Eaton (ETN 77.04, +0.91, +1.2%) describes itself as a power management company that helps its customers manage their electrical, hydraulic and mechanical power more efficiently, safely and sustainably. In some respects, Eaton's first quarter earnings report mirrored that corporate approach to doing business as it reflected a company operating more efficiently.
Net sales increased 0.7% to $4.85 billion and net income increased 9% to $0.96 per diluted share. The latter was comfortably ahead of analysts' average expectation thanks in part to segment operating margins increasing 50 basis points to 14.4%. Excluding restructuring costs, segment margins were 14.8%.
The net sales growth wasn't much, yet it was still a big deal for two reasons: (1) it topped analysts' average expectation and (2) it marked the first quarter of revenue growth since the fourth quarter of 2014.
Importantly, there was some organic growth behind the revenue growth. Organic sales increased 2%. Currency translation had a negative impact on net sales growth, yet that impact was not as negative as Eaton had forecast.
Sales for the Electrical products segment increased 2% to $1.7 billion, with organic sales up 3%. Sales for the Electrical Systems and Services segment slipped 1% to $1.3 billion, but organic sales were flat. For the Hydraulics segment, sales rose 7% to $587 million as organic sales increased 9%. Aerospace segment sales declined 4% to $428 million, with organic sales falling 1%. Finally, the Vehicle segment posted sales of $788 million, down 1%, with organic sales down 2%.
In the wake of the first quarter results, Eaton said it is raising its full-year 2017 earnings guidance by $0.15 per share, which is an increase of 3% to the prior midpoint of guidance. That translates into expected net income now between $4.45 and $4.75 per share, with analysts' current average estimate sitting at the low end of that updated guidance range.
For the second quarter, Eaton expects net income per share to be between $1.05 and $1.15.
With today's gain, ETN is up 14.8% year-to-date, placing it well ahead of the S&P 500 (+6.6%) and the S&P 500 Industrials Sector (+5.5%).