Slide 1: Second Quarter 2023 Earnings Release
Second Quarter 2023 Earnings Release Craig Arnold & Tom Okray | August 1, 2023 © 2023 Eaton. All rights reserved. © 2023 Eaton. All rights reserved. 1
Slide 2: Forward-looking statements and non-GAAP financial information
Forward-looking statements and non-GAAP financial information This presentation or the comments we make on our call today contain forward-looking statements concerning, among other matters, full year and third quarter 2023 adjusted earnings per share, organic revenue growth, segment operating margin
Slide 3: Highlights
Highlights Q2 adjusted earnings per share of $2.21, up 18% over 2Q22 and above high end of guidance, and segment operating margin of 21.6%, up 150bps, are both all-time records. Raising 2023 guidance to 10-12% organic growth with increased margins of 21.3%, at midpoint, and Adjusted EPS of $8.75 equ
Slide 4: Key drivers of Eaton's long term growth outlook
Key drivers of Eaton’s long term growth outlook Key Markets Commercial Data Residential Legacy Megatrends Buildings Center Industrial Buildings Utility Aerospace e-Mobility Vehicle Electrification Energy Transition Digitalization Infrastructure Spending Reindustrialization Green Regulations © 2023 E
Slide 5: Infrastructure spending – Uncapped Inflation Reduction Act estimates increased significantly
Infrastructure spending – Uncapped Inflation Reduction Act estimates increased significantly IRA Energy Security Government Spending on Credits & Incentives $700 $663 $600 $500 $ blns $400 $300 $271 $200 $100 $0 Scoring Aug-22 Scoring Jun-23 Clean Electricity and Reducing Carbon Emissions Fuels Resi
Slide 6: Reindustrialization – momentum continues with mega project announcements
Reindustrialization – momentum continues with mega project announcements Cumulative U.S./Canada Mega Project ($1B+) Announcements $700 $600 $500 $686B ~3X Billions of USD $400 in cumulative normal run rate $300 mega projects $200 since Jan. 2021 $100 $0 Jun-21 Oct-21 Jun-22 Oct-22 Jun-23 Feb-21 Mar-
Slide 7: Utility market dynamics are leading to an inflection point of accelerating growth
Utility market dynamics are leading to an inflection point of accelerating growth Utilities End Market – Indexed Growth Key Drivers: Americas Product Addressable Market • Grid modernization to improve resiliency • Rapid introduction of renewable energy, creating additional demand and complexity of t
Slide 8: Eaton offers broadest portfolio of utility solutions
Eaton offers broadest portfolio of utility solutions Utility Control • Distribution Planning Software Generation Customer Room and • Distribution automation software tools Operations • Growing analytics offerings Powered by Brightlayer Switches / Arresters Assembled Products Reclosers Line Sensing F
Slide 9: Aerospace Growth Cycle – Robust growth in global travel & aircraft production
Aerospace Growth Cycle – Robust growth in global travel & aircraft production Key Drivers Estimated aircraft production Total Aircraft Units • Commercial aircraft production ramp-up as OEMs materially increase output • Air traffic recovery driving increased demand • Full commercial aftermarket recov
Slide 10: Eaton has growing content on ramping commercial & defense platforms
Eaton has growing content on ramping commercial & defense platforms >5x Black Hawk V-280 F-35 2-3x F-16 2-3x KC-135 KC-46A A350 2x A330/A340 1.5x 777 Classic B777X Well positioned on key platforms with increased content © 2023 Eaton. All rights reserved. 10
Slide 11: Financial Summary
Financial Summary (M) 2Q '23 2Q '22 V '22 Sales $5,866 $5,212 13% Segment Operating Profit 1,264 1,046 21% Segment Operating Margin 21.6% 20.1% 150 bps Adjusted Earnings 886 751 18% Adjusted EPS $2.21 $1.87 18% $2.21 All-Time Record Adjusted earnings per share Sales Growth: Organic 13% $1,264M All-T
