Eaton Corporation, Plc · NYSE:ETN
Eaton — Q2 2024 Earnings Presentation
25 slides from Eaton's earnings presentation, Aug 1, 2024
Slide 1: Second Quarter 2024 Earnings Release
Second Quarter 2024 Earnings Release Craig Arnold & Olivier Leonetti | August 1, 2024 © 2024 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 2024 adjusted earnings per share, organic revenue growth and segment operating mar
Slide 3: Highlights
Highlights Record adjusted earnings per share of $2.73, up 24% versus 2Q23. Record segment margins of 23.7%, up 210 bps versus 2Q23. Order growth of 9% in Electrical and 4% in Aerospace on a rolling 12-month basis. Electrical and Aerospace backlog up 27% and 14% in 2Q24 with book-to-bill ratio at 1.
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 Institutional Center Industrial Buildings Utility Aerospace e-Mobility Vehicle Electrification Energy Transition Digitalization Infrastructure Spending Reindustrialization Green Regulations ©
Slide 5: Electrification, energy transition, and reindustrialization driving growth across ~75% of end markets
Electrification, energy transition, and reindustrialization are driving growth across ~75% of our end markets Key Markets Commercial & Data Industrial Utility Aerospace e-Mobility Institutional Center % of 2023 Eaton 20% 14% 12% 11% 15% 3% Sales Previously reported end market CAGRs Growth 9% 25% 7%
Slide 6: Dramatic change in the number of mega project announcements
Leading to a dramatic change in the number of mega project announcements 2Q’24 totals exceed $118B on 36 projects Backlog has grown by ~$800B $1.4T Mega projects represented 15% of total nonresidential construction starts in 2023 in cumulative North America Only 15% of these projects have started me
Slide 7: Commercial & Institutional end markets are also seeing significant growth
Commercial & Institutional end markets are also seeing significant growth Key Drivers: Commercial & Institutional (C&I) End Market Indexed Growth • Increased electrification with smart/connected Americas C&I Market assets & hardware and digitized services • Zero-carbon mandates, CO2 reduction target
Slide 8: Broadest portfolio of solutions for Commercial & Institutional buildings
Eaton offers the broadest portfolio of solutions for Commercial & Institutional buildings Brightlayer Buildings suite software • Energy management system Power Low-voltage motor • Cybersecurity services distribution unit control centers • Charging network manager Power distribution Panelboards and
Slide 9: Investing in incremental capacity to support structurally higher growth
We’re investing in incremental capacity investments to support structurally higher growth Product lines across key end markets $1B+ Global incremental investment announced 2M+ Data Center Industrial Utility Utility: three-phase transformers & voltage regulators, line insultation & protection equipme
Slide 10: Strategic investment in NordicEPOD AS
We made a strategic investment in NordicEPOD AS, expanding reach into the European data center market Completed strategic investment in NordicEPOD, a Norwegian company that designs and assembles standardized power modules for data centers Co-invested with CTS Nordics, a high-growth company with stro
Slide 11: Financial Summary
Financial Summary (M) 2Q ‘24 2Q ‘23 V ‘23 Sales $6,350 $5,866 8% Segment Operating Profit 1,502 1,264 19% Segment Operating Margin 23.7% 21.6% 210 bps Adjusted Earnings 1,096 886 24% Adjusted EPS $2.73 $2.21 24% $6,350M Record Quarterly Sales Sales Growth: Organic 9% $1,502M Record Quarterly Segment
Slide 12: Electrical Americas Segment
Electrical Americas Segment (M) 2Q ‘24 2Q ‘23 V ‘23 Sales $2,877 $2,538 13% Operating Profit 859 669 28% Operating Margin 29.9% 26.4% 350 bps Record sales, operating profit and margin. Sales Growth: Orders up 11% on a rolling 12-month basis. Organic 13% Acquisition -- Backlog up 29% year-over-year.
