ETN - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Eaton's First Quarter Earnings Call. At this time, all participants are in a listen-only mode and later we'll conduct a question-and-answer session. [Operator Instructions] As a reminder, today's conference is being recorded. And I would now like to turn the conference over to our host, Eaton's Senior Vice President of Investor Relations, Mr. Jin. Yan ahead. go Please

Yan Jin

Executive Thank XXXX for today earnings Chairman Tom Arnold, guys. Officer. Chief Eaton are us first our Okray, and CEO; quarter call. and President you morning, and joining Financial all for Craig Vice Good With me

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

posted have questions and Craig's been of would appendix. press statements. today future other release our at the today accessible done we'll on are website are available results comments. earnings related and our through include in the this adjusted free I calls, past www.eaton.com. including on you therefore and we forward-looking cash at end of As we'll be flow statements taking go expected presentation This on and to our be that website A like adjusted measures that will to share, remind comments The our non-GAAP of have presentation, is call the will Company reconciled replay. the webcast for per

it With may I actual our forecasted a to earnings due described the from and uncertainty range materially of release presentation. Our projection wide risk turn in Craig. our will and differ over results to as that,

Craig Arnold

our We'll increasing it. full say And first, year we X as start I'd Appreciate Yan. significantly with guidance, Thanks, saw. just and quarter, had Page on recent we're highlights. a you terrific

year-over-year were above earnings managing solid job midpoint of this and increased our share which outstanding Our market an our results. reflected guidance. the of through strong per teams just XX% a of adjusted have done $X.XX XX% in is dynamic QX environment,

electrical of up the guidance end high of Vehicle which well two outperformance primarily segments QX was range of This organically, as well Our our X.X% business. X%. driven as the $X.X was were by our revenues billion down above

million for incrementals, the of price multiyear of we the profits despite of of the looking and say, generated improvements segment we'd managing execution, that $XX in a We ongoing XXXX XX.X%. strong having program quarter as restructuring higher was cost result This structure as record margins closely well the inflation in we And from million $XX also quarter. announced of, in the posted second lower QX revenues. at our

very part Our flow the closure Jiangsu operating cash our trip We objectives Cobham business. acquisitions and certainly strategic here each our deals. of front, flow Cobham closing finally, was the XX%, on But three depth bus towards and our in progress we quite business of helpful flow Adjusted And advanced deals light on as have in by the thought acquisition also would free the Systems well covered we We're XX%, good meetings. recently announced growth M&A in of agreement Mission be three another increased Having quarter announced cash three China, it also cash of an as Hydraulics. the the strategy acquire successful recent previously region. summary busy strong. been Pacific way provide some to and increased a to adjusted Asia growth electrical investor our important XX% these deals. by of M&A divestiture these of for Mission we of Electric the making of YiNeng Systems

of a decade Their to valuable existing transition. that our building see electrical the It additions market, grid. next charging linked Green the support energy to proven significant First, charger and designs distribution are power everything management our in over in we storage software Motion and power our Switzerland. energy growth based as capabilities capabilities offerings view to where advanced expands and expect

way throughout circuit week, bus X significant products. last YiNeng Asia announce significantly Hanyu segments, way related well Tier also business announced And market in provides in pleased markets expand to participate products that a region. and YiNeng Asia our combined Asia electrical the us really will capabilities high-growth will and of finally, the Hunyu to strong in industrial and access make breakers portfolio in Pacific. and broad open China. Pacific. and the Jiangsu I'd XX% in previously us allowing we're closed center, Electric investment allowing add, portfolio in China, Eaton's up to business position YiNeng's They of high-end X strong give bus also rate Tier products, agreement us to China in in contactors to with that acquire based of accelerate opportunities us to our our data Pacific, commercial and China our is pull-through Hanyu. addressable transactions, We in certainly cost-effective The growth in and and growth

to summarize financial X. of our Moving Page and a results, just note QX We here. points I'll couple

X.X%. X%, this quarter. X% is was the solid revenue. reduced Lighting sales sold of prior savings the and price restructuring manage that XX% by offset margins say, ability despite and increased execution, and were year, This but March decline that, million is XXXX. to by divestiture And of of acquisitions total above effectively I'd largely in business inflation recall during a you'll this And which First, segment the really sales more result in the our of $XXX Lighting, second, we than by

full to for earnings XX% adjusted adjusted impact up we the count, XX% combined more $XXX of in we year. lower share delivered -- with lastly, expect offset full inflation in the worsen, will our when and but our million, fully certainly EPS. a than And our QX, this increase We

X. Page to Turning

We're sharply, and acquisition closed significantly of planned of results, These reduced quarterly Lite basis XX.X%, also profits very Operating revenues, Tripp Electrical Americas as XXX the and of once in PDI to added a to see, again, increased points markets. acquisition utility see XX%. can team X% by our were than pleased And revenues. while their up divestiture million the residential margins, record. by and commercial industrial and you driven good lower as to to see, higher can $XX driven centers, Eaton lighting were Lite really family. favorable have results The you on data divestiture welcome revenues the growth markets, strength driven orders We're savings the sooner segment. which again strength data by XX% of and organically, X% pleased and in up residential This lighting. weakness offset by Tripp the You Revenues were in the once for center with cost in was mix to quarter. due execution, markets. also the

last center markets. and actually versus Our again, backlog data year in, was once and to residential up strength XX% ongoing due

could in certainly encouraged a markets we perhaps And see are also are difficult been about to about. select reading large the sign order been judge, you concern shortages of to that beginning these markets here to We have some think commercial some some turn due too, positive. to orders the that it's have strength supply do very while chain

