Like other industrial conglomerates including Danaher (NYSE:DHR), Illinois Tool Works (NYSE:ITW), and United Technologies (NYSE:UTX), there is a lot of ground to cover with Eaton (NYSE:ETN). Active in areas ranging from automobile components to electrical equipment to truck transmissions and hydraulic systems, Eaton has its fingers in quite a few pies.
For now, though, all but one of the company's major segments is doing pretty well. That, in turn, translated into 14% revenue growth in the first quarter (9% of it organic) and double-digit growth in both income and earnings per share.
In both Eaton's electrical and fluid power businesses, segment profit growth was greater than 30%. What's more, I don't think there's any immediate reason to expect things to turn sour -- commercial aerospace is improving, and management here believes that the electrical business is just starting to hit the "sweet spot" of this economic cycle.
While Eaton's truck business did all right (operating profits were up 9%), the auto business was weak. Because nearly one-third of the company's revenue here comes from Ford (NYSE:F) and General Motors (NYSE:GM), I don't think the culprit is any great secret. On a longer-term basis, though, I would expect the company to look at increasing its auto business with Asian customers -- something that should help offset what is beginning to look like systemic problems with U.S. companies.
One of the things I find attractive about Eaton is that management has tried to intelligently expand into an array of businesses that do well at different points in the cycle. Of course, we're still talking about an industrial company, and if or when recession comes again, that'll likely be bad for the whole kit and caboodle.
Like many of its peers and competitors (including the likes of Parker-Hannifin (NYSE:PH)), Eaton has had a pretty good run over the last six months. I still think the stock is slightly cheap, but not so much so that I'd seriously consider buying it for myself. All the same, this is a story that seems to be getting better, and if management continues to make progress on its goals of cutting costs, building the Asia business, and further insulating itself from cyclical markets, better days could be ahead.
For more industrial-grade Foolishness:
- Danaher Polishes Off Sybron
- An Electric Quarter for Emerson
- Parker-Hannifin: "Industrial" Isn't a Bad Word
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