Slide 13: Electrical Global Segment
Electrical Global Segment (M) 2Q ‘24 2Q ‘23 V ‘23 Sales $1,606 $1,569 2% Operating Profit 305 290 5% Operating Margin 19.0% 18.5% 50 bps Orders up 7% on a rolling 12-month basis. Sales Growth: Backlog up 16% year-over-year. Organic 3.5% Forex ~(1.5)% Book-to-bill ratio of 1.1 on a rolling 12-month b
Slide 14: Aerospace Segment
Aerospace Segment (M) 2Q ‘24 2Q ‘23 V ‘23 Sales $955 $848 13% Operating Profit 206 191 8% Operating Margin 21.5% 22.5% 100 bps Record sales, Q2 record operating profit. Sales Growth: Backlog up 14% year-over-year. Organic 13% Forex -- Book-to-bill ratio of 1.1 on a rolling 12-month basis. Total 13%
Slide 15: Vehicle Segment
Vehicle Segment (M) 2Q ‘24 2Q ‘23 V ‘23 Sales $723 $751 (4)% Operating Profit 130 115 13% Operating Margin 18.0% 15.3% 270 bps Sales Growth: Strong operational performance producing Organic (3)% higher profit on lower sales year-over-year. Forex (1)% Total (4)% © 2024 Eaton. All rights reserved. 15
Slide 16: eMobility Segment
eMobility Segment (M) 2Q ‘24 2Q ‘23 V ‘23 Sales $189 $161 18% Operating Profit / (Loss) 2 (1) -- Operating Margin 1.3% (0.5)% 180 bps Sales Growth: New program launches & ramp-ups driving Organic 18% significant outgrowth versus the market. Forex -- Total 18% © 2024 Eaton. All rights reserved. 16
Slide 17: Electrical and Aerospace backlogs remain robust and growing
Electrical and Aerospace backlogs remain robust and growing Electrical Sector Historical Backlog Aerospace Segment Historical Backlog ($ blns) ($ blns) $11.4 $12.00 $4.00 $3.50 $3.5 $10.00 $3.00 $8.00 $2.50 $6.00 $2.00 $1.50 $1.4 $4.00 $2.8 $1.00 $2.00 $0.50 $0.00 $0.00 Q4 '19 Q4 '20 Q4 '21 Q4 '22 Q
Slide 18: Eaton's 2024 end market growth assumptions
Eaton’s 2024 end market growth assumptions % of Total 2023 % of Total 2023 Eaton Sales Eaton Sales Data Centers & Distributed IT 14% Commercial Aerospace 9% Utility 11% Defense Aerospace 6% Industrial Facilities 12% Electric Vehicles 3% Commercial & Institutional 20% ICE Light Vehicles 4% Machinery
Slide 19: 2024 Organic Growth and Operating Margin Guidance
2024 Organic Growth and Operating Margin Guidance Organic Growth Guidance Operating Margin Guidance Segment Electrical Americas 11.5 – 13.5% 28.7 – 29.1% Electrical Global 2.5 – 4.5% 19.4 – 19.8% Aerospace 10 – 12% 23.3 – 23.7% Vehicle (4) – 0% 16.3 – 16.7% eMobility 17 – 23% 1 – 2% Eaton 8 – 9% 23.
Slide 20: 2024 Guidance
2024 Guidance 3rd Quarter Outlook 2024 FY Outlook Updated Guidance Adjusted Earnings Per Share $2.73 – $2.83 $10.65 – $10.75 Organic Revenue 8 – 9% 8 – 9% Segment Operating Margins 23.5 – 23.9% 23.3 – 23.7% Operating Cash Flow N/A $4.2B – $4.4B Free Cash Flow N/A $3.4B – $3.6B Share Repurchases N/A
Slide 21: Summary
Summary Robust project activity tied to megatrends continues • Reindustrialization, data centers markets and infrastructure spending were strong contributors We delivered a strong second quarter of financial results • Record sales, segment operating margin, adjusted earnings and adjusted EPS Continu
Slide 22: © 2024 Eaton. All rights reserved.
© 2024 Eaton. All rights reserved. 22
Slide 23: Appendix
Appendix © 2024 Eaton. All rights reserved. 23
Slide 24: 2024 Guidance – Additional Modeling Assumptions
2024 Guidance – Additional Modeling Assumptions 3rd Quarter Outlook 2024 FY Outlook Currency Translation ~flat (~$50) Corporate Expenses ~flat with 3Q23 $700M Tax Rate on Adjusted Earnings 16.5 – 17.5% 17 – 18% Capex N/A $800M © 2024 Eaton. All rights reserved. 24
Slide 25: © 2024 Eaton. All rights reserved.
© 2024 Eaton. All rights reserved. 25