We to favorable X. centers, strength a Organic our impact on Electrical largely markets. weaker; the revenue results from We segment. currency, Page Next, utility growth the posted growth with due data residential Global in was show by for and dollar. X% X% organic driven

the see pattern can You here.

basis record margins of delivered points QX also and new a XXX XX%. operating posted in increase We

more versus saving the X% primary came in centers, XX% strong, down markets. backlog earlier Orders like XX% growth driven our cost incremental residential excuse were multiyear by orders from a XX-month by Our last the actions same to sales, here, me, three by quarter, I'd also COVID-related measures, and restructuring markets. lastly, data utility taken declined up segment was on the driven the and good and from the say And grew XX% rolling -- end declines, contributors X% our we're than dragged basis. control margins in the and from also program. year,

year. strong organic impact. We increased Operating significantly growth and were XX%, by also very summarize XXX segment. our strength And orders strong, basis XX%, QX stepped to with point Moving XX%, Page mobile margin X% driven in equipment currency X% Hydraulics to over up X. improvement primarily a up markets. Revenues our positive last

the conditional close is in Danfoss business, is to this still anticipated, the we to process, acquired step and sale regulatory did approval here. Hydraulics in quarter from which expected the an EU second important As receive

Turning X. to Page

were in can the driven XX.X%, the have see, basis And very Aerospace as points you revenues. can down results still including our organic down We margins operating to downturn Currency, to down also segment. by see, as you overall. at Revenues aviation. decline, X% XX%, financial commercial XXX continued added but for levels XX% were attractive

them better than ongoing a I Our to the margins rolling of give aerospace to of decremental a down Orders to due again, approximately normal team, XX-month on were business deliver quickly downturn markets. XX%. basis, They commercial were moved once the and flex in XX% really lot able credit.

up were transaction previously close the of starting a track, QX Systems sequential on lastly, Now remains see however, as And I we basis, Mission to from would some announced of to improvement orders the are XXXX. beginning expect we and our QX. acquisition Cobham on at add, XX%

Page on Vehicle show the results we Next, segment. our of XX,

quarterly seeing great the driven introduction with incremental savings volume transmission this in also volumes XX%. also margins segment is The additional multiyear from already of improved and certainly see, noteworthy very XX.X%, Eaton the restructuring This to point X% margins progress This market. margin pre our The in truck program As And increased automated through X performance target reference from business so was light the segment and XX%, as segment. getting you the I'd that revenues of vehicle our can Chinese here XX%. growth point this some approaching commercial market market. by growth levels, is record vehicle making a despite up was were were that from JV. traction XXX below was Class markets product, another say, undertaken. significantly strong much and Operating in of anticipated. in China here, we've global heavy-duty strongest stronger development increased came of increase the vehicle basis And our new nearly pandemic still and and than one Cummins margins strong strong production the NAFTA a for from

our segment. XX. to summarize Page Turning We e-mobility

We multiyear Of Here, a And to to margins really here growth circuit door we've I QX, next-generation X% with continue by would we This as this be battery say, global both same the secured was award break in to high invest updated R&D. electric just the leverage robust revenues increased hope pedigree the And technology which we electrical how automotive win, in I've a technology. driven past, continue reported awarded in we our vehicle on as in from agreement using products. able protection global XX%: really customer and in leading opportunities. were we're year. XX% we grow organic in our manage heavily X.X% pipeline And buy Operating currency. and to a and XX, solid guidance million platforms organic of and markets, note a low-voltage our of the to experienced vehicles. additional strength does $XX markets. highlight strength vehicle to revenue revenue sales, Slide material it negative for e-mobility represents the for this

you growth revenue year results. see, significantly for We're about organic strong can the our remainder our QX XXXX. increasing the optimistic As we're with of

to Our across and improving and and our basis previously. growing markets And these supply manage We our increasing temporary markets. in some X% demand strong that backlog be order have market organic up experiencing up X% challenges. issues, expect is chain growth X% end most overall book to Eaton of now to is really this we're we through X%, to ability and team's confidence from while

say As growth, kept all points. basis increased by aerospace Electrical by for by you XXX Globals points. has strong seeing we're outlook, market higher-than-expected segments. utility, basis exception for forecast segment, basis our performance increased segments XXX XXX here the mid-single-digit with that see, increased and was remains Vehicle demand other in with we've I'd have really all points markets which our unchanged. electrical in Electrical our about and Encouragingly, the can our line across of of original a

we're segment Page to margin where for our XX. updated guidance also the increasing guidance. year, our significantly We Moving show

