Eaton Corporation, PLC · NYSE:ETN

Eaton — Q3 2018 Earnings Presentation

16 slides from Eaton's earnings presentation, Oct 30, 2018

  1. Slide 1: Third Quarter 2018 Earnings Release

    Third Quarter 2018 Earnings Release October 30, 2018 Craig Arnold © 2018 Eaton. All rights reserved.

  2. 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, performance of our worldwide end markets, the expected impact of tariffs, fourth quarter and full year 2018 ea

  3. Slide 3: Financial Highlights of Q3

    Financial Highlights of Q3 • Earnings per share of $0.95 • Earnings per share of $1.43, excluding the impact of arbitration decision related to legacy Cooper business • Up 14% over Q3 2017, excluding the impact of the arbitration decision and the 2017 gain on Eaton Cummins Joint Venture • Sales of $

  4. Slide 4: Financial Summary

    Financial Summary (M) 3Q ’18 3Q ’17 V ’17 Sales $5,412 $5,211 4% Segment Operating Profit $952 $856 11% Segment Operating Margin 17.6% 16.4% 120 bps Net Income $416 $1,401 70% Net Income (excluding arbitration $622 $558 11% impact and gain from formation of Cummins JV) Sales Growth: Organic 6% Earni

  5. Slide 5: Electrical Products Segment

    Electrical Products Segment (M) 3Q ’18 3Q ’17 V ’17 Sales $1,789 $1,785 --- Segment Operating Profit $343 $330 4% Operating Margin 19.2% 18.5% 70 bps Sales Growth: Organic 1% • Organic revenues, excluding lighting, up 3% Forex (1)% • Orders up 3% Total 0% - Solid growth in industrial and residential

  6. Slide 6: Electrical Systems & Services Segment

    Electrical Systems & Services Segment (M) 3Q ’18 3Q ’17 V ’17 Sales $1,519 $1,421 7% Segment Operating Profit $234 $196 19% Operating Margin 15.4% 13.8% 160 bps Sales Growth: Organic 9% • Orders up 4% Forex (1)% - Strong growth in EMEA and Asia Pacific - Continued strength in data center markets Div

  7. Slide 7: Hydraulics Segment

    Hydraulics Segment (M) 3Q ’18 3Q ’17 V ’17 Sales $670 $634 6% Segment Operating Profit $94 $80 18% Operating Margin 14.0% 12.6% 140 bps Sales Growth: Organic 7% • Orders up 4% with strength in APAC and Americas offset by weakness in EMEA Forex (1)% - Americas up 12% Total 6% - APAC up 9% - EMEA down

  8. Slide 8: Aerospace Segment

    Aerospace Segment (M) 3Q ’18 3Q ’17 V ’17 Sales $478 $438 9% Segment Operating Profit $105 $84 25% Operating Margin 22.0% 19.2% 280 bps Sales Growth: Organic 9% • Orders up 12%, with particular strength in commercial transport, commercial aftermarket, and military Forex 0% rotorcraft Total 9% • Back

  9. Slide 9: Vehicle Segment

    Vehicle Segment (M) 3Q ’18 3Q ’17 V ’17 Sales $876 $858 2% Segment Operating Profit $166 $150 11% Operating Margin 18.9% 17.5% 140 bps Sales Growth: Organic 7% • 2018 NAFTA Class 8 production forecast now at Forex (3)% 320K units Divestiture (2)% • Light vehicle markets down slightly in Q3 Total 2%

  10. Slide 10: eMobility Segment

    eMobility Segment (M) 3Q ’18 3Q ’17 V ’17 Sales $80 $75 7% Segment Operating Profit $10 $16 38% Operating Margin 12.5% 21.3% 880 bps Sales Growth: Organic 7% • Secured an additional contract win in the quarter on a Forex 0% new platform Total 7% • Currently in discussions on a large number of additi

  11. Slide 11: 2018 Organic Revenue Growth and Operating Margin Expectations

    2018 Organic Revenue Growth and Operating Margin Expectations Organic Revenue Growth Segment Operating Margins Prior 2018 New 2018 Change Prior 2018 New 2018 Segment Guidance Guidance Guidance Guidance Electrical Products ~3% ~2.5% (0.5)% 18.7% - 19.3% 18.3% - 18.7% Electrical S & S ~6% --- --- 14.0

  12. Slide 12: Raw material cost/tariff update

    Raw material cost/tariff update • Tariff impact for 2018 is modest and has been fully offset • Responded quickly by aggressively offsetting material / logistics cost inflation and tariffs with pricing actions and cost out • Results can be seen in our strong margin performance • No negative EPS impac

  13. Slide 13: 2018 Guidance

    2018 Guidance 4th Quarter Outlook $1.38 - $1.48 Earnings Per Share Organic Revenue Growth ~6% Segment Operating Margins 17.0% - 17.4% Tax Rate 12.5% - 13.5% 2018 Full Year Outlook $4.82 - $4.92 Earnings Per Share as reported $5.30 - $5.40 Earnings Per Share, excluding impact of arbitration decision

  14. Slide 14: As we look to 2019, our view of markets remains unchanged

    As we look to 2019, our view of markets remains unchanged with a majority of our businesses still in the early to mid portions of an economic cycle Early to Mid Growth Stage Mid Growth Stage Late Growth Stage • U.S. Industrial Construction • U.S. Utility Capital Spending • NAFTA Class 8 Truck • Glob

  15. Slide 15: Initial thoughts on 2019

    Initial thoughts on 2019 • Expect overall market growth of ~3-4% • Incremental contribution margin of 25% - 30% on organic growth • Corporate items (pension, interest, other corporate) flat with 2018 levels • Tax Rate estimated at 14% - 16%, consistent with long term rate • Restructuring spending fo

  16. Slide 16: © 2018 Eaton. All rights reserved.

    © 2018 Eaton. All rights reserved. 16

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