Power management company Eaton Corporation plc (NYSE:ETN) today announced that earnings per share were $1.09 for the fourth quarter of 2019. Excluding charges of $0.28 per share for acquisition and divestiture transaction and integration costs, and $0.09 per share for expected vehicle warranty costs, earnings per share were $1.46. This is flat with earnings per share in the fourth quarter of 2018.
Sales in the fourth quarter of 2019 were $5.2 billion, down 4 percent from the fourth quarter of 2018. Organic sales were down 4 percent. Acquisitions added ½ percent to sales, which was offset by negative currency translation of ½ percent.
Craig Arnold, Eaton chairman and chief executive officer, said, “Our earnings per share of $1.46, excluding charges for acquisition and divestiture costs and expected vehicle warranty costs, were at the high end of our guidance despite market growth coming in weaker than our expectations. Segment margins were 16.4 percent, while our segment margins excluding the above charges were 17.8 percent. This is above the high end of our guidance range and a 40 basis point improvement over the fourth quarter of 2018.”
“During the fourth quarter, the company recorded a pre-tax charge of $50 million for expected warranty costs in our Vehicle segment,” said Arnold. “The costs are being incurred to correct the performance of a product which incorporated a defective part from a supplier.”
“For full year 2019, sales were $21.4 billion, down 1 percent from 2018 with flat organic sales and negative currency translation of 1 percent,” said Arnold. “Segment margins were 17.2 percent. Segment margins excluding charges for acquisition and divestiture transaction and integration costs and the expected vehicle warranty costs were 17.6 percent, an all-time record and up 80 basis points over 2018.”
“We made a number of major portfolio changes during 2019,” said Arnold. “We sold our Automotive Fluid Conveyance business and signed an agreement to sell our Lighting business. And in January 2020, we announced the sale of our Hydraulics business. The Lighting sale is expected to close in the first quarter of 2020, following receipt of the last regulatory approvals, and the Hydraulics sale is expected to close by the end of the year. We also acquired three businesses during 2019, investing $1.2 billion, and announced just yesterday the acquisition of Power Distribution, Inc. The costs in 2019 associated with all these transactions were $198 million.”
“Earnings per share for 2019 were $5.25. Excluding charges of $0.42 per share for acquisition and divestiture transaction and integration costs, and $0.09 per share for the expected vehicle warranty costs, earnings per share were $5.76. This represents a 7 percent increase over 2018 earnings per share, excluding the impact of the 2018 arbitration decision,” said Arnold. “Operating cash flow was $3.5 billion, and free cash flow was $2.9 billion, both all-time records. Share repurchases in 2019 totaled $1.0 billion, representing 3 percent of shares outstanding at the beginning of the year.”
“Looking at 2020, we expect our organic revenues to be between down 1 percent and up 1 percent versus 2019. The divestitures of our Lighting and Automotive Fluid Conveyance businesses are expected to reduce our sales by 7½ percent while the acquisitions of Souriau-Sunbank, Ulusoy, Innovative Switchgear, and Power Distribution, Inc. are expected to add approximately 2 percent to sales,” said Arnold. “We anticipate adjusted segment margins, which exclude acquisition and divestiture costs, to be between 17.8 percent and 18.2 percent, representing at the midpoint a 40 basis point improvement over 2019, excluding the impact in 2019 of vehicle warranty costs.”
“We expect 2020 adjusted earnings per share to be between $5.60 and $5.90, flat at the midpoint with 2019, excluding the 2019 vehicle warranty costs,” said Arnold. “We anticipate adjusted earnings per share for the first quarter of 2020 to be between $1.16 and $1.26, a 4 percent decrease at the midpoint from the first quarter of 2019.”
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SOURCE: Eaton
