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Eaton Corp plc (ETN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered record adjusted EPS of $2.83, near the high end of guidance, with record segment margins of 24.7% despite ~$80M sales headwinds from Hurricane Helene and aerospace labor strikes .
  • Electrical Americas and Aerospace backlogs rose 29% and 16% YoY, respectively; book-to-bill remained >1.0, sustaining multi-quarter demand visibility and supporting 2025 organic growth guidance of 7–9% and segment margins of 24.4–24.8% .
  • Q1 2025 guidance: organic growth 5.5–7.5%, segment margins 23.7–24.1%, EPS $2.30–$2.40, adjusted EPS $2.65–$2.75 .
  • Management flagged accelerating data center demand (hyperscalers’ 2025 CapEx ~$300B) and seven-year backlog consumption at 2024 build rates, with capacity adds and supply chain normalization shifting constraints toward labor availability .

What Went Well and What Went Wrong

What Went Well

  • Record adjusted EPS ($2.83, +11% YoY) and record segment margins (24.7%, +190 bps YoY) on strong execution, with cash flow records (OCF $1.6B, FCF $1.3B) .
  • Electrical Americas posted record sales ($2.9B, +9% YoY) and margins (31.6%, +310 bps), with orders +16% and backlog +29% organically (book-to-bill 1.2) .
  • Data center momentum accelerating: backlog up 50% YoY; hyperscalers’ CapEx outlook ~$300B for 2025; seven-year backlog consumption at 2024 build rates .

Quotes:

  • “We delivered on our commitments…record segment margins and strong earnings per share.” — Craig Arnold, CEO
  • “Our backlog is rapidly increasing, up 50% over prior year…” — Craig Arnold, on data centers

What Went Wrong

  • Q4 sales were negatively impacted by Hurricane Helene and aerospace strikes (~$80M/~130 bps); FX was a 1% headwind .
  • Vehicle (-10% sales YoY) and eMobility (-11% sales YoY) faced demand weakness and launch delays despite margin efficiency in Vehicle .
  • Electrical Global margins (17.7%) trailed Americas due to mix; management noted Europe short-cycle exposure and aims to lift margins via restructuring and volume .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Billions)$5.967 $6.345 $6.240
Diluted EPS ($)$2.35 $2.53 $2.45
Adjusted EPS ($)$2.55 $2.84 $2.83
Segment Margins (%)— (Q4 2024 is +190 bps YoY) 24.3 24.7
Operating Cash Flow ($USD Billions)$1.298 $1.308 $1.597
Free Cash Flow ($USD Billions)$1.055 $1.126 $1.342

Notes:

  • Organic growth +6%; FX (-1%); hurricane/strike headwind ~$80M/~130 bps .

Segment performance (Q4 2024):

SegmentNet Sales ($USD Millions)YoYOperating Profit ($USD Millions)Operating Margin (%)YoY Margin Change
Electrical Americas$2,905 +9% $918 31.6 +310 bps
Electrical Global$1,569 +4% $277 17.7 —
Aerospace$971 +9% $222 22.9 +50 bps
Vehicle$647 -10% $122 18.8 +90 bps
eMobility$147 -11% $3 1.8 —

KPIs and Orders/Backlog:

KPIElectrical AmericasElectrical GlobalAerospace
Rolling 12M Orders Growth (%)+16 +4 +10
Backlog YoY Growth (%)+29 +16 +16
Book-to-Bill (Rolling 12M)1.2 1.1 1.1
Total Backlog ($USD Billions)Electrical $11.8B; Aerospace $3.7B

