago.
Revenues
In the quarter under review, Eaton’s total revenue came in at $5.57 billion, missing the Zacks Consensus Estimate by 0.6%.
On a year-over-year basis, the top line edged up 0.7% primarily due to higher Vehicle (3.8%), Aerospace (2.2%), Electrical Products (1.7%) and Electrical Systems and Services (0.2%) sales. These were partially offset by lower Hydraulics sales (5.7%).
The company reported 2014 total revenue of $22.55 billion, which fell short of the Zacks Consensus Estimate by around 0.1%. Annual revenues increased 2.3% year over year.
Quarterly Highlights
Cost of products sold in the reported quarter was $3,847 million, down 0.9% from the prior-year period.
Selling and administrative expenses decreased to $903 million from $1,001 million a year ago.
The company invested $154 million in research and development, down 6.7% from $165 million in the prior-year quarter.
Interest expenses decreased 12.9% year over year to $54 million due to lower long-term debt.
Financial Update
Eaton’s cash and short-term investments were $1.03 billion as of Dec 31, 2014, compared with $1.71 billion as of Dec 31, 2013.
As of Dec 31, 2014, long-term debt was $8.02 billion versus compared with $8.97 billion as of Dec 31, 2013.
Guidance
Eaton provided its guidance for first-quarter and full-year 2015 operating earnings. Excluding acquisition integration charges of $15 million, the company expects first-quarter 2015 operating earnings in the range of 95 cents to $1.05 per share.
Full-year 2015 operating earnings are expected in the range of $4.75–$5.05 per share, excluding an anticipated integration charge of $45 million for recent acquisitions.
Eaton expects its organic revenues to increase 3%-4% in 2015.
Another Upcoming Release
Regal Beloit Corp. (RBC) is slated to release its fourth-quarter 2014 earnings on Feb 17. The Zacks Consensus Estimate is pegged at 94 cents.
Zacks Rank
Eaton currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include A. O. Smith Corp. (AOS) and Pioneer Power Solutions, Inc. (PPSI). A. O. Smith holds a Zacks Rank #1 (Strong Buy), while Pioneer Power Solutions carries a Zacks Rank #2 (Buy).
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