Eaton Third Quarter Earnings Sneak Peek

S&P 500 (NYSE:SPY) component Eaton (NYSE:ETN) will unveil its latest earnings on Wednesday, October 31, 2012. Eaton is a power management company offering services in the sectors of electricity, hydraulics, aerospace, truck, and automotive.

Eaton Earnings Preview Cheat Sheet

Wall St. Earnings Expectations: The average analyst estimate is for profit of $1.09 per share, a rise of 1.9% from the company’s actual earnings for the year-ago quarter. During the past three months, the average estimate has moved down from $1.12. Between one and three months ago, the average estimate moved down. It also has dropped from $1.11 during the last month. For the year, analysts are projecting net income of $4.25 per share, a rise of 7.3% from last year.

Past Earnings Performance: The company is looking to beat analyst estimates for the third quarter in a row. Last quarter, it beat estimates with profit of $1.15 per share against the mean estimate of $1.09. In the prior quarter, the company reported net income of 92 cents.

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A Look Back: In the second quarter, profit rose 13.7% to $382 million ($1.12 a share) from $336 million (97 cents a share) the year earlier, exceeding analyst expectations. Revenue fell 0.5% to $4.07 billion from $4.09 billion.

Stock Price Performance: Between August 1, 2012 and October 25, 2012, the stock price rose $1.75 (4%), from $43.67 to $45.42. The stock price saw one of its best stretches over the last year between August 2, 2012 and August 10, 2012, when shares rose for seven straight days, increasing 7% (+$3.02) over that span. It saw one of its worst periods between May 7, 2012 and May 21, 2012 when shares fell for 11 straight days, dropping 7.7% (-$3.51) over that span.

Wall St. Revenue Expectations: Analysts predict a rise of 2.2% in revenue from the year-earlier quarter to $4.21 billion.

Key Stats:

This upcoming earnings announcement will be a chance to build on positive earnings momentum over the last three quarters. Net income rose 29.3% in the fourth quarter of the last fiscal year and 8.4% in the first quarter before increasing again in the second quarter.

On the top line, the company is looking to get back on the right track after last quarter’s drop snapped a string of revenue increases. Revenue rose 15.5% in the third quarter of the last fiscal year, 10.1% in the fourth quarter of the last fiscal year and 4.1%in the first quarter before dropping in the second quarter.

Analyst Ratings: With 11 analysts rating the stock a buy, one rating it a sell and three rating the stock a hold, there are indications of a bullish stance by analysts.

Balance Sheet Analysis: The company’s current ratio of assets to liabilities came in at 1.66 last quarter. The current ratio is an indication of a firm’s liquidity and ability to meet creditor demands and generally, for every dollar the company owes in the short term, it has that figure available in assets that can be converted to cash in the short term. The company improved this liquidity measure from 1.65 in the first quarter to the last quarter driven in part by an increase in current assets. Current assets increased 8.2% to $6.37 billion while liabilities rose by 7.4% to $3.83 billion.

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(Company fundamentals by Xignite Financials. Earnings estimates provided by Zacks)

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