ETN - Earnings call transcript Q1 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Eaton's First Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to Yan Jin, Senior Vice President of Investor Relations. sir. ahead, go Please

Yan Jin

are Yan Financial you Senior today all XXXX Vice me First I'm CEO, Chairman Investor Rick Planning and for President Officer. Relations. Quarter Fearon, today With Call. Thank for and Earning Arnold, Jin, morning. our Vice and Chief Eaton's Chairman of Eaton's Craig and Good joining us

Our the first in the Company's agenda today performance includes the opening remarks by Craig, highlighting quarter.

Craig's at comments. our is been past press our calls, will and the will on As end earnings available on reconciliations that have presentation our for questions Please of will go note be include our and done in replay. from through we both morning today, call the press The we to non-GAAP be posted webcast release available we this at and A the have taking website announcement website release measures. presentation www.eaton.com. this of

I today and you forward-looking started, the remind Company would are to statements get future of expected include we to statements. will Before results like comments therefore, our that related

from also results related filing. are forecasted earnings over it differ And and our that, described materially that uncertainties wide our risk our actual Our a in projections due that presentation, the I'll turn release outlined range of in may are to and with X-K to Craig.

Craig Arnold

was Lighting XX% the guidance to end a last $X.XX. $X.XX saying, had and the share of of related our impact strong per year a and highlights we the our QX on another recall as results our $X.XX the of were start Appreciate costs Jin. excluding above to X $X.XX year performance. I begin Yes, $X.XX, announced Earnings GAAP it. begin and of Page which will Thanks, basis quarter our spin-off of to were At with divestiture by you business. with I'll range, toward results, the good higher and the

with margin our up the of currency. basis our in billion, prior were continue with X% above margins X% our guidance, excluding Segment organically we $X.X negative line range strong impact from performance. and over year. end the points guidance pleased and XX And were sales high XX% Our be to

strong quarter, this XXXX. $XXX $XXX flows generated is as QX of shares up from operating and record. we million of cash our a XXXX buy first in in back the repurchased quarter very of XX% million to plan shares also the We And lastly, in part of $XXX quarter million and

real. income and And very renminbi the X% to the a important are comments was our I've So, prior versus out point Page these currencies driven euro, primarily which in impact items currency summarizes start I'll covered year. good most the and again, X statement of us once summary the year. only for so by the

that delivered We are very incremental XX% pleased rate organic on with growth. we our

per spin And after-tax so, you we that mentioned, to our increased business. related again, see we the number primarily the and from cost earnings Lighting once from the And expectations. can incurred share per was, share very $X.XX of as above adjusted And strong our as X%.

even in Products And currency. of and stronger by offset here residential in we summarize U.S. see rates we growth, strength organic segment. the mid-to-high our markets. commercial the with the quarterly X% single-digits increased partially in Electrical construction results includes which X% growth here global Next, particularly X%, Revenue in and

operating and operating the X% our profits by quarter. increased strength orders X% up XXX how Company. performing were Segment continue and are well that consistency this in the to part actually the segment pleased and XX.X% double-digits, stroke, record the Our is was we growth this XX% QX. basis see continued grew Americas of grew led for of margins backlog points we in to a in the and and increase with And results

Moving X%, in Revenues to revenue X% growth offset here results. X% increased in and currency Electrical by & with commercial of X, construction centers. organic double-digit we especially Page partially growth strong data cover Systems and Services our we saw

to the year and solid have had for high momentum a in this started continued We business note on sure.

that guidance be rate. above You is are to for X% will to sales up recall year, we certainly organically and running our for the original that X% so

pause a we are say, we XX business little by some lot because business well increased Conference the regions. markets negotiations. do data we As have a we primarily what XX-month performing of, I'll it we lumpiness it's that call confidence of X% a our better because rolling scale this in what long-cycle particular we bit indicated the us many the record Electrical and a even in maybe, and at lot were I have tell Systems & Services that we all-time driven for a question centers. in in business, point will March, up and what other And months, our Systems our our absolutely about in moving is maybe fact from have of in year. prior is idea Electrical all And in this anticipated. in business the And in to here basis and you orders Services rolling this strength get that ES&S of QX just we I of let's in strength soon. you that reporting we line know On in that Aerospace with on XX-month an negotiations hyper And activity that of is, rolling end the XX% ES&S for major seeing indicator moment the a level I'll perhaps than orders to as & our a actually orders moved talked as this see in in orders gives cover call Investor basis,

a QX, overall to bit activity weakness what to in be in we in continues reported orders And very, very the business versus despite seeing of you this be so little are of underlying some strong. the what what have we actually and saw

only Our operating basis with profits it the to strong in increasing operating growth to points XXX XX.X%. was grow, leverage margins backlog up X% a XX%, quarter. and continued volume increasing generated XX% We

also the announced that Ulusoy we business acquisition will January. the of recall Electric in You

the EMEA on for to are and this provide we April have XXth Asia-Pacific serve platform the We acquisition as purchase closed strong in us then pleased will markets. our certainly customers a and

performance continue - in outlook Electrical a forward. be for go we & So Services and that the once business our for again, really as bullish to quite on we business strong Systems the

