As promised, diversified industrial manufacturer Eaton (NYSE:ETN) served up a dish of first-quarter earnings news earlier this week. It was a six-course meal, comprised of tasty numbers for the most part. Sadly, today I play the part of food critic -- the guy who can't just sit down and enjoy the food, but has to complain over a couple of pieces of gristle. Before we get to that, though, let's review the menu, in six courses.

Sales for the quarter increased 5% in comparison with last year's Q1, while profits grew 15%, or as Eaton put it: "well above the top end of our guidance." This broke down as follows:

  • The electrical business grew its sales 12%, with operating profits up 16%.
  • Fluid power sales were up 7%, with operating profits up 20%.
  • Automotive sales increased 2%, while operating profits leapt 19%.
  • Truck sales fell 5%, and operating profits 9%.
  • As you might guess from the above, profit margins held up quite well, with small (10-basis-point) increases at the gross and net levels (for the trailing 12 months) and a flat operating margin.
  • And last but not least, Eaton predicted about $1.40 per share in net profits for next quarter, while raising its full-year guidance by $0.15, to about $6.30 per share.

After all that, you might well ask: What could possibly be bad about this quarter? And indeed, there doesn't seem to be much to complain about. But looking past the points management emphasized, and focusing on the numbers it ignored, I did find a couple of flaws in an otherwise fine quarter. As often proves the case, they were located on the firm's balance sheet.

There I noticed that while sales were up 5% for the quarter, a couple of other numbers -- ones we'd ordinarily like to see tracking or undershooting sales gains -- rose even faster. Specifically, accounts receivable grew 8% year over year, and inventory was up 20%. In each case, the divergence in growth rates bespeaks less-than-superb working capital management, first by failing to collect bills as quickly as one might wish, and second by letting inventory pile up unsold.

We'll likely find additional bad news on Eaton's cash flow statement, as I doubt the inefficient management of Eaton's cash did any wonders for free cash flow generation. But since Eaton declined to include a cash flow statement with its earnings release, we'll need to await its 10-Q filing with the SEC to see just how much damage was done there.

In closing, belated apologies to investors for any indigestion I've caused. While we await the cash flow news, I'll leave you to enjoy the rest of your meal, and wish you good Eaton.

For an alternative view of the company, don't miss our February "This Just In" column on Eaton's twin upgrades.

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Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.