Will Eaton (ETN) Stock Be Hurt By This Ratings Downgrade?

NEW YORK (TheStreet) -- Eaton Corp. (ETN) was downgraded to "hold" from "buy" at Stifel Nicolaus (SF) on Wednesday.

The firm said it lowered its rating on the diversified power management company as it believes Eaton lacks near term catalysts.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Separately, TheStreet Ratings team rates EATON CORP PLC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate EATON CORP PLC (ETN) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ETN's revenue growth has slightly outpaced the industry average of 6.5%. Since the same quarter one year prior, revenues slightly increased by 2.9%. 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 slightly increased to $633.00 million or 3.94% when compared to the same quarter last year. In addition, EATON CORP PLC has also modestly surpassed the industry average cash flow growth rate of 3.01%.
  • The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems.
  • EATON CORP PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EATON CORP PLC increased its bottom line by earning $3.90 versus $3.51 in the prior year. This year, the market expects an improvement in earnings ($4.58 versus $3.90).
  • You can view the full analysis from the report here: ETN Ratings Report

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