Slide 12: Electrical Americas Segment
Electrical Americas Segment (M) 2Q '23 2Q '22 V '22 Sales $2,538 $2,131 19% Operating Profit 669 495 35% Operating Margin 26.4% 23.2% 320 bps Orders up 7% on a rolling 12-month basis at high levels with Sales Growth: strength driven by data center & IT, industrial and commercial & Organic 19% inst
Slide 13: Electrical Global Segment
Electrical Global Segment 2Q '23 2Q '22 V '22 (M) Sales $1,569 $1,495 5% Operating Profit 290 282 3% Operating Margin 18.5% 18.9% 40 bps Sales Growth: Organic 6% Orders up 1% on a rolling 12-month basis at high levels with Divestiture (1)% strength driven by utility and data center & IT markets
Slide 14: Aerospace Segment
Aerospace Segment (M) 2Q '23 2Q '22 V '22 Sales $848 $742 14% Operating Profit 191 163 17% Operating Margin 22.5% 21.9% 60 bps Sales Growth: Orders accelerated to 26% on a rolling 12-month basis organically with particular strength in defense OEM and commercial & Organic 14% defense aftermarket Fo
Slide 15: Vehicle Segment
Vehicle Segment (M) 2Q '23 2Q '22 V '22 Sales $751 $708 6% Operating Profit 115 108 6% Operating Margin 15.3% 15.3% --- Organic growth driven by strength in North America light motor Sales Growth: vehicle, APAC and EMEA. Organic 6% Won multiple clean commercial valve actuation programs. Total 6%
Slide 16: eMobility Segment
eMobility Segment 2Q '23 2Q '22 V '22 (M) Sales $161 $136 18% Operating Profit (Loss) (1) (2) 50% Operating Margin (0.5)% (1.5)% 100 bps Sales Growth: Organic 18% 2023 YTD wins of more than $450M of mature year revenues. Won program to supply 48-volt programmable power electronics Forex -- contr
Slide 17: Electrical and Aerospace backlogs remain robust and growing
Electrical and Aerospace backlogs remain robust and growing Electrical Sector Historical Backlog $9.1 Aerospace Segment Historical Backlog $3.0 $2.8 $1.4 Q4:'19 Q4:'20 Q4:'21 Q4:'22 Q2:'23 Q4:'19 Q4:'20 Q4:'21 Q4:'22 Q2:'23 Backlog ($B) Backlog ($B) Record backlog provides tremendous visibility and
Slide 18: 2023 Organic Growth and Operating Margin Guidance
2023 Organic Growth and Operating Margin Guidance Segment Organic Growth Guidance Operating Margin Guidance Electrical Americas 14 – 16% 24.1 – 24.5% Electrical Global 6 – 8% 19.5 – 19.9% Aerospace 10 – 12% 23.7 – 24.1% Vehicle 3 – 5% 16.3 – 16.7% eMobility 25 – 35% 0% – 2.0% Eaton 10 – 12% 21.1 – 2
Slide 19: 2023 Guidance
2023 Guidance 2023 Full Year Outlook Adjusted Earnings Per Share $8.65 – $8.85 Organic Revenue 10 – 12% Currency Translation ~$0M Segment Operating Margins 21.1% – 21.5% Corporate Expenses $710M Tax Rate on Adjusted Earnings 16% – 17% Operating Cash Flow $3.2B – $3.6B Free Cash Flow $2.6B – $3.0B Ca
Slide 20: Eaton's end market growth assumptions – 2023 Outlook
Eaton’s end market growth assumptions – 2023 Outlook Electrical Sector % of Total Eaton Sales Industrial Sector % of Total Eaton Sales 2022 FY 2022 FY Commercial & Institutional * 19% Electric Vehicles 3% Data Centers & Distributed IT * 14% Commercial Aerospace 9% Utility 10% ICE Light Vehicles 6% I
Slide 21: Summary
Summary Large project announcements tied to megatrends, reindustrialization and infrastructure spending continued in Q2 and Eaton remains well positioned to win. Second quarter record financial performance demonstrates strong ongoing operating execution to deliver profitable growth. Record backlogs
Slide 22: © 2023 Eaton. All rights reserved.
© 2023 Eaton. All rights reserved. 22
Slide 23: APPENDIX
APPENDIX © 2023 Eaton. All rights reserved. 23
Slide 24: © 2023 Eaton. All rights reserved.
© 2023 Eaton. All rights reserved. 24