I found it enlightening being on Eaton’s 2010 Q4 earnings call this morning. Sandy Cutler, Eaton’s Chairman and CEO, said that the hybrid market had grown mostly in foreign markets where governments were helping to subsidize green efforts. But he wasn’t all roses about hybrids.
“The hybrid market has not grown as quickly as we’ve hoped,” he said.
Cutler noted that the strongest part of the hydraulic market for Eaton in 2010 was in the mobile hydraulics sector. He also talked a bit about prospective acquisition strategies. Eaton’s cash flow and balance sheet seem to show that the company is now well-poised to make a splash with a big acquisition—if it finds the right target.
“I wouldn’t take [the possibility of a big acquisition] off the table,” he said.
But most fascinating to me were his comments on how difficult it has been to track market indices, especially in the hydraulics business. According to Cutler, this is because there was a massive destocking of products in 2008 and 2009 due to the enormous economic slowdown. So production is certainly on the upswing, but a portion of that is helping to restock the shelves.
The tricky part is figuring out how much growth to attribute to the restocking and how much to orders. But to me, the mere fact that distributors are in restocking mode says good things for fluid power in 2011 and 2012.