we expect Compared also for with on higher inflation guidance over acquisitions say of down a and XXXX. midpoint our I sure have our a midpoint guidance overall, increase to to M&A in Eaton margins outlook of is our record. volume. continue for record. a our XX.X% XX.X%, the XX, increase increase basis be at to now note original recent to the of $X.XX We're margins our EPS margins net our incremental to prior XXXX our be over guidance. this margin prior full versus exception posted neutral. the above our margin pre balance guidance, Aerospace segments segment XX we we our each expect which guidance a that noting With of and an raising X%. e-mobility, by we pandemic a worth XX.X% For better this was is our unchanged. I'd XXXX range and year, net to of raised expect XX.X% price this activities, And XX% X% divestitures, from points XX.X%. and basis of X% segment reference, a of of it's And here of with XXX is we've full the which are also adjusted increasing deliver midpoint with will we're $X.XX at year $X.XX, the to also -- It's Page by And headwind on an $X.XX. also in XXXX, point all-time that which we over all-time from points

off to to So follows. and segment The lastly, say, I'd way targets unchanged. longer-term guidance guidance components remain QX, year for achieve is strong as our a remaining our margins. well And to full XXXX XX% our of our start, on we're getting of

intelligent in between a be just $X.XX to Eaton with I'll XX% And high-level if earnings, come we up on revenue for XX, on organic between XX.X%. to expect attractive summary these with we Page could, I segment margins an areas, and XX% secular $X.XX us up be why does and about years: of here. to and for strategy wins. XX.X% In We a wrap of a digitalization. growth kind think remains finally, of power for and to of the that begin I key really position trends on And these gaining investment. electrification, put capitalize talked our to couple last we're number we've energy long-term first, new transition management all traction of And

over are continue And hand. Our for Company. including being view result, the a our looks higher-than-historical reaffirming years, we're platform the Brightlayer as in very customers. much X% well to technology five expect X% by And solutions, rates our received to that next we growth organic outlook

to over We'll Now this XX% per deliver deliver proven deliver us will accelerated XX% continue cash strong solutions for strong. call, to growth remains to add And the share. strategic free cash allow acquisitions optionality own provides our to to and to develop growth year plus to growth, organic the EPS flow, our the to sustainable and customers, I for certainly to businesses invest commitment very expansion our, next on to years. ability in shareholders. ESG also what return average environment our We'll all continue for which that margin five we

So with very that, Yan. to the forward to start really it back Obviously, to turn to I'd looking pleased your answering and strong like a we're with questions. year

Yan Jin

if And turn over opportunity [Operator one operator limit guys instruction. you your Craig. will question one to that it I Thanks, to Instructions] give follow-up. can you and appreciate that, to I the just the just with

Operator

today question of the Deutsche with line going ahead. Bank. Deblase Nicole Please first Instructions] to [Operator Our you. go is from Thank come

Nicole DeBlase

start clarification lot inbounds question, a a of just about with investors from this. could we getting Maybe

at So when months today ago, Lite associated few the with what's to you in the been Hydraulics were relative second to quarter? then into added we early? Tripp look closing And where the guidance incremental with earnings respect a

Craig Arnold

positive it, been the I It's obviously quarter a appreciate question, with number moving I call of, Yes. a very Nicole. busy pieces.

in is the assumption So would our in second current that close Hydraulics it here quarter.

a me, there's or Lite. Tripp could a think cents were And couple Motion. for about of for -- about And specifically, for $X.XX Tripp so the then acquisition -- at of about negative Lite, Hydraulics. we you associated of you about add so And as excuse with then Green to couple it $X.XX could relates months a $X.XX month

so So about $X.XX activity. or between M&A the

Nicole DeBlase

about And Okay. you Got could bit it, price clear. Craig. talk then cost. maybe That's really a little

you more into certain cost So a will be headwind? for that I quarters we And year. think neutral know about assumption? there our phasing factoring year, of segment where throughout the so as facing the price margins margin are said the should we of be you But full

Craig Arnold

obviously well, I say that were model in results of largely, and of I'd it's dealing a is as certainly experienced we the our inflation dealing internally. of say, to other QX, experiencing And this we and others. you're topics one bigger inventory that I'd had lot terms hedges we in through appreciate offset with that what commodity and to able of been out working and agreements. we're And No, think that with Yes. question trying

And quarter us quarter impact the the expect in so we We're of muted very that material for be you strong a in price is little it may But does the us marketplace. given the biggest to one at take look our QX where pricing it's you obviously typically will reasons the impact a into QX. QX. fully and to be biggest guidance, two It say inflation. why the or get And getting really see the cost seeded marketplace. of

certainly most certainly, quarter. we've forward. out, better QX point get that factored our into from will will guidance laid so be the it It's And challenging that and

in offset So as cost certainly, will certainly incremental on margin on you a be will in be. to margin incremental I hyperinflationary incremental QX don't it's tough QX hyperinflationary environment, better if than Fully for get environment, more material inflation certainly sometimes the inflation. it's full basis think it. and a it QX offsetting get generally an than add on But well, would full about you year, will

Operator

ahead. Bank of the to of go line of next Andrew Obin go We'll America. Please

Andrew Obin

Just a question.

background to things do and see in did sort a these You of opportunity to a and you in and very lot deals that companies deals China? give in that the to in do physically Can us being of being U.S. to as more of find came be on China, you're don't a also how just you deals sort intriguing these guys able bit more able executed them. China like around

