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Eaton Corporation PLC Stock Buy Recommendation Reiterated (ETN)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Eaton Corporation (NYSE:ETN) has been reiterated by TheStreet Ratings as a buy with a ratings score of A-. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:

  • ETN's revenue growth has slightly outpaced the industry average of 2.3%. Since the same quarter one year prior, revenues slightly increased by 7.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $687.00 million or 22.89% when compared to the same quarter last year. Despite an increase in cash flow, EATON CORP PLC's average is still marginally south of the industry average growth rate of 32.13%.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • EATON CORP PLC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, EATON CORP PLC reported lower earnings of $3.51 versus $3.94 in the prior year. This year, the market expects an improvement in earnings ($4.35 versus $3.51).

Eaton Corporation plc operates as a diversified power management company worldwide. The company operates through Electrical Americas, Electrical Rest of World, Cooper, Hydraulics, Aerospace, Truck, and Automotive segments. Eaton has a market cap of $29.0 billion and is part of the technology sector and electronics industry. The company has a P/E ratio of 18.00, above the S&P 500 P/E ratio of 18.00. Shares are up 9.4% year to date as of the close of trading on Wednesday.

You can view the full Eaton Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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