Eaton Corp. (ETN) swung to a first-quarter loss on slumping
sales, and it anticipates the woes will continue.
As such, the diversified manufacturer for the automotive,
aerospace and electrical industries plans more cost-cutting it
slashed full-year earnings expectations and projected
second-quarter results well below analysts' estimates.
Eaton now sees 2009 earnings of $2.50 to $3 a share, down from
January's view of $4.20 to $5.20. The company also expects
second-quarter earnings of about 25 cents a share on revenue of $3
billion to $3.1 billion. On average, analysts' surveyed by Thomson
Reuters projected $1.04 a share and $3.49 billion,
respectively.
Eaton and other industrial manufacturers have experienced sharp
declines in market demand as customers cut spending. Companies
exposed to the struggling U.S. auto industry have been hit
particularly hard. Eaton said in January that first-quarter results
would be hurt by auto-plant shutdowns.
In that period, the company posted a net loss of $52 million, or
30 cents a share, compared with year-earlier net income of $250
million, or $1.67 a share. Excluding acquisition-related costs, the
loss would have been 22 cents. In February, the company cut its
outlook to a loss of 25 cents to 35 cents.
Revenue decreased 20% to $2.81 billion. Analysts expected $3.06
billion. Gross margin fell to 22.7% from 27.6% amid the sales
woes.
Under Chairman and Chief Executive Alexander Cutler, Eaton has
diversified from the automotive industry and into supplying
electrical and hydraulic systems to a host of industries. But the
breadth of the recession has affected nearly all of its
business.
Since January, all three major U.S. credit ratings agencies have
cut their ratings on Eaton, citing slower-than-expected debt
reduction and the slowdown in demand from many segments.
Eaton's shares closed Friday at $44.75 and were inactive
premarket. The stock is down by more than half the past 10
months.
-By Kerry E. Grace and Kevin Kingsbury, Dow Jones Newswires;
201-938-5089; kerry.grace@dowjones.com