Craig Arnold

Yes. thrilled well. we been able a question our Thanks with of the And in JVs XX% of. These I willing electrical in we're to attractive fact, consolidate relationships are what won't we their team. least as have lot a we of is off of on has deals absolutely We strong are China. with proven the revenue. leverage our of really as and local and that attributed partner. some low-cost the we'll JV put market, local team fact combination of a to outside and in would, track it's we're the been local to grow to region, number products footprint some do years, businesses being companies for pull to And having in I for very revenues our team's a consolidate connectivity and record we China, market. the But in local China willingness partner. and successful that the team the At think these their emphasis say able the Eaton's really And the market I that of building our will

do helpful effectively both same And the and company effectively -- partnering with. you to at very a our in strong are in can partner to company our time, we aerospace the business reputation companies a that of around we in know, with. China, company you can have And very our things As number inside we're think very of JVs have in that I a that the country China.

very question, are, a of bus or we in the in of filling cost we're product products having we other hopeful because number it's other the the and to gaps see parts fact, we kind I types here to on the We of market that like that you of thrilled conversations low your pattern in have market of today, to gap really China product technology build whether way will that in around it's to Nothing announce in would similar And a a form things of portfolio. continue the other ability opportunities other with that's this gap a so other we're similar but it. because transactions. add the don't local to have do a product. compete

Andrew Obin

a bit you and on just visibility such a have a it's of maybe do question deep hot more hyperscale Can dive you -- it's been just give big color a in a such you market maybe one us how of months enterprise centers. Fascinating. growth much just you data -- Just And driver then quarter region, on do by have here. year? guys? six visibility, for Just a and

Craig Arnold

been electrical certainly, I -- low the by hottest Yes. the see mean growing that the has double markets and one digits. and market data center we space, in market of

increasing And strong to this very continue in strong it's of hyperscale, amounts think window we we long to market long believe months store of of terms get to very will a of attractive will very And The data for the so process market. fairly will out and a the specifically very world we're in be for extent to continue visibility. market terms to XX typically be idea that center saying, it visibility, back market in And good a a data. whole in very be having to generate, a consume, And time. you in that time. the X

specifically lumpy As tend we've hyperscale historically, to be market. a said, relatively

as centers. in to and we But the year grow sometimes by just market certainly, versus they when the in more the here. slugs by this continue prospects our data one so come drilled market quarter or others orders their position And look are in at reconfigure one to big broadly, you

Operator

Nigel the Research. of ahead. line with to Coe We'll next go Wolfe Please go

Nigel Coe

So a bit into there. little impressive leverage margin Electrical I very wanted to get Obviously, Americas deeper.

But how called impact being mix? You Is strong commercial any center being margin data data residential there residential as markets. does here, and impact and accretive, to particularly used mix out Craig? margin maybe We're dilutive. industrial center

Craig Arnold

commercially side margin. we margins to if to in your I think well on industrial point, higher tend lower you relative make Yes. that the stuff a the business be more Nigel, oriented and I'd anything, the to say, know the of tends basis business

mix experienced And Electrical business. in so certainly any positive Americas the not we have

work the teams a that the we executing Americas, company, in some the the this inside we as of volume shrink ahead to to to portfolio to call think business. in big divested come of room we that we markets. you tail, that's when is, record Electrical grow, serving one expansion levels we to think We're more and obviously, done a growth electrical the certainly, well. the and things what ensure in that posting attractive as our we're from industrial there's But helping. And and talked the you're obviously is segment, us we Lighting these is really margins. no, margins is we continue function if seeing do that restructuring think accretive Americas about of benefiting and about, Company going margin are that would about be And our which margin certainly things as back, I to continue markets certainly to we've expect

Nigel Coe

Right.

And which with of Okay. were out of the called in going Great. strength higher said Global, U.S. the basically single-digit markets, all not range. utility, And you exception end that then on them you remains mid the in

So wondering would in we helpful. we're what year? I'm be Any softer just seeing the first trends Are slightly of space. color the there maybe utility U.S. seeing half the in

Craig Arnold

just really continuing utility us, the numbers. in we with markets, a We performing I we with for to started as market perform is those relatively would mid-single-digit I And the mean the year, what at market say, in line the be originally strong largely are utility said. line markets growth. knew

versus the change U.S. distinction, our function original commentary global between say versus really, around the is the really of expectation. I'd so And a

the have we're seeing energy space. resilience, about markets things And that to so lot activity. think a with We we've of utility be on and transition, the the are a talked going very attractive work grid we around good continue hardening grid, of that

broader up If quarter. from significantly look our business, quite they Electrical at the you negotiations our fourth in were

the a segment, vectors that forward. be And growth so as continue much very we and utility important think the we of about going its to optimistic is Company market be we than really different to the history look for one is yes, this

Operator

We'll go Vertical ahead. Sprague next Research. Please line of the to Jeff go of

Jeff Sprague

pick of some pick you're of orders on just seeing that are industrial. Craig, elements of from later of up beginning would your business, those actually your Are in customers hearing signs of Perhaps business up? hasn't the what about channel materialized kind but maybe and to it bit just yet, little in to be a anywhere kind you your early interesting. discussion cycle

Craig Arnold

too but early, Jeff, we mentioned, It's and markets pipeline, you certainly on And -- to end in of with stuff, seeing victory back. any to some it's the in negotiations a our do this things declare come Yes. have as you obviously it, starting know, of as I are signs industrial you early business, sale. booking you negotiations a for up ultimately a and to

that increase, increase in coming businesses. our negotiations call our And we what they track of business the quite we part fourth so from our up and negotiations most industrial biggest that in of I'd the is say are significantly from quarter and

certainly some we're so green seeing And shoots there.

very are for that lot big in see you U.S., whole the certainly projects example, sizable number here announced about of discussion market, the large companies of You and projects. very those trend this in today And towards see very a have reshoring. a where semiconductor industrial semiconductor

some clearly we're early yes, too where to, again, we signs, but to seeing once so certainly here, early clear And headed let's we're know say, that exactly encouraging.

