Eaton rides global economic recovery to a 1st-Qtr profit as revenue jumps 10 percent

Eaton posts 1Q profit on global economic growth

CLEVELAND — The expanding global economy pushed diversified manufacturer Eaton Corp. back to a profit in the first quarter, the company reported Tuesday.

Chairman and CEO Alexander M. Cutler said Eaton’s “newly reset cost structure” helped the company improve its profit margins.

The Cleveland company makes hydraulics and electrical equipment used by manufacturers in a variety of industries.

In a conference call with analysts, Cutler highlighted the “enormous change” in the improving automotive segment, where first-quarter sales of $374 million were up 39 percent from the same period last year.

The segment had an operating profit of $42 million, compared with a loss of $45 million in the first three months of 2009.

“It’s quite a year of recovery,” Cutler said.

Eaton earned $155 million, or 91 cents per share, in the three months ended March 31, versus a loss of $50 million, or 30 cents per share, a year earlier amid the deepening recession.

Sales rose 10 percent to $3.1 billion from $2.8 billion a year earlier. Half the increase came from higher foreign exchange rates.

Both the revenue and adjusted earning per share figures topped Wall Street estimates.

The company said its operating income was $1.09 a share if charges were excluded for the integration of acquisitions and the tax impact of the recently enacted health care reforms.

Analysts had forecast a profit of 83 cents per share on revenue of $3.06 billion. Analysts typically exclude one-time items from their estimates.

After rising to a 52-week high of $81.78 in morning trading, shares closed at $78.31, down 84 cents, or 1.1 percent.

Jeffrey Hammond, an analyst with KeyBanc Capital Markets, said the price swing reflected strong expectations and selling when the positive report was digested.

Cutler said there was “a lot of anticipation of very strong results here for the first quarter.”

Eaton expects second-quarter net income of $1.05 to $1.15 per share and, for the year, raised its earnings forecast to $4.15 to $4.45 per share.

Analysts expected earnings on average of 95 cents in the second quarter and $4.04 for the year.

Eaton said its end markets grew 4 percent in the most recent quarter and it expects overall growth in end markets of 6 percent for the year.

“In general, we are seeing the strongest growth in Asia and Brazil, while many U.S. markets are starting to accelerate and Europe is recovering more modestly,” Cutler said.

For the year, Eaton expects global automotive markets to grow 15 percent, with U.S. production up 31 percent and production up 6 percent elsewhere.

On the Net: www.eaton.com