(New throughout, adds comments from CEO and analysts)
By Lewis Krauskopf
April 29 Diversified manufacturer Eaton Corp
on Tuesday forecast second-quarter profit below Wall
Street's target, weighed down by restructuring costs.
Shares of the U.S. maker of electrical and hydraulic systems
fell 2.5 percent in afternoon trading, even though the company
reported slightly better-than-expected first-quarter earnings
Eaton projected second-quarter operating earnings in a range
of $1.05 to $1.15 per share. Analysts had estimated $1.29 per
Eaton plans to incur restructuring costs worth 8 cents per
share in the second quarter, as the company takes actions to
make its hydraulic, aerospace and vehicle businesses more
Eaton Chief Executive Officer Sandy Cutler said the company
decided to take the actions in light of "growth anxiety" around
the world, including concerns over the potential eruption of the
crisis in Ukraine or over possible slowing economic growth in
"In this kind of marketplace, where it seems that the risk
is a little bit more on the downside, we're just taking actions
that will allow us to be more efficient," Cutler said in an
interview. "We think this is a prudent action to ensure that the
company continues to be competitive."
Excluding the 8 cents in restructuring costs, analysts noted
that the second-quarter forecast still would have fallen below
"Even if you take into account restructuring, it was still a
little but shy of what the Street was thinking," said Mig Dobre,
an analyst with Robert W. Baird.
Eaton backed its full-year operating earnings forecast of a
range of $4.50 to $4.90 per share. The $4.70 midpoint of that
forecast trails the analyst estimate of $4.81.
Dobre noted that second half earnings will have to outpace
the first half to meet the company's earnings target.
"Naturally that creates a little bit of anxiety as to how
they're going to get to the second half numbers," Dobre said.
First-quarter net income rose 16 percent to $439 million, or
92 cents per share, from $378 million, or 79 cents, a year ago.
Excluding one-time items, earnings were $1.01 per share.
That topped the average analyst estimate by a penny, according
to Thomson Reuters I/B/E/S.
Severe winter storms in North America hurt Eaton earnings by
an estimated 3 cents per share, the company said.
Eaton said corporate expenses were lower than it had
expected for the first quarter, helping earnings.
Revenue rose 3.4 percent to $5.49 billion, in line with
Organic growth excluding acquisitions rose 4.5 percent,
which Cutler noted was the company's strongest quarterly
performance since the first quarter of 2012.
Eaton shares fell $1.88 to $72.62 on the New York Stock
Exchange. The shares are down 4.5 percent this year,
underperforming the broader U.S. markets.
(Reporting by Lewis Krauskopf, Editing by Franklin Paul,
Jeffrey Benkoe and David Gregorio)