growth with growth more summarize X% QX for organic I'll than but results Page, comps had we slightly equipment. for Hydraulics our growth down but I by Organic more certainly Ag organic business a QX. the we in year. note some original XXXX, slow what in tough offset On X% the this equipment, than would in reflected here had probably next our in more continued plans at X%, did growth that construction and currency. only X% in in revenue expected, slightly we industrial we Revenues of note than were X% declines some but

this where we well. Page last level, across the year. in here half weakness off principally as summarize XX%, inefficiencies on see of do equipment our versus in every XXX in well last And strong year. delivering last orders QX at continues year some some in in record down X% year, issues were expect the as in were experienced and declined performance we the a X, markets we margins some driven second that as mobile stepped just the And to Backlog had almost comps up as half quarter single of XX%. through also as detailed Conference, business. we business, performance global XX.X%, business by down tough points see, metric. high orders results from margin we the for business work And continue efficiency our work of but can the this the Investor second segment at very And you to perform to we Aerospace basis Our

XX-month ES&S, both and And transport, for revenues orders this to military XX% with negative and basis Our XX%, transport aftermarket. and orders. Like reporting fighters, growth a increased currency. moved commercial on in strength increased a military organic we particular commercial rolling military X% XX% basis,

in across this segment. really board the So strength

increased XX% strong with Our increase Operating lastly, margin and profits operating quarter. a we margins margins all-time business. demonstrated point to quarter. improvement the up also incremental very And in and a basis another of XX% high backlog XXX the significantly, to some labor for the XX.X%, in add

mix we experienced overall. also addition favorable strong product the really volume some the team So execution quarter, to by but in growth, in the

to Next, summary I'll our move Vehicle segment. of a

the of in saw organic driven actually And like will the Eaton X% sales the reduction down Cummins which revenues joint in organic by growth very combination to venture of vehicle a revenue down declines currency. XX% perform to X%, Our which of and and revenue joint from and markets, in X% XX% continues increases well. was impact ongoing that venture. decline I quarter The were the were transfers note global a negative includes

of organic which with performing little increased had We expected, this XX% really global business year. business overall, but growth, have bit But we weakness also tough as in a comps with last markets. automotive in this is

operating And light to we the XXXX. margins XX increased to units, organic XX%. the XX.X% vehicle have less lowered basis the expect of But to year, NAFTA lower flat XXX,XXX the continue we despite at lastly, decrement for with and on volumes, for production margin outlook of For year. X Class be points our than a markets

continue team, XXX% our Revenues eMobility And includes X%, our by accelerate really increased quarter. the will growth, execution by which we the So currency. our which up by R&D we our business. as X% Page Vehicle spending, once summaries, And segment segment partially planned, X% offset in cover were strong some up on again, in organic wrapping to XX.

we to forward. we continue what invest segment growth participate opportunity in is this So in we exciting as to an move really heavily think

grown market, our $XXX of segment inverters traction our event, that significant program. We did of Conference mature a a year our are new the XXXX, schedule accreting opportunities we outlook and now which to turn developing largely since the all our result this in global of billion. is to in certainly was revenues pursuit from our programs for OEM with to billion mid-April, growth grow the midpoint X%, for first major this $X.X Eaton of what by revenue $X creating program organic businesses. new businesses our well optimistic we this we guidance X.X% is going the for rapidly segment in this announced has actually actually to At and new $X and for in Company one expect I'll prior This for million to a approximately about March, are original slightly long-cycle XX. our about we for is certainly and point, our Page our think the now reducing is for billion way increasing a ahead of Investor ago, customer for announce customer us for short-cycle to on We pipeline At guidance year this and win segment on down PSA our overall. be

at rates organic our we mobile X% to or itself. organic to increased what lowered we products was be growth points equipment once Hydraulics, for on And say and light electrical upon some Vehicle due some would I for growth X% to And X% of XX. we automotive the down at we off, X% coming weak noted Specifically, changed And markets, not growth lowered a eMobility. And QX primarily both side are vehicle for X%, midpoint organic expectations growth by rate to expect again, global in midpoint, Aerospace. the our slow really by by three in to business expectations have organic X% the growth Page margin and markets. we ES&S based and now the

modestly are raising XX.X% our XX.X% We at midpoint. to XX.X% guidance or from the

growth primarily. in Products XX to and to lowering to increases to are Electrical the XX more due basis XX% for XX.X% and Vehicle basis points in But XX.X% by by offset lower this to margins. for than is margin We XX.X% points expectations Hydraulics Aerospace organic by

unchanged. point new to be is expectation point Products also Our And midpoint other for two basis and for the between remain XX.X% at basis new XX% increase margins increase XX expectation midpoint. Aerospace the Electrical is to the margins for be XX.X%, a the and for to XX at a segments XX.X%,

performance the So we at the midpoint, XX.X% naturally Eaton of and on another be and for Page for would overall. summarize level guidance this for And lastly year. our QX XX, record

expecting at per foreign the year. are include, our and million. roughly guidance share $X.XX impact between earnings of organic increase we growth, represents this adjusted exchange and assumptions last X% midpoint, we to over $XXX expect $X.XX For QX, X% be Other in an

XX.X%. Our to our of and margin with quarter and expectation expect have We between be tax that would expect is margins between QX flat XX.X% we and XX.X%. of for the XX.X% the XXXX would cost corporate rate

