Reasons to Add Eaton (ETN) Stock to Your Portfolio Right Now
Eaton Corp. plc ETN, with its rising backlogs, systematic capital expenditure, rising earnings estimates and strong ROE, offers a great investment opportunity in the Industrial Products sector.
Let’s focus on the reasons that make this Zacks Rank #2 (Buy) stock a solid investment pick at the moment.
Growth Projections & Surprise History
The Zacks Consensus Estimate for ETN’s 2024 earnings per share (EPS) has increased 3.2% to $10.56 in the past 90 days. The Zacks Consensus Estimate for ETN’s total revenues for 2024 is pegged at $25.14 billion, which indicates growth of 8.4% from the year-ago levels.
The company’s long-term (three-to-five years) earnings growth is pegged at 12.1%. It delivered an average earnings surprise of 4.7% in the last four quarters.
Capital Investment Plans
Strategic capital investments are making ETN stock stronger and more resilient. Its capital expenditures were $757 million in 2023. The company now expects its capital expenditure to be $800 million for 2024.
Management invested $754 million in R&D programs in 2023 and now has laid out a 10-year plan that includes a $3 billion investment in the same. Courtesy of ongoing R&D expenses, the company is creating new products for its customers that provide efficient power management solution.
Solvency & Liquidity
Eaton’s times interest earned ratio (TIE) at the end of the first quarter of 2024 was 32. The TIE ratio being more than 1 indicates that the company will be able to meet its interest payment obligations in the near term without any problems.
Its current ratio at the end of the first quarter was 1.56. The ratio, being greater than one, indicates the company’s ability to meet its future short-term liabilities without difficulties.
Dividend History
Eaton has been increasing shareholders’ value through solid dividend payments. In February 2024, it announced a quarterly dividend of 94 cents per share, an increase of 9.3% from the previous level of 86 cents, resulting in an annual dividend of $3.76. Its current dividend yield of 1.14% is better than its industry yield of 0.67%.
Rising Backlog
ETN’s solid order activities resulted in a backlog of $11.3 billion in Electrical Americas and $3.4 billion in the Aerospace segment at the end of the first quarter of 2024, up 27% and 11% year over year, respectively. The Electrical Americas and Aerospace segments backlog growth remained strong as orders and the supply chain began to normalize gradually.
Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing its funds to generate higher returns. Currently, Eaton’s ROE of 20.69% compares favorably with its industry’s average of 11.85%. This indicates that the company has been utilizing its funds more constructively than its peers in the industry.
Price Performance
In the past six months, ETN shares have risen 47.2% compared with the industry’s growth of 28.7%.
Other Stocks to Consider
A few other top-ranked stocks from the same sector are AZZ Inc. AZZ and Powell Industries ( POWL), each currently sporting a Zacks Rank #1 (Strong Buy), and Emerson Electric Co. EMR carrying a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
AZZ’s long-term earnings growth rate is pegged at 14%. The Zacks Consensus Estimate for the company’s fiscal 2025 EPS is pegged at $4.83, which reflects an increase of 5.5% in the past 90 days.
POWL’s long-term earnings growth rate is pegged at 10.5%. The Zacks Consensus Estimate for the company’s fiscal 2024 earnings per share is pegged at $9.04, which reflects a rise of 19.9% in the past 90 days.
EMR’s long-term earnings growth rate is pegged at 10.7%. The Zacks Consensus Estimate for the company’s fiscal 2024 earnings per share is pegged at $5.43, which reflects a climb of 0.4% in the past 90 days.
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Emerson Electric Co. (EMR) : Free Stock Analysis Report
Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
AZZ Inc. (AZZ) : Free Stock Analysis Report
Powell Industries, Inc. (POWL) : Free Stock Analysis Report
