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Investing.com - Bernstein SocGen Group has raised its price target on Eaton Corporation (NYSE:ETN) to $410.00 from $396.00 while maintaining an Outperform rating, despite the stock falling 7% following its quarterly earnings report. According to InvestingPro data, the stock currently trades at $359.21, with analyst targets ranging from $288 to $432, reflecting mixed sentiment on the electrical equipment giant’s valuation.
Eaton reported second-quarter earnings per share of $2.95, exceeding analyst expectations by 1%, and raised its full-year guidance by 50 basis points compared to Street estimates. The company’s third-quarter guidance, however, fell 2% short of expectations at $3.04 per share at the midpoint. InvestingPro analysis shows the company maintains strong financial health with a ’GOOD’ overall score, supported by 7.66% revenue growth and consistent dividend payments spanning 55 years.
Bernstein SocGen identified three key positive factors from the quarterly results: growth broadening beyond data centers, stronger underlying business margins than headline guidance suggests, and Eaton’s expansion of its data center total addressable market. With a market capitalization of $139.75 billion and a P/E ratio of 36.09, InvestingPro’s Fair Value analysis suggests the stock is currently trading above its intrinsic value.
The firm noted several non-recurring headwinds affecting Eaton’s margins, including 100 basis points of pressure from manufacturing capacity ramp and $50 million in discretionary technology investments in areas such as AI and ERP systems that were decided upon during the year.
These factors are expected to cause incremental segment margins to decrease from 30% in the first half of 2025 to 26% in the second half, according to the research note, which indicated these investments would have otherwise boosted earnings per share by 25 cents.
In other recent news, Eaton Corporation reported its second-quarter financial results, revealing adjusted earnings per share of $2.95, which surpassed analyst estimates of $2.93. The company’s revenue hit a record $7.03 billion, exceeding the consensus estimate of $6.91 billion. Despite these positive results, Eaton’s shares fell by 6.4% due to disappointing third-quarter guidance. The company experienced an 8% organic sales growth, which was at the high end of its guidance range, contributing to an 11% increase in revenue compared to the same quarter last year. This growth was driven by 8% from organic sales, 2% from acquisitions, and 1% from favorable currency translation. Additionally, Eaton achieved a second-quarter record in segment margins, reaching 23.9%. These developments highlight the mixed investor reactions despite the company’s strong performance in the recent quarter.
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