For the midpoint, a the would At $X.XX represent increase Other revenue per expect of full-year full-year the of overall. revenue full-year XXXX. We the $X.XX earnings share XXXX, Ulusoy continues assumptions the we essentially adjusted guidance growth are impact million of for include a acquisition to the $XXX over Ulusoy this guidance from to our X% raising acquisition. of organic includes X%. $X.XX $X.XX, from of which midpoint impact to

and million $XX I in our the XX.X% foreign increase prior We and no be We change mentioned, items impact is expect, segment forecast. as from guidance. a million of expect to exchange really to margin other would $XXX this

So in another strong in year QX. start the say I for would summary,

We results absolutely with to of we the are overall. thrilled deliver performing well another Company and year positioned is that record the are way

So it to Yan turn with I'll for back Q&A. that,

Yan Jin

Thanks, Okay. Craig.

we I see today, of do call Before is present. session in individuals the of queue members that our have peers Q&A the begin we

today given limit questions opportunity these just and time over So possible, hour of to as constraint question our please as to desire get your an and to be many follow-up. a one our to

that, our give over guys will to I the operator So it with turn to guidance. you

Operator

[Operator Instructions]

Yan Jin

Okay.

Goldman from Joe We with Sachs. take our will first question Ritchie

Joseph Ritchie

commercial data centers up on being maybe quarter? Thanks. center your data ES&S especially this We news, side, the expand conflicting comments chain. supply everyone. on Craig, some heard double-digits in in could of and the out Good you morning,

helpful. would And so any there be provide other further color you can

Craig Arnold

I Yes, perform now tell to the overall very you that, data well. would us thing the for continues center only market

our continue for revenue as mentioned, levels center up sales. to double-digit data quite are be We still I running Activity strong. is

clarify of piece hyper the think scale, the the center follow it quite for that tend of that Company, we - sake I I that all trying to who data are when especially the to lumpy. they orders, you be to comes

we quarter but Systems as market. of up which one again, growing mentioned a experiencing fastest business, is be be of for the really think of us negotiations, for to to So, activity in are slug of are our so record strength levels level in get decision going segments. will & quarter you they rolling proxy and we Services economic in that big place made a in seeing it I more And and that why quarter, taking move mentioned, the and XX really that a one lighter next orders I our a level we Electrical activity months, will record negotiation because to good in the still levels. that we reflects activity is very to the at the continue think once that we market. accurately for activity is is the is XX% But look is we see take which underlying and economic good we center overall, us, this to data

so, have we in activity continues data up to Systems and centers be in Electrical no seen a And bright for Services & by spot really large, us. let and

Joseph Ritchie

And driving Craig, the verticals the strength within really commercial, are what are there? that

Craig Arnold

this gas and pretty back would certainly, strengthen We... really seeing the to we businesses say we commercial and overall. centers. is I oil And Yes, come has broad-based strengths are in data - mentioned

Richard Fearon

commercial we example a under look new institutional, office report and straight just are side Dodge high-single-digit, seen, that. look if in just little are CXX strength bit government, seeing at for up has reports over both that some at Yes, except But you if up governmental double-digits. broad-based commercial like numbers the you the of Europe even the for data, And low things. XX% of

all it, So it's pretty consistent.

Craig Arnold

are Right. It's the seeing broad well. world we and And commercial around in in strength also really as businesses too general.

just not it's market. in So the U.S.

Joseph Ritchie

business. on just my that helpful. the Maybe Now, follow-on is Hydraulics

we intra-quarter, start guidance because your year. have businesses all the have in And of and to already down interesting, had gotten Hydraulics maybe to part off be taken kind the this it's know business a portfolio. when You sounded this, had of start like the we about meeting it right talked to better earn January, February. that met to you Yet,

can how terms you And in fits so also then of quarter the of went kind just longer like And Hydraulics? contextualize it how portfolio the with - with term?

Craig Arnold

always Day to short have of associated to we some First self-inflicted say, some as to wounds an in would talked all internal move the kind general, believed as I some transition, of going during our what and that Investor work some with would I of recovered organization. we have second transition do resolution fix, that we internally of about half a call are we of And a kind managing site more to that be issues. was

think markets. I really what guidance are drove new us business largely some for some that end our we Hydraulics news in seeing of of the the the the weakness is of in reduction in terms

the certainly so, hit still that our we is new mobile largely as market. own have some that our year. really certainly second expect weakness of stuff some I operationally our I would of are do work and system of equipment we to flushed the would the in QX. that inefficiencies the acknowledge, the teams And the fix in by that. orders working And the And say through But are we we would piece weak half seeing, some be to time to we were of say

are. orders names of at their take all than customers, up are that say would our a you I well, sales know our some the If you better look holding

look could as a there forward. we better be so And outlook

would taking today, function it's more But of point, as of that sure in. say would believe are at have business Company. as plan all And some any we all to. of criteria team of we and Hydraulics, we is we a Company, our in place for part our this expectations Hydraulics can But would a operational is different to plan right no for call extent. weaker a anticipate issues and part fix really Company, their them overall, other are turn the and have a And or proud if of the of this to be team There plan we businesses into Eaton we the part as of And the a and that that Hydraulics expect when a that accountable and the we can't the executing any about we meet to what criteria we Hydraulics we necessary. that volumes. meet segment. set not inventory to that fully think the act expect repositioning we willing for to We I keeping part now, plan is

Joseph Ritchie

Thank you.

