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Tickers in this Article: ETN
In the lead up to Eaton's (NYSE:ETN) announcement of its third quarter earnings on Wednesday, October 31, 2012 analysts' expectations have fallen over the past month to earnings of $1.09 per share from earnings of $1.11 per share.

Investors care about earnings because they drive stock prices. Strong earnings generally result in the stock price moving up and vice versa. SEE: Surprising Earnings Results

What to Expect: Eaton is expected to report $1.09 per share, up 1.9% from a year ago when the company reported earnings of $1.07 per share.

This is a drop from the consensus estimate three months ago of $1.12. For the fiscal year, analysts are expecting earnings of $4.25 per share.

Revenue is expected to exceed last year's figure of $4.12 billion by 2.1% and come in at $4.21 billion for the quarter. Eaton is expected to report revenue of $16.4 billion for the fiscal year.

Company Performance: In the second quarter, Eaton broke a three-quarter growth streak with a year-over-year decline in revenue. After rising 4.1%in the first quarter, 10.1% in the fourth quarter of the last fiscal year and 15.5% in the third quarter of the last fiscal year, it fell 0.5% in the most recent quarter.

ETN's P/E ratio of 10.8 is under the industry average of 13.69. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. Price/earnings ratios (P/E ratios) provide a measure of the relative value of a stock. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: The P/E Ratio: A Good Market-Timing Indicator

The stock price has risen from $43.93 on July 30, 2012 to $45.42 over the past quarter. Eaton's stock price is on a downward streak. The share price has fallen $1.32 since October 17, 2012.

The Competition: Eaton is a power management company offering services in the sectors of electricity, hydraulics, aerospace, truck, and automotive. Analysts are optimistic about Eaton, with 11 of 15 assigning it a buy rating. This rating hasn't changed in three months.

The company's closest competitor in the electronic instr. and controls industry is Magnetek (MAG). Analysts are more optimistic about Eaton than about Magnetek. Only zero out of one analysts rate the latter a buy.

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