Industrial inventory related to AI reports strong quarter. For now, we like it
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May 2, 2025
Eaton, the manufacturer of power management solutions for AI data centers and other commercial markets, offered a solid quarter on Friday, raising more questions than answered. Earnings per share for the first quarter, which ended in March, rose more than 33% from the same period last year, breaking LSEG-compiled analyst consensus estimates by a penny. Revenues rose 7.3% to $6.38 billion, with LSEG-compiled analyst consensus estimates falling to $62.6 billion. Organic sales rose 9%, up 6.8%, far above Bloomberg estimates. Eton Why we own it: Eton is exposed to several important megatrends such as electrification, energy transition, and infrastructure spending. It is also a player of generation AI to help data centers respond to the growing demand for more computing power, using power management solutions and electrical equipment. There is a long runway for growth. Competitors: Parker Honeyfin, DuPont, Honeywell Latest Buys: Starting April 3, 2025: On November 15, 2023, did Eaton shares peak? During the morning meeting, Jim Kramer said he was worried about it. In the afternoon trading, Eaton stocks were positive in a strong overall market. However, the stock is struggling to return to its 2025 closure high of $371 on January 22nd. Jim said he’s not ready to give up on Eton because he’s “doing so well.” In fact, the company reported that it accelerated organic sales growth with a record first quarter margin. However, he said that the club’s position in DuPont and Dover also have links to AI trade, so he needs to rethink its position. He also turns his eyes to Ge Vernova in the bullpen to fill out the theme of electrification/power generation. ETN YTD MOUNTANE EATON YTD Eaton’s revenue and EPS beat, as well as sales of three of the company’s five segments – Electric America, Electric Global and Aerospace were better than expected and had strong growth. The other two segments, the vehicle and emobility, missed, with the former sinking nearly 15% year-on-year, and the latter increasing by just 2.5%. Orders in the Electric America segment, which account for almost half of total company revenue, organically fell 4% on a 12-month rolling average. Orders rose 4%, excluding one large multi-year data center order in the first quarter of 2024. Jeff Marks, director of portfolio analysis for the club, said Friday that the market appears to be aware of a slower order as Eaton and all multinationals are trying to grasp the endgame of President Donald Trump’s tariffs. Slowing growth in order was a multi-quarter trend due to difficult comps dating back to 2023. “Book-to-Bill is more than one, growing 6% in a massive $10.1 billion backlog in 2025, providing strong visibility into organic growth since 2025. According to the company’s 2025 growth assumption, the data center end market accounts for 17% of Eaton’s total revenue. In the phone, next CEO Paulo Ruiz, referred to a tech company that reported revenues this week, including Amazon, Meta Platforms and Microsoft, saying, “This week, all hyperscalers confirmed the level of CAPEX. CAPEX stands for capital expenditures, while CAGR represents combined annual growth rates. Lewis will be CEO following Craig Arnold’s May 31 retirement, who has been at the helm since 2016. Management also spoke about the future data center design that requires Eaton to work with chip makers as well as the large tech companies that run the facility. “Therefore you need to have an open discussion with things like…nvidia and others. Many companies, especially foreign companies, cannot interact with them. So this is a barrier to another entry that creates Eaton opportunities in this development area of the end market, Lewis said in the call. Eaton, which aims to manage through tariffs, will adjust costs, supply chains and prices as needed. Lewis said, “We will see how tariffs evolve. We hope they will recover from a margin perspective over time, but this year.” The company expects to completely offset the impact of tariffs through the USMCA through 2020 US-Mexico-Canada contract, compliance, supply chain optimization, discipline cost containment, and commercial measures. Eaton believes that strategy with the region provides a competitive advantage. Guidance Eaton raised its annual organic sales growth guidance range from 7% to 9% from 7.5% to 9.5%, but slightly lowered its segment margin outlook as a result of pass-through in tariff costs. The company has reaffirmed its full-year EPS guidance. The company’s second quarter adjusted EPS guidance was a lack of estimates between $2.85 and $2.95. Perhaps the management was a bit conservative here. The growth in organic sales and segment margin outlook for the second quarter were OK. Management said the forecasts “reflect the net impact of the released tariffs and assume that the current 90-day suspension on mutual tariffs will last until the end of the year.” (Jim Cramer’s charitable trusts are the long ETN, DD, DOV, AMZN, Meta, MSFT, NVDA. See the full list of stocks here.) As a CNBC Investment Club subscriber with Jim Cramer, you will receive a trade warning before Jim makes a transaction. Jim waits 45 minutes after sending a trade alert before purchasing or selling stocks in the Charitable Trust portfolio. If Jim talks about stocks on CNBC TV, he will wait 72 hours after issuing a trade alert before running the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with the disclaimer. Due to receiving information provided in connection with the Investment Club, there is no obligation or obligation of the fiduciary. No specific outcomes or benefits are guaranteed.
NYSE’s Eaton Corporation sign
Source: NYSE
Eatonmanufacturers of power management solutions for AI data centers and other commercial markets offered a solid quarter on Friday, raising more questions than answered.
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