As 2013 begins, now's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.
Today, I'll look at Eaton (ETN 1.90%). The electrical component maker had an electric performance in 2012 as it pulled off a massive buyout of equipment maker Cooper Industries. But will the company be able to integrate Cooper and justify its high price? Below, you'll learn more about Eaton's prospects for 2013.
Stats on Eaton
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| |
|---|---|
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Average Stock Target Price |
$58.56 |
|
Full-Year 2012 EPS Estimate |
$4.09 |
|
Full-Year 2013 EPS Estimate |
$4.40 |
|
Full-Year 2012 Sales Growth Estimate |
0.8% |
|
Full-Year 2013 Sales Growth Estimate |
27.8% |
|
Forward P/E |
12.7 |
Source: Yahoo Finance.
Will lightning strike for Eaton in 2013?
Analysts are cautiously optimistic about Eaton's prospects for the near future. Their target price on the stock is just 5% above where it trades currently, but even though the revenue figures largely reflect the Cooper buyout rather than organic growth, a modest boost to earnings would give Eaton a nice tailwind this year.
One promising sign that Eaton has already seen is that inventories of heavy machinery have started to fall, showing that buyers are finally making capital expenditures to boost their production capacity. That's good news not only for Caterpillar (CAT 0.07%) and Deere (DE -0.65%), which received upgrades from analyst firm ISI Group last week, but also for Eaton and its component business.
Still, Eaton will have to deal with plenty of competition in 2013. Emerson Electric (EMR -0.14%) isn't going through the challenge Eaton faces of digesting a major acquisition, arguably leaving Emerson in a position to be more nimble about its strategic moves this year and beyond. Moreover, with General Electric (GE -2.11%) being an ever-present wild card in the industry, especially as it starts to contemplate a move toward heavy equipment of its own, Eaton will have to stay on its toes and be ready to respond to whichever direction GE chooses for itself.
Overall, how Eaton does in 2013 will depend on how well it can take advantage of the opportunities that the Cooper buyout opens up. If the economy cooperates, it could be a perfect time for Eaton to thrive.
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