Yan Jin

next Jeff with from question coming Vertical Our is Research. Sprague

Jeffrey Sprague

everyone. kind some value of there Good project time morning, a of healthy it really Thank dollars? negotiation more us morning. to is year that up low a I means some that conversion And you you good. of one in on come sounds on kind kind wondering XX% big kind that QX was results color what could Was being - what and would back you. ebb rate negotiation? ES&S obviously such a Is in typical Good have number anyhow? if of give just just last in

Craig Arnold

nothing thing I'll of question we just to of kind There last a year is would the the in low mean, Yes, noise. is that clear. suggest no. absolutely that QX first bar had answer I around

bid it during was I quarter last was mentioned, than than to of And course not the large quotations all-time and a is other just XXXX. it as higher only bid of projects number the making of but the level I QX on the As significantly are customers essentially and think this our during that various that was we year, on you record we articulate, higher period. any course

the us activity economic of best business. proxy for the it in level underlying that really And so, probably that for have we is

to in a performing anticipate. it's that we the that indicator business, really very fact very think we business we much this would So actually like well the expect cycle, at be point long-cycle performing is this strong of a

Richard Fearon

take sometimes these little activity notable typically negotiation big how just XXX And it longer some days, it is XX will But of to levels to time for strong projects. a quite the days final bids yet, are. bids, become for

Jeffrey Sprague

on therefore is and sole Ulusoy. offset you'd for Is for the in And else that reason and just it as negative a actually or the accretive more there year, $X.XX equation? follow-up the guide than the a somewhere separately maybe

Richard Fearon

really of No, of it's but the way to about right it's $X.XX intangible now of think amortization our accretive estimate have is, we accretive, $X.XX it $X.XX and Jeff costs.

so, it $X.XX. how And that is up at ends

Jeffrey Sprague

you. Thank Great.

Craig Arnold

core the are at other so in elements no for the all. guide of we fact the But all holding and business, change

Jeffrey Sprague

Thank you.

Yan Jin

from Scott Research. from Our question next Davis is coming Melius

Scott Davis

Good Right. guys. morning,

of margin why Just to be center volumes, mix because on ES&S, clear, the just are is data correct? you that raising largely not reason the and guidance that because of is

Craig Arnold

concern that I I in forecast within that the wait we range would that of to year. out. First certainly pleased coming Things we and plays anything the and is for see our be projects have that and take in all, not is would about say lot suggest will margins as we from in ES&S ES&S the nothing the business. a is I a say with set and for how year. And sign of point, in any to very there But your so to right growth in our would margins QX are would today early of about. that that are concerned if now, margins way today quite would there is our well it I going say

Scott Davis

there there you all I there. is strength easily it's cheap. seems assets priced. have of who relatively of the a been could They you kind the could seller what be deals. competitors market And on fully -- out be participates? a of couple that as of some into two and on about take of this is be assets. announced But buyer seem really actually M&A to your got mean of ways market you big have take, think I get Okay. is out as Craig, the the likelihood a your guess, it, that to Eaton Nothing

you that do current? in So think how the about

Craig Arnold

The I first transactions the thing properties mean extraordinary asset prices. see as in respect some these pricing that can been have are of for with by values to and you announced, going

on going said prided cycle, that be basis of through we the ourselves fact cost be are and to we that cost have to We want our and disciplined deliver points to continues this X% think our capital to over XXX X% we we of capital.

And to so be priced disciplined buyer being looks assets extraordinary we a continue like at market will levels. that into a

I would have And active we we very that deals have are in the time, But will so long a in than at we looking so today, well. we the a pipeline say and make as past. probably we more commitment very as have

with We when chase what on of metrics. unattractive cash financial would I not are going at set say deals their to returns are you look cash

look the at that of kind we way it. So is

Scott Davis

people about willing Craig, other could some side maybe maybe obviously as is pay of price time now for are sell more that, think and if stocks, of to that is a possibility? I you a partnering the with cyclical to But something, mean the a

Craig Arnold

Yes.

a all, cycle. say of strategically we our look would at businesses I through took First the

this through really established the we going is good a hold that we period the be as long-term seller, a cycle. think itself hole to about look and are based we And criteria the so we to to we over at think them portfolio upon and strategic how whether or trying not the

that you the that Now take businesses that to we choose decision strategic businesses would say, that we of But a versus to things want generally have term, we having as in to to time exit do - your said want in view that to to it. of a want be be more you longer now portfolio if a let's terms great asset, point, we exit. come would to

Scott Davis

luck and to you guys. fair. is That Thank you good

Craig Arnold

you. thank Alright,

Yan Jin

Our next question Deutsche Nicole with Bank. from DeBlase

Nicole DeBlase

Yes, morning guys. Good thanks.

