Cleveland—Eaton Corp. (NYSE:ETN) announced net income per share of $0.91 for the first quarter of 2012, an increase of 10% over the first quarter of 2011. Sales in the quarter were a first quarter record of $4.0 billion, 4% above the same period in 2011. Net income was $311 million, up 8% over the first quarter of 2011.
Net income in both periods included charges for integration of acquisitions. Before acquisition integration charges, operating earnings per share in the first quarter of 2012 were $0.92, an increase of 10% over the first quarter of 2011. Operating earnings for the first quarter of 2012 were $313 million, an increase of 8% over 2011.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, “We set first quarter records in sales, segment operating margins and earnings per share. Our earnings per share in the first quarter exceeded the high end of our earnings guidance.
“Our markets grew modestly during the first quarter, increasing 4% over the first quarter of 2011,” said Cutler. “The 4% sales growth in the first quarter consisted of 4% organic growth and 1% growth from acquisitions, partially offset by a 1% decline from lower foreign exchange rates.
“We entered 2012 expecting it would be a year of subpar global economic growth, leading to approximately 5% growth in our markets,” said Cutler. “We continue to believe that for the full year markets will grow 5%, but we now believe the rate of growth in our U.S. markets will be higher than originally expected and the rate of growth in our non-U.S. markets will be lower than originally expected.”
“We anticipate operating earnings per share for the second quarter of 2012, which exclude charges to integrate our recent acquisitions, to be between $1.05 and $1.15, and net income per share to be between $1.04 and $1.14. Having raised our full year operating earnings per share guidance by $0.05 in February, we are now raising our guidance by an additional $0.10 to between $4.30 and $4.70, and for net income per share to between $4.23 and $4.63.
“For full year 2012, we expect another record year, with revenue growth of 7.5% and operating earnings per share growth of 14%,” said Cutler. “These growth numbers represent strong performance in an uncertain global growth environment.”
Selected business segments
Hydraulics segment sales were $735 million, an increase of 7% compared to the first quarter of 2011. Global hydraulics markets increased 4% in the quarter compared to the first quarter of 2011. Operating profits in the first quarter were $109 million. Excluding acquisition integration charges of $1 million, operating profits were $110 million, an increase of 4%.
“The hydraulics markets in the first quarter grew about as expected,” said Cutler. “Our bookings in the quarter declined 15% from the first quarter of 2011, as bookings in the first quarter last year reflected orders placed by OEM customers to rebuild their order backlog with suppliers. For all of 2012, we now believe hydraulics markets will grow by 5%, up 1% over our previous estimate.
“We announced the acquisition of Turkish hose manufacturer Polimer Kaucuk (SEL) in late February,” said Cutler. “This acquisition further expands our portfolio of hydraulic and industrial hoses and greatly expands our global hose manufacturing footprint.
“Early in April, we signed an agreement to acquire substantially all the shares of Korean hydraulics manufacturer Jeil Hydraulics,” said Cutler. “This acquisition provides us with a well-established portfolio of hydraulics components for the construction equipment market in Asia.
“We are excited to add SEL and Jeil to Eaton,” said Cutler. “Together, they will add approximately $525 million of annual revenue.”
Aerospace segment sales were $430 million, up 11% over the first quarter of 2011. Aerospace markets grew 6% compared to the first quarter of 2011. Operating profits in the first quarter were $60 million, an increase of 33% compared to a year earlier.
“As we expected, the rapid growth of commercial OEM sales, greatly in excess of the aftermarket, caused our operating margin in Aerospace to be lower than it typically is,” said Cutler. “We expect margins to improve slightly in the balance of the year.
“We continue to believe that our aerospace markets will grow by 5% for all of 2012,” said Cutler.
The Truck segment posted sales of $631 million, up 10% compared to the first quarter of 2011. Truck markets increased by 11% in the first quarter. The segment reported operating profits in the first quarter of $116 million, an increase of 29% over the first quarter of 2011.
“U.S. truck markets continued their rapid growth in the first quarter, with NAFTA Class 8 production growing 50% compared to the first quarter in 2011 and 3% over the fourth quarter of 2011,” said Cutler. “Our non-U.S. markets declined 7%, driven by lower production in Brazil following the prebuy at the end of 2011. In light of the soft conditions in Brazil, for all of 2012 we now expect our truck markets to grow 7%, compared to our previous forecast of 9% growth.”