Jeff Sprague

just M&A. but really Maybe Motion. partner just at you're little back Analyst Day. unrelated, interesting on on was a sounded like more doing secondly, It that to your here a what Green And

and but thought it very maybe little, was XX kind have XX. just revenue entirety revenues, obviously, what -- out them process of you in there's into take you to And there? You sounds some no have out or visibility but like chose, the you like feel

Craig Arnold

so they revenues but around so company a electrification are Yes. revenues, I mean, new at started everything this back relatively and organization of -- is and are relatively vehicles some as new kind point. Green a in it's Motion modest of XXXX, that in is

as terms hardware spend As to a continue to Uday, we and respect as fit in perfect with really yet, the to us. grow. mean fast-growing lot about in of electric to a this I both grid margins this it's participate to time it's energy billing technology but of in really mentioned, dilutive going mean I exciting and talking opportunities the to to systems allow have what software strategically, and transition see, the team the and for we just and And his vehicles they space. And us invest continue business,

what so And perfectly and we're most integrating a taking Europe. countries Nordic technology with doing be that works solution in today, have it We'll North of the America. they that in and currently

a North have the market as well. solution American we for that So

of And an couple our company accelerates This say, organically. done inside gives strategy I'd important to what head have we planning of of company. this would part so for we at organically by acquiring were year least our it us, really do a start it's really what and

you these I in XXXX, by doesn't because think of change organically. that our of probably it where goals investments think if be we materially making said longer-term planned terms about we on we'd

So -- but it certainly accelerates our progress.

Operator

to next Melius ahead. go We'll Please with Scott the go line Research. of Davis

Scott Davis

we lot about But talk supply if a backed through the little bit, far. of so morning. Good Craig, up stuff just A talked and issues. good chain

Is how -- mean, issues? average. managing our the little Is raw guys mix than of you How you more think And you would higher it business it bit a it? around your costs? is supply more about I company, Your are is it? about about more material kind you chain do rank different freight? how it

Craig Arnold

we are raw whether we're sheet say, levels XXXX. basket have we're Scott, if copper, of buy, all -- today the that's at we of it's those levels those dealing inflation dealing key XXXX, that seen since with challenges. probably with I'd certainly fair probably materials that probably in to look probably not you seeing of aluminum, at that steel, And We're say, commodities

And key. so a is our significant commodity challenge. increase on is clearly, material cost Input quite

mentioned which you semiconductors, the vehicle you're and As on availability to dramatically impacting intermittent well. then electrical reading certain our is a challenges, our with with newspaper the and business you is things these world to extent, And obviously, dealing like around with business. the respect freight up issues as also, is impacting

the market good tell just in challenges teams great of I and managing is market, kind of you the the of through I would of And extraordinarily And so well. in this we're dealing news a with that strong all our now how is. portfolio this entire think are right it indicator

And very And for the the as is we going that your do. other price as moves, and we're as so thing is must something company long inflation in cases, that market you markets, end side getting and positive of easier. know, and distribution. freight these something what be the with around on example, It's like price a experiencing. In really challenges for certainly certain as dealing that's good distribution, is a

or behind and we're And with intermittent so new we've this business before. us. well product that I be hiccups would of before. bigger a We've dealt today, these of manage intermittent and but see before, the well. we'll nothing each line that challenges, all dealt the dealing in with chain issues the tell there'll any for you of in for and certainly a We've be I'm managing these get managing confident our are or supply we'll time here teams to start QX. quarter. you things as it with to by through large, But to improve at of through a This extremely well, But perhaps we'd company. beginning is we're issues in by and QX, been these our challenges, expect to to that one end inflation the lot year And

Scott Davis

semiconductor this How just it about do a kind thumb, Jeff's never content. XX% in kind of That's you I part I've -- always the new onshoring of rule the I think but fab? of think of guys question, to been be fabs factories, think semiconductor electrical one. helpful, mentioned of this actually of Craig. is going is you And and but thing,

So is lighter, perhaps some be... kind heavier an it electrical is it clearly content than Is it would of -- widget factory? average

Craig Arnold

tend of for energy typical requirements be than higher to facility a semiconductor your The commercial example. project, would

the would so And of electrical higher. kind project of much be intensity that much,

where electrical the the markets we talk well another I growth industrial projects side. once of tell about again has starting as that market these that of other other didn't to in the intensity see products with would some higher one That's in that is wastewater. One on of you another we're water markets.

Operator

line John the of to go next go Inch of ahead. Please Gordon We'll Haskett.