Looks this full-year growth have down So organic was are little on organic implying still the you quarter. focus I know just but Hydraulics. throughout to X% little a your like some a I in year. bit brought want bit, growth guidance improvement basically it you

maybe March conviction I that throughout of progressed demand So driving if what sign or in quarter, any that is guess, frame the just into there and was I'm early with April? improvement curious how

Craig Arnold

of growth that half would are year take than say stronger question gate the in maybe in your a delivered terms we out little certainly to we the bit back implying of in the first I right of, QX.

mentioned that my organic within I was As in actually X% growth commentary, our opening plan. internal of X%

construction And markets is to other we quite you will customers saying, been bedded down, our boost some end still we as are the look major the two going working comps so, of that, at specific serve growth. that as if kind that a in programs have have equipment, on are amount growth take would actually growth are of thing into improve measurable also largely look Ag forecasting are equipment, our that in as that we look year. plan the And you out-quarters, our I of get QX. internal And help a company not that the very tell low off what year the we help on, markets and initiatives that by for most they are cases, levels. working They our very important a in specific you forecasting at growth easier we frankly, are big on. the single-digit Hydraulics moves And are we

a there place rate. our QX probably relative that that inventory of little And also was took correction that so growth do in we bit held down believe

Nicole DeBlase

a was saw this rest than got we isn't quarter. Was because the sustainable the quarter? going the it year of full-year Okay, margin there expansion the it. Thanks, Craig. guidance there? little on a really implies Is margin performance And shifting just impressive less first anything to Aerospace, impact the that bit then special throughout just mix in

Craig Arnold

Yes, bit in mean in certainly have quarter record Aerospace, and I for did that record of a QX. margins favorable it record, was we say for mix I all-time a would an just QX a not

was a the basis bit things stronger quarter, Our growth push as that in OE but our and well the for certainly on business, helped a a core relative also aftermarket business help the volume up. also was than

But of principally, And so more probably that to you at Aerospace that levels margins not even those are see, function I for sustainable levels. we QX forecasting a customers really aftermarket is performance, I that it industry-leading many strong in as of and again the can led was really the cases mix mix a would would are say, of levels. say once at record and OE

Nicole DeBlase

you. Thank it. Got

Yan Jin

with from Our Ann Duignan JPMorgan. next comes question

Ann Duignan

guys. Hi,

ES&S bidding again, I percent win would been, you rates is but you what you have win what up know had? kind have versus not back significantly, Just success to said of traditionally

Craig Arnold

We strong in market share our pretty businesses. have Ann,

our a As you of and & know, industry-leading business, we market shares Electrical business. I this activity mean, this Americas in in have is lot the Services in Systems

going market win our underlying with rate And our so is share. consistent be to very much

So business. bidding believe our we that ultimately do in activity to growth translate this will

Ann Duignan

than you are that And about agriculture, about what Hydraulics then Maybe of saying anticipate the helpful farmer to US, is of where in that is talk sentiment American quarter question Okay, how the for orders? maybe the in weaker that expected would Is the the color. course. I there? Appreciate your could weakness ask it. term back staying customers full-year? And have bad you also, North was in to given

Craig Arnold

point, the order are to commodity dampening for was And Ag But the that you outlook mean, farm of our least as decent some think weak in the kind underlying year, kind think were kind we a Ag the at in a low that for call do are, it's we sales they in single-digit like prices Ag markets. as actually quite of think in in in I your cautionary the market grower around enthusiasm being I certainly incomes And of we for is the year, there today that QX. it's Yes, in rates but and down. that are absolutely Ag of right Ag on felt is sentiment general. and

Ann Duignan

similar think the maybe view XXXX I Yes, a Ag would we would into and even for XXXX. of have market

Thanks. back there just it leave in my were I'll answered. Most other Okay, of get questions line.

Craig Arnold

Okay.

Yan Jin

Coe from Our next Nigel Research. question Wolfe come with

Nigel Coe

guys. morning, Good Thanks.

get X% I'm backlog for the off to targets think with orders very I do and back Hydraulics positive high But in achieve I remaining just we sort is year understand or level. and negative? down, to see to X% the wondering back a your the was backup coming of to XX% orders come growth to still Hydraulics, Just of remainder flat come the that have can to

Craig Arnold

the no like your earlier, I Yes, at will at year the us very confidence gives yes. the down, is perspective. while growth The versus asked all, still historical year, that very once can levels backlog that again the of X% Nigel the we problem question but actually was what running spirit it's I down say and the much and for is but think from very, question backlog outlook last deliver high a

the as the in easier relatively the with get And big comparisons that obviously the message general, comps sales, think I really general, in respect that so orders, year comps with you easier unwinds. And on. have respect to as year wears is the is to

Ag once well while that we construction growth markets there have are of very We we have little again down initiatives a that been is the market, grow and to think year. that the of specific in as company us identified place put that a that continue some and big some to going the caution believe two do in bit have we give very

Nigel Coe

is follow-on markets delta looking then at three-point outlook. Okay, the Vehicle are great. the And obviously, the light we weaker. on And vehicle significantly question my

how revenue the Was of segments, great. wondering, between at in there delta I'm that would caused is help transmission a Cummins and the So because factor be business that legacy JV? by all? Any a that explainable, just the shift complexity your much given is

Craig Arnold

the and growth world that in I reduction with continue automated say, to down venture light that so, is global markets I as from in mean same to the I the of points say, have, quarter, into the mails more by joint of the transmissions, to way, Cummins that I commentary, point was do moves my around say market. impact on was as We move was one really we for was vehicle and by revenue it mentioned a bigger that see you because data way, what terms for the the that say of that is the put Americas light business becomes of weakness the China move you going the the in other in of XX%; we in it would business we I'll I the in and Europe piece much as on think mean, the three table down a the legacy forward. most Yes, global principally and weakness is a X% would see. world driven down vehicle in couple the X%; terms really by

also that As revenue segment, of up the legacy the and world become that and business to our electrification shows eMobility. out comes vehicle in moves eMobility

that our look are business the And number going factors worse and is. are of underlying so it there revenue on than Vehicle really perhaps that a make growth

Nigel Coe

Okay, Craig.

