Eaton Raises Outlook as Second-Quarter Sales Climb 21%
Organic growth reached 14% as demand strengthened across Eaton’s electrical businesses.
Eaton (ETN), the intelligent power management company, raised its full-year organic-growth outlook after second-quarter sales reached $8.53 billion.
Sales rose 21% from a year earlier, accelerating from 17% growth in the first quarter and 13% in the fourth quarter. Organic growth quickened to 14% from 10% and 9%, respectively, while acquisitions supplied 7 percentage points of growth and foreign exchange contributed none.
GAAP diluted earnings fell to $2.11 a share from $2.51 a year earlier, while adjusted earnings increased to $3.15 from $2.95. Acquisition-and-divestiture charges rose to $0.49 a share from $0.14, and intangible-amortization expense doubled to $0.50 a share. Segment margin improved 40 basis points from the first quarter to 23.1%, though it declined 80 basis points from a year earlier.
Electrical Americas remained the main organic-growth engine. Organic sales increased 18%, up from 14% in the first quarter, and operating margin expanded sequentially to 27.5% from 25.6%. Orders grew 41%, while backlog growth moderated to 33% from 44% in the prior quarter.
Electrical Global sales climbed 44% as organic growth doubled to 18% and the Boyd Thermal acquisition contributed 25 percentage points. Operating margin rose to 19.8%, while order growth accelerated to 33% and backlog increased 103%. Aerospace sales advanced 13%, operating profit rose 16%, and margin expanded 60 basis points to 22.8%.
Mobility provided a different mix: organic sales declined 2%, currency added 2%, and reported sales held at $841 million. Operating profit still increased 7%, lifting margin 90 basis points to 13.0%. Eaton changed the planned separation of the business from a standalone spinoff to a Reverse Morris Trust combination with Dana, which is expected to close in the first quarter of 2027. Eaton is to receive about $1.1 billion, and its shareholders are expected to own at least 50.1% of the combined company.
Eaton now expects full-year organic growth of 11% to 13%, up from 9% to 11%, and continues to project segment margin of 24.1% to 24.5%. Adjusted earnings guidance rose to $13.40 to $13.60 a share from $13.05 to $13.50, while GAAP guidance declined to $10.36 to $10.56 as acquisition, divestiture, and amortization adjustments increased.
Free cash flow rose 22% to $874 million, and operating cash flow increased 23% to $1.13 billion. That cash generation accompanied faster organic growth even as transaction-related costs weighed on reported earnings.