November 17, 2008 Ticker: ETN About Eaton Corporation is a diversified industrial manufacturer. It designs, manufactures, markets, and services electrical systems and components worldwide – it operates in the following major segments – Electrical, Hydraulics, Aerospace and Automotive. Earnings Actual Estimates Surprise Q3 2008 $1.95 $1.88 $0.07 Q2 2008 $2.10 $1.94 $0.16 Q1 2008 $1.70 $1.66 $0.04 The recent earnings all show a positive surprise. I looked a little further back and found that ETN's EPS has been beating the analyst estimates since Q4 2004 (or before - I did not check beyond that). Quite interesting! why do the analysts always underestimate this company? Other Numbers
Warren Buffet's Berkshire recently revealed a position of 2.9 million shares in ETN. The price range for ETN varied between $57.41 - $81.71 for Q3 2008. It was trading today at $41.33 (P/E: 5.74). I heard today on Bloomberg that over the last 31 year period, if you were to invest in the stocks that Warren Buffet did, right after him, the average annualized return would be around 25%. A very healthy rate indeed when you compare it with the S&P's average of 10% - and in this case you can undercut him by about 30-40%.
I did some internet search and found that other than Warren Buffett - Glenn Greenberg (Chieftain Capital Management), Ruane Cunniff (Ruane, Cunniff & Goldfarb), David Dreman (Dreman Value Management) and Richard Aster Jr (Aster Investment Management) - also hold ETN
In addition to the ultra-low P/E what also weighs in for the stock is a dividend yield of over 4.8% - better than 84% of other companies in the Electronic Instr. & Controls industry.
ETN has a very healthy cash flow position – with the CPS at $2.30 for Q2 2008. ETN reported Q3 2008 Revenue of $4.1B. The estimates for FY 2008 were set at $15.8B and it looks ETN is well on its way to beat the annual revenue estimates - that in my opinion would be an achievement in itself given the current economy.
Eaton's Gross Margin is comparable to other companies in the Electronic Instr. & Controls industry, and the Operating Margins are better than 81% of its peers - an indicator that ETN controls its costs and expenses better than 81% of its peers.
The company's Return on Equity is higher than 84% of its peers in the Electronic Instr. & Controls industry - indicating a very high level of efficiency in reinvesting its earnings.
Here's some more peer comparison info for ETN -
ETN's consensus score is higher than 75.5% of the Industrial Electrical Equipment Industry
ETN's consensus score is higher than 83.7% of the Industrial Goods Sector.
ETN's consensus score is higher than 87.8% of the Jaywalk Universe.
I think that this is a great investment for the long term at this price. However, I would not be surprised to see it go about 10-15% further down due to the current state of the automotive sector and economy in general. That, IMO, would be a very good buying point for Eaton – until then, wait and watch.
0 comments:
Post a Comment