We very much. offline. will dig Thanks in

Craig Arnold

you. Thank

Yan Jin

KeyBanc. Next question comes Jeff Hammond from with

Jeff Hammond

guys. Good Hey. morning,

about has in Just maybe is sale as it's two is sales? or a interest margin then have than just on without Thanks. been a you Lighting announced, just bump driving that more talk And indications EPG, two, one, what any change been? spend of likely the can you gotten likely the

Craig Arnold

plan say I I business we conversion primarily the we EPG, put getting largely we would the anticipated on margins, would originally when in in and together. execution better Yes, say than better the are

really it to that some we team the really the and for in on of so, the initiatives put plan. executing And delivering cost-out complements

increase kind guidance so than the anticipated. little And going what what And things the drove are in is we just better year. of a for that

the all of that still is be we get and As of in To end the to along your continues process moving expect Lighting, spin say make by first be point outside to of sure the terms as interest, done business we specifically anticipated to the path that I around ready we can we prime the would mentioned year. and to that yes.

an As a alternatives, we of good path in And the but imagine, these obviously is we you an potentially will the interest always choice can number of spin who to prime be in two working are through on, acquiring to has so option and there raised business. have that business. it's been companies the once again,

Jeff Hammond

then level or talk the particular areas just is auto. you and resilience in mean mentioned Europe? about Europe, there been of weakness talk just Can Okay there, about I on you any slowing macro some Thanks.

Craig Arnold

in we think the to out we of growth around in data environment Europe that slowdown your Germany, suggest and all see are the the have point would as we I US, continue perform much businesses very businesses are overall. in Yes, coming in businesses. the to long-cycle Europe. in we seen of macro specifically in economic Europe the in many say like I well that it Then, some certainly our fact seeing seen would short-cycle seeing well across

Europe, and data Systems in the Services specifically well. & Aerospace, industry global centers, So Electrical doing is obviously

different in markets put assumed think think, it's we weaker. not on about the like. we more that But have when bit question, and could the seen, perhaps basis, essentially we And less industrial than and be seeing the what accentuated no But together. same continuation industrial so an our globally. weaker I terribly we that of is or bit trends is a Europe our we plan going controls Europe a and all It's profit incorporated when think you I guidance are to

Yan Jin

with comes Our from of America. Bank next Obin Andrew questions

Andrew Obin

taking morning. my Good Thanks guys. Yes, call. for

China the have Mobile China. Just expected of Can bigger about a during talk positive. sort China Frankly, to a would progression question be on Hydraulics I you quarter?

any much. can China. April was Thank in the as is give I surprised color just So And move if you as that you. needle us to developing how they didn't

Craig Arnold

than first specifically China. of March the your months markets GDP Even of year. started say data January, we relatively and Yes, and IP of March month in China data was the weak the in the they year a stronger coming I to two automotive much mean and the that see quite certainly the better were off month. I out speaking, were point, will And in

And a indicators, economic government Chinese stimulus so the the suggest are desired early into it is the is lot that say would place putting it that I impact. would of having but

we Eaton a in overall, revenues to this think continues grew actually China in China from so company. as QX strengthen And probably forward. point

some the important it's offsets market as big given XX%, to an do some needle, I are excavator in segments point, move of part enough your it automotive to that look we up in the - But not of So weakness growth that quite regions in It's think saw China yes, other us, the business. for was and obviously the we we strong other improves forward. And but that we QX. Hydraulics, believe despite specifically. was China, the markets, had actually mid-single-digit market fact in some strong,

Richard Fearon

pretty if got positive the China, you the Andrew at and went some And as construction were QX positive metrics they on. look of in more in quarter

XX%. are starts residential So offer starts up XX% up and were I think

of markets. into you are lot in China construction-related start the So seeing stimulus a flowing somebody's

Andrew Obin

and And color, upstream, the gas. in second are of give definitely some more and what downstream just question, strength us at you you Crouse-Hinds? color seeing you maybe Can highlighted oil midstream, sort specifically

Craig Arnold

first of as piece do in quarter think than and seeing we exposed mid-to-high we kind grows And we that think market a a X% we single-digits. of and oil somewhat think had But play XXXX we more the company, our good are that we No, and we would gas, count in orders rig oil is downstream of quarter in in gas. to And revenue, say the the upstream, we so in definitely of the good so Yes. saw and there market. are then strength business first I you more or up QX. do a

we do And is seeing well. business continues And that as so in gas oil what we to and are think our strengthen.

Richard Fearon

from And are of large downstream some projects. we benefiting these

downstream these so we applications. petrochemical, type are slanted of LNG are and and some facilities configured being that now example, definitely toward more For

Andrew Obin

Do backlog your or fast a does is that see hit oil how it there moves? price you it lag? immediately And

Craig Arnold

be the that exploration probably or drilling more downstream, increase side. us bigger are will LIBOR certainly be upstream to a from there lag move is generally place, the lag. I Andrew. question in that clearly in capacity the fact have of the given is a detail, for in oil we putting a say them and would price I there for and I lot studied not would companies even mean to than who But it exposed are on

Andrew Obin

so you much. Thank Perfect.