John Inch

visit pending a rehire? right-sized over you for would basis flight market next a years, but to shop to aerospace rebound still actually Craig, on after begin Hey, commercial lagging the likely is rebound of nonetheless? a couple Or have

Craig Arnold

we've businesses of that time, of question, a these well appropriately of that And aerospace. to things tend I that businesses lived supply is from around always you in certainly experience you and we're swings, would how commercial but getting company is cyclical bigger challenge the big I the tell so a appreciate our you one go through and John. that appreciate I is and And pretty done for tell rebound is It's our positioned little these cyclical a manage that we've through lot different The have sized do business would be that periods around aerospace it. these one of chain. side days,

trying our do it's only your and order, create that it's chain the tend -- also house is and everyone supply link But we're else that prepared weakest we're the rebound. to we to ready issues like what have businesses, these for So businesses. in and not throughout in sure for that everything make the

a things have business of shovel-ready would talked of more costs some what 'XX call was structural 'XX, And we come so that well done with healthy each that fixed it it's even do our very around yes, as will prior footed our of we of in try these years, we not to environment. about what businesses projects. did viewpoint in inside business. anyway, Most We -- have back, we we the actions a And recovery. itself take think restructuring

to low out that we this of in of respond so simply during Things we're to any that's simply would And in that And undertake period in. point list we aerospace. time. accelerated upon anyway, the restructuring them and them then of what environment based at take do things would living And we that done simply or wanted way, this projects we market any did have we capacity the that them economic system. decelerate we activity, capability them not but accelerate

great we're sure make ramp. that And our also to suppliers with they're obviously, shape. the So we're working prepared in for

John Inch

and to background say? I'm things, for like Tom, your be to in. -- don't I be of this, wondering areas I'm could Maybe sure XX ask, also, It whatever uncovered? a for sitting could there, you sounds where a a your like a good to just for wanted as maybe days, additive your about know if though, first positive follow-up, whatever, you're it's in say to talk And like to maybe opportunities areas Eaton I positioning with going lot some pretty but so what you improvement? you'd boss have

Tom Okray

it, appreciate a I've guess I that Yes. seen. few things John. I

I it, I've issues another expected. after one with And a here. really wants to top-notch area first win. in. couldn't to and that The commodities just or been is organization is and happier is And that's get to I I just something really amount I that coming has additive thing the found that team and just all just knew growth, supply than tremendous of a managing, of chain, I whether be a to a thing all that professionalism it's the can of even been that mitigate final we've it organic combination, opportunity. that's that just to opportunity be is of in specifically it for remarkable be think And of leadership And the the great more great hopefully, the us. be,

Operator

ahead. Next, we'll KeyBanc. to Please line go Jeff with go the of Hammond

Jeff Hammond

there when of Craig, how feeling versus those construction I a about frame gave commercial your markets months ago? of and couple and think you Can early oil gas in first you're kind year you just laggards. seeing or and the outlook, end were what you're

Craig Arnold

some question, much talked commercial our say, once strong. Yes. We've about, context speaking, But happening laggards. segment what's markets certainly as a for the view on increasing. example, general, what in is that be the clearly the MRO starting still Appreciate higher electrical intensity I commercial, a there seeing is But to commercial and example, year, rig are to they to and commercial count And and seeing in certain The do firming. continue Within shoots the overall projects these the business say, applications. our calling gas, market this of well. relative that more then we're that in the I'd is where and we're a green in electrical again, and oil another largely that one that to general, it's in slightly. lag we overall, than segments up market while are of I'd we're another flat warehousing, place like. with Jeff. see to felt mean, we other And market, it, is institutional call market certainly electrical for We're very are

still a beginning not laggard year, is end next largely electrical the at kind certainly we're But this overall that market, flat that perhaps into we return the year be of overall essentially is market. improving. So market expect to In would still but on once versus see, to that the growth market of the to to year. the still market, relative that a calling again, electrical

Jeff Hammond

are. and chain that guys And materially on And you outlook raised XQ better. you're speak to and chip raising of supply helpful. a the issues certainly That's be the of Can seems vehicle, just you to just lot then of materially a kind in pretty where is some those of pretty headwinds seeing lot that kind Okay. supply semiconductor your chain the markets? versus of push-pull

Craig Arnold

let's of they're light And the the in to vehicle vehicle that's there say, would bit, harder it issue a have to issues shortages to make one OEMs are bigger they're about tending is semiconductors of the much vehicles. And decisions I that expensive not issue, to little responding has thing there a the as to been say, certainly I market the market. more us it's are commercial produce, respect the way I'd we with certainly that kind mean Yes. manufacture to think helped the say semiconductor if than that. market. aren't appreciate commercial challenges it I but say light there has, hit the you if And vehicles, vehicle well, in

are what higher so where make margins is the they content. where And you're and has trucks Eaton to tend also finding things places higher

being muted the so OEMs they are somewhat by impacted And being way what by the semiconductor is issue way our in we're impact the this prioritizing produce.

to one it's as revenues on managing X% X% even issue. so QX and higher, a it so a to our it and Overall, semiconductor once revenues. have expect that deal again about throughout would X% impact issue really we maybe and maybe X% with think real QX, been well, QX. we for but the are And is into And teams to but

Operator

Morgan go Please We'll Pokrzywinski Josh ahead. of Stanley. of the Thank you. line go to

