Eaton Corporation ETN provided a preliminary insight into its upcoming third-quarter 2015 results. The company expects third-quarter revenues to be nearly $300 million lower than its earlier expectation. The reduced expectation is due to a $240 million cut in its organic revenue forecast.
Primarily due to the weakness seen in its revenues, Eaton’s earnings per share will come in between 95 cents and $1.00, down from the earlier guidance of $1.00 to $1.10 per share. However, the company reiterated its operating cash flow projection.
During the second quarter earnings release, the company had lowered its organic revenue growth expectation by 2% to a range of 0–2%. However, it appears that organic revenues in the third quarter will be even more moderate.
Eaton’s top line is under severe pressure owing to the weakness in the end markets it caters to. To add to its woes, negative currency translation is having a negative impact on the overall earnings.
As the company is facing challenges across most of its reporting segments due to soft demand, it has resorted to a number of restructuring measures to reset its cost structure. The measures taken by the company might realize $45 million in benefits in 2015 and $125 million in 2016.
Eaton Corporation is currently a Zacks Rank #5 (Strong Sell) stock. Some better-ranked stocks in the electric industry are CUI Global, Inc. CUI, Energous Corporation WATT and Powell Industries, Inc. POWL. All three stocks currently have a Zacks Rank #2 (Buy).
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