- Record second quarter earnings per share of $1.86 and record quarterly adjusted earnings per share of $2.21, up 18% over 2022
- 13% organic sales growth, above the high end of guidance, record quarterly segment margins of 21.6%, 150 basis points above the second quarter of 2022 and a 33% incremental margin
- Robust operating cash flow of $851 million, up 150%, and free cash flow of $691 million, up 244% versus prior year
- Raised adjusted earnings per share guidance midpoint to $8.75 reflecting 16% growth over 2022
DUBLIN–(BUSINESS WIRE)–Intelligent power management company Eaton Corporation plc (NYSE:ETN) today announced that earnings per share were $1.86 for the second quarter of 2023. Excluding charges of $0.21 per share related to intangible amortization, $0.08 per share related to acquisitions and divestitures, and $0.06 per share related to a multi-year restructuring program, adjusted earnings per share of $2.21 were a quarterly record and up 18% over the second quarter of 2022.
Sales in the quarter were $5.9 billion, a quarterly record and up 13% from the second quarter of 2022, driven entirely by organic sales growth.
Segment margins were 21.6%, a quarterly record and a 150-basis point improvement over the second quarter of 2022.
Operating cash flow in the quarter was $851 million and free cash flow was $691 million, up $511 million and $490 million, respectively, over the same period in 2022 and in-line with full year targets.
The company raised its full year adjusted earnings per share guidance to between $8.65 and $8.85, up $0.35 at the midpoint. For the third quarter of 2023, the company anticipates organic growth of 9-11% and adjusted earnings per share of between $2.27 and $2.37.
Craig Arnold, Eaton chairman and chief executive officer, said, “Achieving quarterly record adjusted earnings marked the end of a very strong first half of the year. Demand across our markets continues to be strong, propelling backlogs to record levels. We’re confident we can achieve our increased guidance for the year and that we remain well positioned to capitalize on reindustrialization in North America and Europe as well as the secular growth drivers of electrification, energy transition and digitalization.”
Business Segment Results
Sales for the Electrical Americas segment were a record $2.5 billion, up 19% from the second quarter of 2022, driven entirely by organic sales growth. Operating profits were a record $669 million, up 35% over the second quarter of 2022. Operating margins in the quarter were a record 26.4%, up 320 basis points over the second quarter of 2022.
The twelve-month rolling average of orders in the second quarter was up 7% organically, with particular strength in data center and distributed IT, industrial facilities, and commercial and institutional markets. Backlog at the end of June was up 30% organically over June 2022.
Sales for the Electrical Global segment were a record $1.6 billion, up 5% from the second quarter of 2022. Organic sales were up 6%, partially offset by the impact of a small divestiture. Operating profits were $290 million, a second quarter record and up 3% over the second quarter of 2022. Operating margins in the quarter were 18.5%, down 40 basis points over the second quarter of 2022.
The twelve-month rolling average of orders in the second quarter was up 1% organically, with strength in utility and data center and distributed IT markets.
On a rolling twelve-month basis, book-to-bill ratio for the Electrical businesses remains very strong at 1.2.
Aerospace segment sales were a record $848 million, up 14% from the second quarter of 2022, driven entirely by organic sales growth. Operating profits were $191 million, a second quarter record and up 17% from the second quarter of 2022. Operating margins in the quarter were 22.5%, up 60 basis points over the second quarter of 2022.
The twelve-month rolling average of orders in the second quarter was up 26% organically with particular strength in defense OEM and commercial and defense aftermarket. Backlog at the end of June was up 26% over June 2022. On a rolling twelve-month basis, book-to-bill ratio for the Aerospace segment remains very strong at 1.2.
The Vehicle segment posted sales of $751 million, up 6% from the second quarter of 2022, driven entirely by organic sales growth. Operating profits were $115 million, up 6% over the second quarter of 2022. Operating margins in the quarter were 15.3%, flat to the second quarter of 2022.
eMobility segment sales were a record $161 million, up 18% over the second quarter of 2022, driven entirely by organic sales growth. The segment recorded an operating loss of $1 million with a 100-basis point improvement over the second quarter of 2022 driven by higher volumes, partially offset by wage and commodity inflation.
Eaton is an intelligent power management company dedicated to improving the quality of life and protecting the environment for people everywhere. 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, helping to solve the world’s most urgent power management challenges, and doing what’s best for our stakeholders and all of society.
Founded in 1911, Eaton is marking its 100th anniversary of being listed on the New York Stock Exchange. We reported revenues of $20.8 billion in 2022 and serve customers in more than 170 countries. For more information, visit www.eaton.com. Follow us on Twitter and LinkedIn.
Notice of conference call: Eaton’s conference call to discuss its second 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 second quarter results, which will be covered during the call.
This news release contains forward-looking statements concerning third quarter and full year 2023 adjusted earnings per share, third quarter 2023 organic sales growth, and anticipated 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: the course of the COVID-19 pandemic globally and government actions related thereto; geopolitical tensions, 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; 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 June 30, 2023, are available on the company’s website, www.eaton.com.
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EATON CORPORATION plc |
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CONSOLIDATED STATEMENTS OF INCOME |
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Three months ended June 30 |
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Six months ended June 30 |
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(In millions except for per share data) |
2023 |
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2022 |
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2023 |
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2022 |
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|
Net sales |
$ |
5,866 |
 |
 |
$ |
5,212 |
 |
 |
$ |
11,349 |
 |
 |
$ |
10,054 |
 |
|
 |
 |
 |
 |
 |
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 |
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|
Cost of products sold |
 |
3,747 |
 |
 |
 |
3,505 |
 |
 |
 |
7,346 |
 |
 |
 |
6,774 |
 |
|
Selling and administrative expense |
 |
986 |
 |
 |
 |
828 |
 |
 |
 |
1,890 |
 |
 |
 |
1,618 |
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|
Research and development expense |
 |
187 |
 |
 |
 |
168 |
 |
 |
 |
366 |
 |
 |
 |
333 |
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|
Interest expense – net |
 |
42 |
 |
 |
 |
31 |
 |
 |
 |
91 |
 |
 |
 |
63 |
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|
Gain on sale of business |
 |
— |
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 |
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— |
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— |
 |
 |
 |
24 |
 |
|
Other expense (income) – net |
 |
7 |
 |
 |
 |
(41 |
) |
 |
 |
(4 |
) |
 |
 |
(50 |
) |
|
Income before income taxes |
 |
898 |
 |
 |
 |
720 |
 |
 |
 |
1,660 |
 |
 |
 |
1,339 |
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|
Income tax expense |
 |
153 |
 |
 |
 |
119 |
 |
 |
 |
276 |
 |
 |
 |
205 |
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|
Net income |
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