Josh Pokrzywinski

It the versus that's I trying worth? much the a bit guys supply be Craig, handle on How Americas comments constraints. people were electrical. you you growth you mechanism Just saw that something timing your until what, supply to in the ordering, maybe follow-up you ahead of business? get bit XX% might some just backlog get attribute to of more a to that in that would on sounded to of atypical from know, sort underlying don't thought ordering earlier advance trying or, double shortages, benefiting like chain maybe a and little maybe

Craig Arnold

we say, in I'd safety you below But it's March. inventory I say I think of probably say where some shortages. levels certain be. could to or put out the took some that, -- terms general, to about for double think it be at call still overall, the month probably certainly increases, difficult of to behavior in slightly to of some against really inventory QX end really mean, get levels, that that to trying concerns on I of of going that see price obviously a specifically would I order to say question what's channel. if Tough that place surges the in would or ordering could in the ought about know and in of some front Yes. did in ordering, I they protect stock be

they that in to If the seeing. are with some markets, and, let's levels residential below where of respect others need equipment there and to of probably OEM we're with dealing some you the kind markets of still hand factory be, we're of to say, think well of end mouth inventory about demand our some and

has And of to we're business pop real I would that question of in it's true kind bit so it be Or strength this comfortable we're think driving all would more that ordering seeing these The say more a that demand underlying that seeing? that almost, what's real. little do of the spirit is for seeing think artificial is, legs? mostly, Electrical love the we inventory of position in tell we're an than I would the I you end anything. the same largely really in we markets is sentiment, customers. And and actually in we'd that's today a our where had be we're

Josh Pokrzywinski

at shifts lot of just electrification the And a secular some sort electrical discussion are buying. helpful. the customers Day, on following up That's then Analyst and around in it. maybe obviously, of way Got

projects, project don't this just of level I project that higher than, out? would As I playing Or are guess, up up is bidding is that some, there kind content on suggest velocity seeing you're know, is this content? rather show you picking guys

Craig Arnold

both to, velocity both. is It's it's always what's and it's going also in residential say to, one it's really even construction relate to And back one No. that content. on go I I would which easy an today.

every move ability mechanical a breaker breaker has just as provide. growth an trends connectivity, think that these market. this end equipment digitization we every single -- of are increase really the I in the about talk that almost in in, participate idea requiring we we broader content in electrical the secular almost I you electrical from in do If that as an circuit the to the to fault in content circuit seeing you standard breaker think more protection. today, content or homes about electrical mean, we're your electronic circuit project a

as increased I both well would It's velocity sell. projects of on both. every that we project say it's content the So as

Operator

We'll Sachs. Joe go ahead. line Ritchie the of go of to Please Goldman next

Joe Ritchie

as investments than you've been making your carve-out announcement the with interesting week you've on And you know this as terms this a in thinking opportunity e-mobility guys this business how smaller their your business front have business initiating longer build this of last offering. you that is footed about footed curious, been today. just are of been business, the being guess portfolio. for I front momentum? of on carve-out Craig, Saw you term? a So their potential I'm I pretty well business ABB, like a

Craig Arnold

with value you connectivity filed between organization. well about obviously just in own electrical that of that ABB. unlock as around think do them. broader I'd e-mobility in synergies we tons your business, we We And what see our their we got strategy company the our as And from Yes. every business has announcement between say how

technology, being source in really synergies we platform we the about leverage supply so the and chain. of And growth think a for Eaton to great scale way respect develop that way key we as a our with

we our so part do company an we as of it And go really integrated see as forward.

about from wins at get technology, could think, that we're the market has talking one space historically right used breaker If that you where technology circuit break around technology that break our vehicle of number and only of of today full mentioned we application we it $XXX vehicle now. working million a our think resettable kind great all lifted this That's maturity the that's a so and naturally examples team here, bed used once and in modified the we this developed fuses, that wins for came in it maturity was a we business a core technology electrical That key of e-mobility business. are, commercial in that example. which about the that's on down space. we worth to landed this a we earnings is call be this around basically tour in door

do e-mobility our the our will the that back to and the we and really leverage scale our see business piece of way we segment. ultimately we'll So, the way both electrical run as synergies Company, to a our way core flow it we grow and

Joe Ritchie

if end lot could you quantify a but intra-quarter of I'd a that guys trends be April talked the trending curious the I follow-on color the you and sense, guess how been about has some saw lot to Makes in know of different Greg. appreciate relative we've there. trends, I first question, market my quarter? I

Craig Arnold

in Yes. us some to of April forecasting. a And for what we're rather in I'd slightly But came last were COVID-XX strong and came say very April. better month actually, that modest actually the good than working we get comps given we had year.

think And strong so in good is we everything another at juncture, this looking QX. quarter for

Operator

ahead. we'll Please line Morgan. Next go to of the go Ann JP of Duignan

Ann Duignan

gotten kind with terms the pick might mean anticipated are of have back you're they've any in better just I aid. that green activity of in government, been budgets Most about the answered. of of for terms you just have of infrastructure, retrofitting quoting my requirements you seeing questions any electrical But either maybe and there. growing state on or are side, we shape local modernization up? curious of taking local if can now I'm for of evidence all than any retrofitting money energy interest shoots renewable in talk seeing or