Yan Jin

Next from Deane Dray is question RBC. with

Deane Dray

Hey, the just of quarter or some on called of not the have morning, as in variables either industrial Good a out other touch companies maybe that you. factor. broadly Thank everyone. the the a factor number

that been a see particular the of that weather. the quarter? you you fourth anything So year, And of the any quarter last that factor your out Did first any about I about and experience of adjustments. have a into Did come play? pull-in didn't hear might into business this quarter talked inventory

Craig Arnold

tangential really kind And try ascertain difficult I business. we around elements how from of Deane, those to away that to stay light would the say, your impacted it's and because weather

around the I we the that business. the big at say an have the that, was QX, was really material at over it could say would didn't let's see fundamentally say so in pull-ins, would weather end thesis point it outlook to impact change I this enough or been; QX well And pull-ins probably And the impacted to of as point, QX, not. our of, would on year, any kind have

variables, would of on these really I And a would so say impact QX. material in none extraneous the results had have

Deane Dray

say And started? is you did April how That fair.

Craig Arnold

the for say that QX. with just is provided X% to what would and that would growth to I we continue much But We in didn't. you guidance I likely are say very we going expect and cycle would Aerospace No, down have see of part to why mentioned, our the taken in short as guidance Electrical perform that and will we and Services Systems long-cycle very the & the we business. businesses Electrical well reason Products continue line

is So like offsetting of the extremes, playing we the short-cycle more revenue once weakness much long-cycle out more strength stuff Company's in in a story again, with I think the bit perhaps perhaps really anticipated, with businesses. very

Deane Dray

Thank you.

Craig Arnold

you. Thank

Yan Jin

Our next Andy comes with Fargo. from Casey Wells question

Andrew Casey

that here. restructuring? to compression, the bit some But morning I and dead of that accelerated a Hydraulics is margin of QX related a outlook, Good decline Craig. beat horse margin reduced little the on to everybody. Thanks, is specifically some apologize the

Craig Arnold

say in really, significantly would margin to not say, are we really not more doing articulated of is business. I we I business the and that as and obviously we a function no, do earlier, restructuring Andy. volume I compression Yes, Hydraulics are so would restructuring our the continuing largely mean in because in

at won't of day, I end less obviously XX% the of a for certainly lot focus accounts as say, our in Now Hydraulics and a the profits. understand of why segment, Hydraulics than we

the And that the have frankly, business. extraordinarily our it's well in we on a and a and volume just businesses But that no, of are for little think decrementals volume. strong in we are more change performing really so, lot quite a making Hydraulics having restructuring, other of really than more I really bit up, story shortfall it's not in

Andrew Casey

Okay. surprising that Thanks, we given some strength we seeing. little Electrical Products, are you Is bit share what a Craig. of And which then some in been residential, within that have gains there? the seeing highlighted or macro data

Craig Arnold

the valued driving certainly for Resi this factor growth know, do saw essentially higher we equipment to AFCIs you up. just and mean by of it that strong housing are a and revenue growth But I in prices the move we as helping regulations Yes, as codes us, are you are really strong standards, electrical ground fault order this and largely business. that and QX was performer, is think with large, standout and where quite frankly, and

of don't out is the played quite up that start lot housing remodels data, in continue QX. a seeing we Resi necessarily show are be We certainly that in on that and but bullish to

Richard Fearon

is for that, Resi is overall the last would And some on taken is mean Based belief market is but That data that likely data, strong. year. care, our we we to pretty the have what throughout show. this equipment believe the electrical

Craig Arnold

taking up year. mid-to-high our think the Resi business single-digits for up, is We construction

source really a for the think of we it's strength Company. So

Andrew Casey

very you Okay, thank much.

Yan Jin

question Our Suisse. with Walsh Credit come from next John

John Walsh

morning. of how the guess, year? how talk balance good I maybe on tariff that little about I about thinking versus commodity margin. you inflation, and in Hi, a bucket you a for bit Can price cadence the guess, the performed the are question quarter the

Craig Arnold

probably year will way think the reduce, tariff-driven good but you. Thank where can't be obviously, marketplace. to have The out But and certainly about we relatively are of and is running noted commodity copper little holdout probably is think pass inflation Company, we largely said certainly prices natural bit neutral other less less as have mean, at think so versus a cost each that cost see, still price in copper is Company. are the other, as for costs commodities less price the that in Company. that that kind that also see Commodity played prices we QX and Appreciate high a the all most question. think of one we abated cost we the levels, as being well and past the for price see, increases important we we the as the we we the and thing the you obviously offsets have Yes. I price for seen that though. we the

XXXX are will guidance neutral, cost we our largely much very be for comfortable been. that has So like very pricing

John Walsh

Great. like little is the revenue And one doesn't a in as bit multiple It to business then the it just give maybe the more? comment. a kind number, negotiations a way size you there more to sound absolute attack way to give of of want but to the frame

Craig Arnold

of size a negotiations of as revenue? percentage The

John Walsh

a number. couple have what absolute increase attacked around year-on-year. XX% or I of it Yes, the means people the mean

Just...

