What happened
Eaton Corporation plc (ETN +2.50%) shares rose 11% in July according to data provided by S&P Global Market Intelligence. The power management specialist reported earnings on July 31, but as competitors like Honeywell started to report strong quarterly results earlier in the month investor anticipation for a good showing from Eaton increased. That pushed Eaton's shares higher toward the end of July with the company's earnings release, which lived up to expectations, giving a nice pop to close out the month and pushing the monthly gain over 10%.
So what
Eaton's $1.39 per share in earnings in the second quarter of 2018 represented an impressive 21% gain over the same period in the prior year. Net income was up 18%. Both were above the high end of management's guidance range. Organic sales growth, meanwhile, was 7%, the highest it's been since 2011.
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The industrial company saw strength across each of its six businesses, with the hydraulics segment, a one time trouble spot, showing a continued rebound. What was most exciting, however, was the company's outlook for the rest of the year. For starters, Eaton upped its earnings guidance by $0.10 a share. It also increased its organic growth expectations in three of its businesses. And management highlighted that it believes most of its operations are in the early to mid point of their cycles, suggesting that there's several years of growth ahead for the industrial giant.
Now what
Eaton's 3.2% yield remains compelling for income investors. As does its relative valuation, with its price to earnings ratio of around 11.5 below its five year average. It's forward price to earnings ratio, meanwhile, is below that of the industrial group as tracked by Vanguard Industrials ETF, an exchange traded fund that follows the industrial sector. The company's positive results and strong outlook suggest that investors looking to put money to work today would do well to do a deep dive into Eaton Corp.