Craig Arnold

as today question appreciate happening absolutely significant I of that infrastructure dollars needs state governments. in by our And and it's being are Biden and put Ann, in vast I programs you're either going can you of proposed terms stimulus today, local or Yes, what's well, right. the country in are the days. already the to both and administration mean the I early approved tell hands are that

approved report, think projects. When the the be to C-XX the been And tended some of you I'd are that construction. commercial starting at what's little sector we to In see public going what's when than of say look already, stronger of in terms about kind has those a you on private sector.

the and won't of impact these material if dollars pointing go a lot of obviously, probably and where in out terms obviously going And think, depend have we us. -- And some biggest it's is upon the But think in the administration economy, about Biden we of show on company that in If building infrastructure, talking administration electrification current another in of those company. front we I'd roads growth But the dollars, where it's of of so we've very the this build. to our our forecast piece reduced bridges, our it, greening of is resiliency, that seen infrastructure economy, it's that grid that's think that say, But our already. outlook still the not have real, I energy and leg the into lot the out today, we're a hopeful. up in are little of for really seen things and of business. the could of be whether baked consumption, a electrical that

Ann Duignan

time? a Okay. back little think they That's winner? helpful. electrical I company high, can it's what little mean, the in Motion countries, the and I entry why we about regional And and across the talk on talk so over you different company then charging about on quickly Green are about there's differentiated as just bit is that very company be to that think that barriers being and hi-tech Europe, standard just bit a commoditized mean, will because very not charging you issues

Craig Arnold

gateway We software view real with more hardware that equipment. is I really charging -- in you when clearly, could there manage about differentiated. think obviously the say, charging infrastructure. of is the think the the you not creation the itself. It's argue as the hardware when side really you value infrastructure the do very a as how and It's of I'd you comes piece Yes. think really today, that's and about the associated

we of in yes, us do electrical value pull-through charging upon equipment of associated opportunity of because have smart so in opportunity, depending the be lot has do they And that's an Nordic really us Motion and the piece on isn't manage in way creating. the biggest infrastructure charging that already we what how ultimately have segment ability where and you a the the real do of infrastructure value in same. will really the an Green We really value environment. charging done But countries. to There and really Motion we about in and which which Green think the side, in, think around software the we the and we billing that a complex ultimately already with depending charging And a and they there's the on done intrigued where the is manage do couple believe, you're interesting well vehicles, with the important. the and for upon fleets, way the year as to what what is the think what is has you're serving, itself is market hardware charging that charging, all application and see load solutions the

Operator

Julian And go we have more for time ahead. that from one of Please line come question of Mitchell Barclays. the will

Julian Mitchell

about the Maybe about from yet, that £XXX million. by before. just was cash I free it net unchanged, don't a was think clarification raised income question I The anyone's guide around think, flow, adjusted asked but guidance

headwinds? capital a So the pieces check sort to do moving it Thank is what lot of you. adjustments are? that? Is just wanted Or more wondered with Just around of it bigger those working to perhaps on EPS to noncash?

Craig Arnold

early. dealing uncertainties with chain, as today, little about to chain a need working just we capital challenges. the deal of think with the bridge some think of to inventory supply way that I'd to may it, are build relates it's and supply number say we piece, these Julian, I to a it

way how And so system. their year of work chain the way in more going I through some early think the the about are is, around the it some to anything than just it's uncertainty supply and challenges

what that numbers, prevent the would and flow, around at plan And and in number held sure. up free the chain. very nothing taking uncertainties on these a from today strong kind for that that that's better for guidance from there's supply saw can QX it's what's point. had but this in of you early back particularly through the there's than we cash just see in our us going of And that we playing As year, a

Julian Mitchell

high And then the on assume the year for embeds maybe what context? just guide that's sales from for aerospace just growth year for in your very mix a I and the that a help with commercial XXX-point recovering us quick aftermarket follow-up it. for the QX year. is step-up of tailwind balance XXX, Maybe margin aftermarket understand specifically, a commercial the carrying assumption

Craig Arnold

Yes.

as a accretive So be commercial lift certainly are expecting very or and the of so in we going the much two overall. margins aftermarket aftermarket half by year, aftermarket, to OEM the we get lags certainly typically a and that's second quarter to into the

baked in with expanded But dramatically. margins benefits margins Even as other did those into certainly the that Aerospace. as up very A programs that's the lot XX.X%, the Company. restructuring see completed place, QX, very certainly, our business margin delivered lot attractive well So Aerospace. into in our And are our assumptions. a volumes down of show And that we of we'll that restructuring comfortable as the get outlook margins. in went of for I said, we we're in on

And so margin as think the would in profile or about the to nothing and our business extraordinary forecast. Herculean overall, I'd that we be effort say the deliver

Yan Jin

guys, all think the thanks questions. for Okay, I

for will a good day. I As Chip, Have questions. follow-up be available always, any and

Craig Arnold

you. All Thank right.

Yan Jin

Bye. Thank guys. you,

Operator

event ladies that using today. conferencing. your conclude participation conference for for you and for gentlemen, you. and AT&T does our Thank And Thank

You disconnect. may now

Eaton (ETN) 4 May 212021 Q1 Earnings call transcript