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Growth (%)FY 2025End markets +6–8% (framework) Company organic +7–9% New company guide above end-market framework
Segment Margins (%)FY 2025—24.4–24.8 New
EPS ($)FY 2025—$10.60–$11.00 New
Adjusted EPS ($)FY 2025—$11.80–$12.20 New
Free Cash Flow ($)FY 2025—$3.7B–$4.1B New
Share Repurchases ($)FY 2025—$2.0B–$2.4B New
Tax Rate (%)FY 2025~18% (framework) ~18% (framework maintained) Maintained
Organic Growth (%)Q1 2025—5.5–7.5 New
Segment Margins (%)Q1 2025—23.7–24.1 New
EPS ($)Q1 2025—$2.30–$2.40 New
Adjusted EPS ($)Q1 2025—$2.65–$2.75 New
Electrical Americas Organic Growth Midpoint (%)FY 2025—~11.5 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
AI/Data Center DemandQ2: Mega projects and NordicEPOD investment; backlog build; capacity adds . Q3: Data center sales +35%, orders +55%, negotiations +90% .Backlog +50% YoY; hyperscalers’ CapEx ~$300B 2025; seven years to consume backlog at 2024 build rates .Accelerating; multi-year visibility improving
Supply Chain & Lead TimesCapacity investments (>$1B incremental); lead times elevated; backlog growing (Electrical $11.8B) .Internal supply chains largely back to pre-COVID; constraints pivoting to labor; lead times remain above historical but competitive .Improving; bottleneck shifting to labor
Utility End MarketsQ2/Q3: strong growth; Electrical Americas mid-teens; Global low-teens .2025 outlook: high single-digit utility growth overall; double-digit in high value products; China utility investment robust .Resilient; mixed by product tier
Regional Trends (Europe/APAC)Q2: APAC strength; Europe short-cycle weakness . Q3: APAC double-digit; EMEA mid-single-digit .Electrical Global organic +5.5%; margins impacted by mix; aim to lift via restructuring and volume; Europe short-cycle bottoming .Gradual normalization; margin repair targeted
AerospaceQ2/Q3: strong sales; strike impact noted; margins mixed .Q4 margins 22.9% (+50 bps YoY); 2025 growth led by OEM; aftermarket high single-digit; strike impact timing-only .Healthy; execution focus
Tariffs/Macro Preparedness—Playbook ready; production closer to consumption; commercial actions to offset if needed .Monitored; contingency plans in place
Home Electrification/ProductsQ3: Home-as-a-grid strategy; AbleEdge smart breakers (Tesla collaboration) .Reinforces secular pull for residential electrification; IRA incentives supportive .Structurally additive to Electrical

Management Commentary

  • “We continue to see positive market activity with orders at high levels and ongoing backlog strength.” — Craig Arnold .
  • “Hyperscale customers alone expect to spend almost $300 billion in CapEx in 2025…at 2024 build rates, it would take 7 years to consume the current [data center] backlog.” — Craig Arnold .
  • “We are back to where we were pre‑COVID [supply chains]…our suppliers have responded…labor continues to be somewhat constrained.” — Craig Arnold .
  • “Electrical Americas will accelerate a bit in the second half because of extra capacity we are adding…Global likely picks up with European recovery.” — Paulo Sternadt .

Q&A Highlights

  • Growth cadence: H1/H2 EPS split 48%/52%; Q1 sequential EPS decline guided ~4% vs historical ~10–11% on growth investments and merit increases .
  • Capacity/lead times: Multiyear capacity adds across product lines; lead times above historical but competitive; more capacity online in 2H 2025; bottlenecks shifting to labor .
  • Mega projects: 2024 mega project sales doubled to >$600M; negotiation pipeline +60% YoY; cancellations ~11% below historical .
  • Data center shipping/visibility: Multiyear agreements with hyperscalers; shipments phased with site readiness (transformers/switchgear earlier; UPS later) .
  • Tariffs: Production near consumption; commercial actions to offset tariff impacts if necessary .

Estimates Context

  • Wall Street consensus from S&P Global was unavailable at the time of analysis due to a system limit. As a result, we cannot quantify beats/misses versus consensus for Q4 2024 or 2025/2025 Q1 estimates. Values retrieved from S&P Global were not accessible.
  • Directionally, Q4 adjusted EPS was at the high end of company guidance ($2.78–$2.84), and segment margins exceeded the guidance range, which typically supports upward estimate revisions for 2025 margins and Electrical Americas growth .

Key Takeaways for Investors

  • Demand visibility is exceptionally strong across Electrical and Aerospace with backlogs up 27% and 16%, respectively, and book-to-bill >1.0, underpinning the FY 2025 guide for 7–9% organic growth and 24.4–24.8% segment margins .
  • Data center secular tailwinds continue to accelerate; management cites hyperscalers’ ~$300B CapEx in 2025 and years-long backlog consumption, with Eaton’s capacity investments aimed at avoiding being an industry bottleneck .
  • Short-term trading: Q1 2025 EPS guide implies a milder-than-usual sequential dip (~4% vs ~10–11% historically) on proactive growth investments; investors may see through near-term margin noise tied to capacity ramp-ups .
  • Medium-term thesis: Mix shift toward higher-value Electrical offerings, restructuring benefits, and operational efficiencies should support further margin expansion beyond 2024 records, especially in Electrical Americas and targeted repairs in Electrical Global and Aerospace .
  • Watch points: Labor availability as a key constraint, European short-cycle recovery pace, and execution on staggered capacity adds (2H 2025 heavy) .
  • Capital returns: 2025 free cash flow guide of $3.7–$4.1B and buybacks of $2.0–$2.4B provide support to EPS growth and flexibility for bolt-on M&A in Electrical and Aerospace .
  • Utilities and residential electrification are durable supports; utility growth high single-digit overall (double-digit in high value segments), with residential electrification and IRA incentives adding a structural tailwind .