Eaton PLC Earnings Call Insights: Outgrowth vs Markets and Third-Quarter Outlook
Eaton Corporation PLC (NYSE:ETN) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Outgrowth vs Markets
Steve Winoker – Sanford Bernstein: A lot to cover here, but just maybe first on the outgrowth versus the markets. You’ve talked obviously a lot about the market weakness that you experienced, but traditionally you’ve given us a very good flavor on how you think Eaton has done relative to those markets. Could you maybe provide some color across the portfolio about how you think you did on a relative basis and why?
Alexander M. Cutler – Chairman and CEO: Steve, we indicated in our first quarter this year that we would not be providing kind of the quarterly breakouts on that during this year. We will do so at year-end. And really the reason why is that we’ve got a number of new businesses and a very large number of data streams that I can tell you with what’s just been issued this week in terms of the rebasing of so many of our traditional data streams, it’s very difficult for us to do that on a quarterly basis. So our sense is, I can tell you across our businesses that we’re doing well on these businesses but we don’t have an ability to quantify it this year.
Steve Winoker – Sanford Bernstein: Maybe talk a little bit about what you are seeing in non-res specifically. I mean, you talked about it being weaker than your prior expectations. What do you think is driving that? What are you anticipating? Are you seeing any inflection points there?
Alexander M. Cutler – Chairman and CEO: Yeah, I would say, not an inflection point, but I would say, certainly, on the government side, on those projects that are government-financed, you are seeing a negative number in that segment. And so the private put in place, if you will, is stronger than this 2% to 3%. But you’re seeing a government side which is on the order of sort of a negative 5% to 6% and that is providing, I guess, I would say, some downward pressure on that. We see a lot of projects being talked about, a lot of projects being bid. But there is some caution I guess I would say in the marketplace that I think is very much what we’re seeing broadly across our businesses here in the U.S. where people aren’t quite sure how to really continue to invest in a GDP that’s clearly not going to reach 2% this year. So, I think that degree of caution while you find individual segments where people are very bullish, you’ll see other areas where people are really kind of biting their time. And so, I’d say, it’s not a lack of projects on the drawing board or projects that are being bid. It’s really more of kind of getting them released and moving them forward.
Steve Winoker – Sanford Bernstein: And before I hand it off, could you maybe give us a view sequentially in the third quarter by business unit, sales and margin?
Alexander M. Cutler – Chairman and CEO: We don’t go into the specifics in terms of our guidance in terms of – but I can tell you kind of from a historical point of view, generally you’ve seen vehicle markets have a third quarter because of some of the shutdown period that’s a little weaker than the second quarter. Generally, the second and third quarter are you stronger Electrical segments out of the year with the fourth quarter that’s being a little weaker and the first quarter being the weakest. Aerospace tends to be fairly consistent through the year. Then Hydraulics generally is a little weaker in the second half than it is in the first half. Those are sort of the pattern how it normally lays out.