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OFFON

EATON CORPORATION PLC

(ETN)
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Eaton : Second quarter 2021 earnings release

08/03/2021 | 06:53am EDT

Eaton Communications Eaton Center Cleveland, OH 44122

tel: +1 (440) 523-4006

jennifertolhurst@eaton.com

Date

August 3, 2021

For Release

Immediately

Contact

Jennifer Tolhurst, Media Relations, +1 (440) 523-4006

Yan Jin, Investor Relations, +1 (440) 523-7558

Eaton Reports Record Second Quarter 2021 Results, Raises 2021 Outlook

  • Eaton Reports Second Quarter Earnings Per Share of $1.26 and Record Second Quarter Adjusted Earnings Per Share of $1.72, Up 98% Over the Second Quarter of 2020
  • Record Second Quarter Segment Margins of 18.6%, 390 Basis Points Above the Second Quarter of 2020
  • Raising Adjusted Earnings Per Share Guidance for 2021 to $6.73 at the Midpoint, Up 37% Over 2020
  • Raising Full Year 2021 Operating Cash Flow by $200 Million Above Previous Guidance at the Midpoint

DUBLIN, Ireland … Power management company Eaton Corporation plc (NYSE:ETN) today announced that earnings per share were $1.26 for the second quarter of 2021. Excluding charges of $0.25 per share related to intangible amortization, $0.18 per share related to acquisitions and divestitures, and $0.03 per share related to a multi-year restructuring program, adjusted earnings per share were a second quarter record of $1.72, up 98% over the second quarter of 2020 and up 19% over the first quarter of 2021.

Sales in the second quarter of 2021 were $5.2 billion, up 35% from the second quarter of 2020. The sales increase consisted of 27% growth in organic sales, 5% growth from acquisitions, and 3% from positive currency translation.

Craig Arnold, Eaton chairman and chief executive officer, said, "Building on the momentum from the first quarter, we achieved strong performance in the second quarter. We delivered

record second quarter adjusted earnings per share and segment margins, and organic sales were slightly above the midpoint of our guidance range despite supply chain constraints impacting many of our businesses. We are pleased with how well our businesses are executing in this environment."

Second quarter segment margins were 18.6% and up 390 basis points over the second quarter of 2020. This result was above the high end of our guidance range, and a second quarter record. These strong segment margins were driven by effectively managing supply chain constraints, increased productivity and continued benefits from the multi-year restructuring program announced in the second quarter of 2020.

Operating cash flow in the second quarter of 2021 was stronger than expected at $637 million and free cash flow was $484 million.

During the quarter, we continued to improve our portfolio of businesses. The company closed the acquisition of Cobham Mission Systems, and the acquisition of a 50% stake in Jiangsu YiNeng Electric's busway business in China, adding new products and growth opportunities for the Aerospace and Electrical Global segments. The Hydraulics sale to Danfoss closed August 2.

"Driven by strong second quarter performance and anticipated higher organic sales for the remainder of the year, we now expect 2021 adjusted earnings per share to be between $6.58 and $6.88, up 37% at the midpoint over 2020," said Arnold. "Additionally, we expect 2021 full year adjusted operating cash flow to be between $2.6 billion and $2.8 billion, up $200 million at the midpoint over our previous guidance. Finally, for the third quarter of 2021, we anticipate adjusted earnings per share to be between $1.72 and $1.82."

Business Segment Results

Sales for the Electrical Americas segment were $1.8 billion, up 24% from the second quarter of 2020. Organic sales were up 15%, the acquisition of Tripp Lite added 8%, and positive currency translation added 1%. Operating profits were $393 million, up 28% from the second quarter of 2020. Operating margins of 21.3% were a second quarter record, up 60 basis points over the second quarter of 2020 and up 190 basis points over the second quarter of 2019.

2

The twelve-month rolling average of orders in the second quarter was up 13%, with particular strength in data center and residential markets. Orders increased 43% over the second quarter of 2020 and 14% over the first quarter of 2021. Backlog at the end of June was a new record and up 43% over June 2020.

Sales for the Electrical Global segment were $1.4 billion, up 28% over the second quarter of 2020. Organic sales were up 22% and positive currency translation added 6%. Operating profits were $259 million, up 46% over the second quarter of 2020. Operating margins of 18.3% were a second quarter record and up 230 basis points over the second quarter of 2020.

The twelve-month rolling average of orders in the second quarter was up 10%, driven by data center, utility and residential markets. During the second quarter, the business experienced strong order growth of 46% over the second quarter of 2020 and 9% over the first quarter of 2021. The June backlog grew 50% over June 2020 and was also a new record.

Aerospace segment sales were $625 million, up 36% from the second quarter of 2020. Organic sales were up 17%, the acquisition of Cobham Mission Systems added 16%, and positive currency translation added 3%. Operating profits were $131 million, up 93% from the second quarter of 2020. Operating margins in the quarter were 21%, up 620 basis points over the second quarter of 2020.

