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CLEVELAND — Eaton Corp., which makes parts, hydraulics and electrical equipment used in a range of industries, reported a 92 percent drop Monday in second-quarter earnings as the global recession drove down its sales especially in its key automotive markets.
The company beat Wall Street earnings expectations when one-time items are excluded, but it cut its full-year forecast for the third time.
Wall Street applauded the performance in a tough environment: Eaton shares rose $3.99, or 8.9 percent, to close at $48.94 Monday. Eaton has traded in a 52-week range of $30.02 to $75.72.
Eaton provides electrical components and systems for power quality, distribution and control. It also makes hydraulic, aerospace and vehicle parts and systems.
"As we survey our end markets, the year is shaping up to be considerably weaker than we had forecast in April," said Chairman and CEO Alexander Cutler.
"We now anticipate our overall end markets will decline by between 21 and 22 percent versus our earlier forecast of a decline between 15 and 16 percent. We see our U.S. markets declining by 25 percent, while our non-U.S. markets are expected to decline by 19 percent."
Cleveland-based Eaton said it earned $29 million, or 17 cents per share, in the three months ended June 30, down from $333 million, or $2.03 per share, a year ago.
Excluding one-time charges, however, the company said it earned 23 cents per share.
Cutler, asked about the stock price rise, noted the company's strong cash-flow situation, cost cutting and overall balance sheet amid a difficult economy.
"The company has been agile, and flexible and has been successful in repositioning itself to be able to compete effectively and efficiently in these reduced markets," he said.
Analysts polled by Thomson Reuters expected, on average, earnings per share of 17 cents per share. Such estimates typically exclude one-time charges.
Revenue fell 32 percent to $2.9 billion from $4.28 billion a year ago. Analysts surveyed by Thomson Reuters were expecting revenue of $3.04 billion.
The sales decline was spread throughout Eaton's markets: hydraulics down 39 percent, aerospace down 12 percent, truck segment down 49 percent and automotive — hurt by the upheaval in the U.S. car industry — was off 51 percent.
"The automotive market in the U.S. was markedly impacted in the second quarter by the shutdowns at General Motors and Chrysler," Cutler said. "Outside the U.S., several markets benefited from incentive programs designed to boost auto purchases. We now anticipate global automotive markets will decline by 25 percent in 2009."
For the full year, Eaton lowered its earnings forecast to between $1.65 and $1.85 per share, down from a February projection of $3.60 to $4.20 per share. Before that, the company forecast 2009 income of $3.80 to $4.80 per share.
Analysts had been looking for earnings of $1.90 a share for the year, on average, according to Thomson Reuters.
Eaton said it would maintain its dividend for the second quarter at 50 cents, payable in mid-August.
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AP Business Writer Mike Obel in New York contributed to this story.
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On the Net: http://www.eaton.com
