Eaton Corp. (NYSE:ETN) announced net income per share of $0.83 for the first quarter of 2011, an increase of 80% over the first quarter of 2010. Sales in the quarter were $3.8 billion, 23% above the same period in 2010. Net income was $287 million, up 85% over the first quarter of 2010.
Net income in both periods included charges for integration of acquisitions. Before acquisition integration charges, operating earnings per share in the first quarter of 2011 was $0.84, an increase of 75% over the first quarter of 2010. Operating earnings for the first quarter of 2011 were $289 million, an increase of 80% over 2010.
Alexander M. Cutler, Eaton chairman and CEO, said, “We had a strong first quarter, with earnings per share above the high end of our increased earnings guidance provided at the end of February. Our markets enjoyed strong growth during the first quarter, increasing 14% compared to the first quarter of 2010. The sales growth in the first quarter of 23% consisted of 19% organic growth, 2% from acquisitions, and 2% from higher foreign exchange rates.
“Our Electrical Americas, Hydraulics, and Truck markets grew more strongly than anticipated and we are increasing our expectations for the growth of these three markets in 2011,” said Cutler. “As a result, we now anticipate our markets for all of 2011 will grow by 10%.
“We anticipate net income per share for the second quarter of 2011 to be between $0.89 and $0.95 and operating earnings per share, which exclude charges to integrate our recent acquisitions, to be between $0.90 and $0.96. As a result of our strong first quarter and our slightly stronger market outlook for the year, we are raising our full year guidance by $0.15 for net income per share to between $3.66 and $3.96 and for operating earnings per share to between $3.70 and $4.00.”
Business Segment Results
Sales for the Electrical Americas segment were $964 million, up 20% over 2010. The sales increase was made up of a 15% increase in core sales, 4% from acquisitions, and 1% from foreign exchange. Operating profits were $132 million. Excluding acquisition integration charges of $3 million during the quarter, operating profits were $135 million, up 27% over the first quarter of 2010.
“End markets for our Electrical Americas segment grew 14% in the first quarter,” said Cutler. “We saw solid growth in our industrial markets, and we continue to believe nonresidential construction activity is on track to begin recovering by the middle of this year.
“Our bookings in the Electrical Americas segment were up 21% from the first quarter a year ago,” said Cutler. “We are revising our estimate of the growth in 2011 of the Electrical Americas markets to 7%, 1% higher than our prior estimate.”
Sales for the Electrical Rest of World segment were $743 million, up 22% over the first quarter of 2010. Our Electrical Rest of World markets grew 9% in the quarter. The segment reported operating profits of $70 million, compared to operating profits of $42 million in the first quarter of 2010. Bookings in the quarter grew 9% over the first quarter of 2010.
“During the quarter, we reached agreement to acquire ACTOM (Pty) Limited’s low-voltage electrical business in South Africa,” said Cutler. “This acquisition provides us with a solid position in the South African electrical market, as well as a platform for growth in southern Africa.”
Hydraulics segment sales were $685 million, an increase of 40% compared to the first quarter of 2010. Global hydraulics markets increased 27% in the quarter compared to the first quarter of 2010. Operating profits in the first quarter were $106 million, an increase of 96% over the first quarter of 2010.
“The hydraulics markets in the first quarter continued their ‘V’ shape recovery from the sharp downturn of 2008-2009,” said Cutler. “Bookings in the quarter grew 39% over the first quarter of 2010, establishing a new quarterly bookings record. For all of 2011, we now believe hydraulics markets are likely to grow by 18%, up from our prior estimate of 16%.
“We were particularly pleased with the record quarterly margin of 15.5%,” said Cutler. “We believe this business is likely to earn margins of this level for the full year.
“We completed the acquisition of Tuthill Couplings on January 1,” said Cutler. “This acquisition further expands our offerings of hydraulic and pneumatic quick connect coupling solutions.
“We signed an agreement in March to acquire Internormen Technology Group, a leader in hydraulic filtration and instrumentation based in Germany,” said Cutler. “This acquisition significantly expands our portfolio of filtration products and adds additional presence in emerging markets.”
Aerospace segment sales were $389 million, up 3% over the first quarter of 2010. Aerospace markets grew 2% compared to the first quarter of 2010. Operating profits in the first quarter were $45 million, a decline of 8% compared to a year earlier.
“Our margins in Aerospace were impacted during the quarter by increased expenses stemming from changes in scope, program delays, and execution of new customer programs,” said Cutler. “We anticipate that margins will likely improve by the second half of the year.
“We were pleased to establish our new joint venture in China with Shanghai Aircraft Manufacturing Co., Ltd., a subsidiary of Commercial Aircraft Corporation of China (COMAC), to produce products for the new COMAC C919 single-aisle passenger aircraft,” said Cutler. “The joint venture will focus on the design and manufacture of fuel and hydraulic conveyance systems.”
The Truck segment posted sales of $576 million, up 27% compared to the first quarter of 2010. Truck markets increased by 20% in the first quarter. The segment reported operating profits in the first quarter of $90 million, an increase of 96% over the first quarter of 2010.
“U.S. truck markets accelerated in the first quarter, growing 36% compared to the first quarter in 2010 and 16% over the fourth quarter of 2010,” said Cutler. “Our non-U.S. markets grew 9%.
“We were pleased with the 15.6% operating margin our Truck segment posted in the first quarter,” said Cutler. “As the NAFTA Class 8 market continues to expand over the course of this year, we believe margins will improve even further.”
The Automotive segment posted first quarter sales of $446 million, up 19% from the first quarter of 2010. Global automotive markets were up 13%. The segment reported operating profits of $50 million, up 19% compared to the first quarter of 2010.
“Global auto markets posted strong growth in the first quarter,” said Cutler. “U.S. markets grew 17% while markets outside the U.S. grew 12%.”