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, increase in net income, 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 somewhat disappointing return on equity.
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- The revenue growth came in higher than the industry average of 11.3%. Since the same quarter one year prior, revenues rose by 34.1%. 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.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Electrical Equipment industry average. The net income increased by 21.5% when compared to the same quarter one year prior, going from $311.00 million to $378.00 million.
- 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's earnings per share declined by 13.2% in the most recent quarter compared to 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).
- ETN's debt-to-equity ratio of 0.67 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.96 is weak.
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