Ohio’s Eaton Corp. 2Q earnings rebound from recession-hit earlier period

Eaton 2Q earnings surge on higher sales

CLEVELAND — Diversified manufacturer Eaton Corp. reported a surge in second-quarter profits Wednesday as global sales increased 16 percent over the same period last year when the entire industry was hammered by the recession.

“As we survey our end markets, the year is shaping up to be better than we had forecast in April,” said Alexander M. Cutler, chairman and CEO.

Shares jumped 6 percent in afternoon trading.

The Cleveland company, which makes hydraulics and electrical equipment used by manufacturers, reported earnings of $226 million, or $1.33 per share, on revenue of $3.4 billion in the April-June period.

Last year Eaton earned $29 million, or 17 cents per share, in the second quarter, on revenue of $2.9 billion.

Excluding acquisition charges, earnings of $1.36 per share easily beat the Wall Street forecast of $1.17.

Reflecting the rosier outlook, the company boosted its guidance and increased its dividend.

Eaton now expects third-quarter income per share of $1.25 to $1.35, with the Wall Street forecast $1.19. For the year, Eaton expects earnings of $4.75 to $4.95 per share, above the recent Wall Street forecast of $4.57.

The quarterly dividend was increased from 50 cents per share to 58 cents.

Despite debt problems in Europe that are likely to slow growth in some markets and the rate of economic growth in China that has moderated slightly, “We anticipate solid global growth continuing during the second half of the year,” Cutler said.

Cutler told analysts that Eaton’s markets are well-positioned to benefit from the economic recovery. “The markets are actually playing right into some of our strengths,” he said.

Cutler cited federal stimulus grants for infrastructure and energy projects that rely on heavy equipment, which taps into company product lines.

However, Cutler conceded that parts distributors are restocking cautiously because they are fearful of another economic downturn that would put them at risk if they were caught short of cash.

“Memories are recent, so people are being prudently cautious about getting overextended,” he told The Associated Press in a phone interview.

“The normal distributor restocking rebound you see in the first year of a recovery will not occur in the first year. It may occur out in the second year.”

For the first six months of the year, Eaton earned $381 million, or $2.24 per share, on sales of $6.5 billion, compared with a six-month 2009 loss of $21 million, or 13 cents a share, on sales of $5.7 billion.

Company shares rose $4.08, or 5.9 percent, to $73.14 Wednesday.

On the Net: www.eaton.com