The twelve-month rolling average of orders in the second quarter was down 16%, driven by the downturn in commercial markets. On an organic basis, backlog at the end of June was flat to June 2020. Sequentially, organic orders were up 12% compared to the first quarter of 2021.

The Vehicle segment posted sales of $675 million, up 106% over the second quarter of 2020. Organic sales were up 103% and positive currency translation added 3%. Operating profits were $121 million with operating margins of 17.9%, compared to a loss of $21 million in the second quarter of 2020.

eMobility segment sales were $88 million, up 57% over the second quarter of 2020, driven by organic sales growth of 54% and positive currency translation of 3%. The segment recorded an operating loss of $6 million reflecting continued investment in research and development and ramp up costs associated with new program wins.

3

Eaton's mission is to improve the quality of life and the environment through the use of power management technologies and services. We provide sustainable solutions that help our customers effectively manage electrical, hydraulic, and mechanical power - more safely, more efficiently, and more reliably. Eaton's 2020 revenues were $17.9 billion, and we sell products to customers in more than 175 countries. We have approximately 85,000 employees. For more information, visit www.eaton.com.

Notice of conference call: Eaton's conference call to discuss its second quarter results is available to all interested parties as a live audio webcast today at 11 a.m. United States Eastern Time via a link on Eaton's home page. This news release can be accessed under its headline on the home page. Also available on the website prior to the call will be a presentation on second quarter results, which will be covered during the call.

This news release contains forward-looking statements concerning third quarter and full year 2021 adjusted earnings per share, expected costs and benefits associated with restructuring actions, as well as full year 2021 organic sales and adjusted operating cash flow. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company's control. The following factors could cause actual results to differ materially from those in the forward-looking statements: the course of the COVID-19 pandemic globally and government actions related thereto; unanticipated changes in the markets for the company's business segments; unanticipated downturns in business relationships with customers or their purchases from us; competitive pressures on sales and pricing; unanticipated changes in the cost of material and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; strikes or other labor unrest; natural disasters; the performance of recent acquisitions; unanticipated difficulties completing or integrating acquisitions; new laws and governmental regulations; interest rate changes; changes in tax laws or tax regulations; stock market and currency fluctuations; and unanticipated deterioration of economic and financial conditions in the United States and around the world. We do not assume any obligation to update these forward-looking statements.

Financial Results

The company's comparative financial results for the six months ended June 30, 2021, are available on the company's website, www.eaton.com.

4

EATON CORPORATION plc

CONSOLIDATED STATEMENTS OF INCOME

Three months ended

Six months ended

June 30

June 30

(In millions except for per share data)

2021

2020

2021

2020

Net sales

$

5,215

$

3,856

$

9,907

$

8,645

Cost of products sold

3,545

2,877

6,729

6,179

Selling and administrative expense

876

691

1,671

1,556

Research and development expense

154

126

302

279

Interest expense - net

37

38

75

72

Gain on sale of business

-

-

-

221

Other (income) expense - net

(17)

77

(28)

112

Income before income taxes

620

47

1,158

668

Income tax expense (benefit)

114

(7)

193

176

Net income

506

54

965

492

Less net income for noncontrolling interests

-

(3)

(1)

(3)

Net income attributable to Eaton ordinary shareholders

$

506

$

51

$

964

$

489

Net income per share attributable to Eaton ordinary shareholders

Diluted

$

1.26

$

0.13

$

2.40

$

1.20

Basic

1.27

0.13

2.42

1.21

Weighted-average number of ordinary shares outstanding

Diluted

401.4

401.3

401.2

406.2

Basic

398.8

400.4

398.6

404.8

Cash dividends declared per ordinary share

$

0.76

$

0.73

$

1.52

$

1.46

Reconciliation of net income attributable to Eaton ordinary shareholders

to adjusted earnings

Net income attributable to Eaton ordinary shareholders

$

506

$

51

$

964

$

489

Excluding acquisition and divestiture charges, after-tax

72

80

109

89

Excluding restructuring program charges, after-tax

11

148

23

148

Excluding intangible asset amortization expense, after-tax

101

67

171

134

Adjusted earnings

$

690

$

346

$

1,267

$

860

Net income per share attributable to Eaton ordinary shareholders - diluted

$

1.26

$

0.13

$

2.40

$

1.20

Excluding per share impact of acquisition and divestiture charges, after-tax

0.18

0.20

0.27

0.22

Excluding per share impact of restructuring program charges, after-tax

0.03

0.37

0.06

0.37

Excluding per share impact of intangible asset amortization expense, after-tax

0.25

0.17

0.43

0.33

Adjusted earnings per ordinary share

$

1.72

$

0.87

$

3.16

$

2.12

See accompanying notes.

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Eaton Corporation plc published this content on 03 August 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 August 2021 10:52:09 UTC.


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Managers and Directors
Craig Arnold Chairman & Chief Executive Officer
Thomas Bernard Okray Chief Financial Officer & Executive Vice President
Raja Ramana Macha Chief Technology Officer & Executive VP
Katrina R. Redmond Chief Information Officer & Senior Vice President
Joe Rodgers Senior Vice President-Ethics & Compliance
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