Craig Arnold

future is be would the like big not a of you to we number the is that say to you really number. it but It and like. a would of confidence would us, what give for looks material large, I very to a enough give Yes, I indicative number, very business tell

Yan Jin

with Julian from Our next question Mitchell Barclays. comes

Julian Mitchell

just of for then in low in margin the may year something top-line on I whole. in you worst but outlook. of for squeezing sort relaxed implies particularly urgency your The bit both about decremental the sound wondered year in versus intensely the the had maybe Vehicle thanks XX% a And Worsening Hydraulics. prior in reduction the outlook a I cost decremental both and be for me. revenue businesses there think just more or a just short-cycle you a a around double-digit guide outlook. Vehicle, as something wasn't Hi, around question maybe businesses, cost the guide, the smaller why but face maybe And it mix, QX.

is the what have changing you year? mix in terms So later something or in of there

Craig Arnold

businesses, volume, your side metrics cases can track the address to changes businesses maybe of and mean that we our we flex but variable impression I that I more for is I of first That Julian, is can. the expect minute. their extent in on, down it's that to that the business flexing the we the key Both I mean shortfalls stakes. business doing that Vehicle business is relaxed. that To us a nobody one our our something many have in they our table that we don't every for of every they that of And want you everything promise leave cost Yes, do I first revenue question to all cost, of is would any wrong extent our with say to and are day. Hydraulics

about we that our The talking the that big that. a lot changes spent event would have to kind although plans, we dramatically, in say, are revenue about. do So world are it's time not we thing to ability drive of of material and the the in restructuring the talking changes enough that not changed

of vehicle, QX. that nobody ensuring decremental is to performance way in And are the decrementals with yes, so relaxed very strong I respect about costs can And any in promise business. you we inside managing our then in

the Vehicle but business. our for little what than perhaps we would decremental of as still bigger year, the that, well below a normal a balance For call

assured do costs the again, is Vehicle job, in a They And so on a rest always managing our of face once team that great their game. have, are downturn.

And continuing count on to you deliver. them can so

Julian Mitchell

just you'd sit the across helpful. trends How very is you then levels levels be partners at would weeks feel they out as any or been any has channel in terms of OEMs about That recent inventory months? today do or my around change and in second And question inventory businesses? call interesting there absolute

Craig Arnold

large revenue largely Yes, big partners not. line our you with for been channel Inventory growth. distributor would where that if they changes. I with the their and have historically you maybe are in today where first, with And is line typically by own of because would outlook the say see are in taking and kind

have any And so change seen we material all. really there not at

are really adjustments, mentioned businesses. OEM on very we perhaps on managed. and is of the well where the As But some I short-cycle some inventories have other that, seen the side call, than

Julian Mitchell

you. Thank helpful. Very

Yan Jin

with last At Baird. of time, the question Mig from the take this point will Dobre I

Mircea Dobre

Great. Thanks want asked before that in for Vehicle. I back me question a is to squeezing and to been go on

I'm I the in at think mean, you light this looking guidance, correct existed the much of change challenges knew in space issued of but if vehicle So growth pretty wrong, the in year. guidance, me terms that I this when some everybody builds organic for

in JV? trying about changed think it or shifts So by out what eMobility your what driven been is it Is reduction? figure how this guidance mind that to really Is happening with the this prompted we do move? to more

Craig Arnold

say anticipated. to economic would QX, of evidenced anticipated is than I really around by we vehicle really world going America like what is of has certainly this are It a come No, fine. and what as seeing to than is be North transfer Class on are have absolutely nicely And world largely what would truck is change of function market. the some most with around forecasters think nothing and I today, general, weaker commercial today markets the just in do vehicle beginning light anticipated the we global I now. on said, of that inside year there that X what weaker vehicle have the revenues, do we and as in we revenue have I it's track. at continues think the markets least mentioned growing The at JV what

really see what but the We weakness three influenced of really of QX will certainly brings, guidance what changing world the year. rest for largely have year in all the our is the regions to the

Mircea Dobre

I see.

of for commercial the make fact us are fair is be lower and business will margin going Given had take step look year-over-year, now challenges the all that again of the we XXXX? XXXX to to be margins slightly to as is that the you adjustment vehicle and to we the know in going a the side once margins have, that it that thinking toward down

Craig Arnold

is our years I venture, business the No, because strong inside know, of we the business the say know, there. have And to of inside cycle. that mean, used in our the that work not. of margins longer a our you you through as to over essentially certainly delivers have as build done volatility no we number of I Vehicle lot business sit portfolio lot joint last a of really that would

We lot change America is from material business restructuring profitability where this should at even down have say, in is expect done year. it market would you a Class take and of a this to not with, so I that North let's significantly say, X all

Mircea Dobre

you. thank Alright,

Yan Jin

you. Thank good. Okay,

our the everybody’s We and of call we appreciate questions. end do reached have

all As questions always, and your us available do Craig Thank address something weeks. today for I will you be the and to joining all following today.

Craig Arnold

Alright, thank you.

Operator

Executive the for your And today. Service. ladies your conference for using Thank Teleconference and you and gentlemen, that participation does conclude AT&T for

You now disconnect. may

Eaton (ETN) 30 Apr 192019 Q1 Earnings call transcript