ETN - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Eaton Second Quarter Earnings Conference Call. At this point, all the participants are in a listen-only mode.

However, there will be an opportunity for your questions. [OPERATOR INSTRUCTIONS] As a reminder, today's call is being recorded. I'll turn the call now over to Yan Jin, Senior Vice President, Investor Relations. Mr. ahead. go please Jin,

Yan Jin

today guys. and Relations. Jin, joining Thank Quarter Okray, With Eaton's morning, and our President and Financial CEO, us Senior Officer. of Second Tom me call. earning Investor you Vice XXXX Craig I'm good Arnold, Eaton's Chairman President, Yan Executive Vice for are Chief Hey, all for

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

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

that earnings wide I Our differ due described a our and it materially over range turn will release our are uncertainties of (ph). forecasted actual to in and presentation. risks that, projection from may results With Craig to

Craig Arnold

Thanks, Okay. Jin.

time. taking had guidance saying significant we normally of our for we seeing we're our of So in and that And very and like summarize second on up do a with markets, highlights we'll by X XX result obviously the page start the quarter. strong that, increases I'll as we're another quarter

costs. our and significant for very of a and Our year the disruptions rising earnings teams XX% up of $X.XX despite importantly, perform earnings and adjusted versus XX% guidance, XXX% level last continue supply midpoint QX above to chain were nearly QX record, high at commodity sequentially.

the and billion, guidance. of XX%, XX% midpoint $X.X our were sales organically, up above Our

record points facing. XX delivered XX%. incremental were the segment we're basis headwinds we pleased the up our also row, We up XXX We're a from in Quarter points strong basis XX.X%, margins sequentially. margins. that costs, of think material and Second given results, the For margins with QX year prior

of for loyal billion. the We're quarter. up successful Our XX% Electrical Hydraulics the who want Systems of the and yesterday segments was thank closed Danfoss owner $X.X pleased And to our of Orders our sale continues. each Hydraulics under for have highlight both ownership The quarter leadership in record China. We Danfoss, Cobham Eaton. Shareholders, Eaton, their of in employees Hydraulics service biggest Jiangsu are also of former our the a the in for for more YiNeng And be Danfoss. with backlog. will we XX% and perhaps at an to order excellent and Electric than ended think transformation of completed well the is the Portfolio And business. Growth we them acquisition sale a of we our our outcome certainly wish Mission business

on highlights progress initiative. point a And next just out strong on our make to strategic few continue we Lastly, slide. growth the I'll

Highlighting business, an digitalization. and So, we're energy most a example we renewable powertrains, and where vehicle that our and in because expect, electrical electric traditional switchgear. and tied be our begin storage many the to we vehicle as examples, large in project vehicle about X a it solution. new energy example even trends both the had electrification, I'll noting distributed strong team and In leading wins residential noting you significant which wins Company. the our as area for a a recently will $XX a services transmission, growth In-vehicle, we've creating us as with electrification delivered for won would you've greenfield attractive And OEM. financial wins turning EV demonstrates gearing, million medium-voltage I'm EV EV includes in opportunities think This X, notable very project progress management secular transition, leading of energy X areas the a talk and energy a to case, solar and building In where large electrification, secured is win with of you transition, few for differential. energy applications. Electrical, Eaton all our businesses. growth this of page important is heard and this providing Company, making about great seeing a Company. we're In We're for low results. great significant

monitoring in power power operational digitalization, remote in management real-time insights with monitoring application, our software portfolio to [Indiscernible], the with our provide leading Electrical solutions. along mobile team our win leverage hardware solutions delivered delivered bright data, really markets In to provide expertise with Controller. devices. of processing layer and software, a this chemical Foreseer Our Eaton's and that our industrial the are Microgrid customer directly Company global a electrical our to their In

the the customer will and operating benefits, be trending, industrial to able data optimize measurement bright to layers, addition energy to In use usage.

growth area. at in certainly center continue we this be to we'll you time exciting an as and of keep X the trends, it's updated progress to So these

I'll to out QX results Moving a point summarize highlights we and X, our couple here. page just of

on XX% operating to in leverage. delivered XX% growth, revenue operating very increase First, total strong a profit we

level. by very Second, managing increased our at XX%. $XXX are Overall, effectively million corporate adjusted We're also our costs. Earnings a teams our executing of high certainly

constraints, increasing efficiently trend for the that are our chain a balance of the from and managing year. programs, we productivity, expect multiyear benefits expected restructuring the continue to We and delivering supply

added X%. segment. Lite X% in Tripp we residential as organically, in page acquisition markets X, solid results of to also Turning currency [Indiscernible] had strength XX% up But and growth summarized added commercial datacenter our and The Electrical America the driven and by markets. Revenues we well. institutional of were

QX. Looking quarters, And here. at X% the a X% our were we seen have accelerating between up rate growth our I'd lift say sequential historically, growth, so over we is

above record. is of XXX to This Basis Our Operating in a XX XX.X%, margin points pre-pandemic XXXX. increased Basis levels QX QX points

had and and This which institutional. all strength our increase levels. on and once led We're electrocution, also to portfolio end-market Our and solid orders the from multiyear sale at basis. all Quarter, in contributed also again residential, improvement. data in our a in the of Lighting pleased with with benefits once broad record again particular of in the acquisition program, XX% now XX-month commercial, a the rolling XX% a increase backlog, We XX% Tripp changes, centers, to restructuring orders Lite, strength the growth sits in

negotiation going end half in at in market year started really You'll select the we markets. strengthened of QX some significantly. recall growth. This see that QX, up was to Data, and commercial the and of data should the our large in solid commercial be all Xnd into which that the pipeline orders XXXX suggest pattern

of in were incremental multiyear basis very to with Turning the again, but we in and up industrial commercial in margins record strong last basis an last year from once X%. markets, and and up strong, at page and center also restructuring points from from strength up again, we and XXX Once driven from institutional, broad-based QX XX%, had X, control revenue you quarter of utility, organic Orders organic we points result of was some XX% operating and and and Global year. you growth margins solid up cost data data year strong the We currency had And added also XXX on particular a program. XX.X%, sequentially. basis. good our posted ended our Americast, were The XX-month see backlog, XX% record markets, markets and again as from we organic last growth see, from benefits strength Electrical on can with well. Like basis up had XX% once residential summary will as here, the all across a by the financial segment, rolling markets. up XX% center a strength and residential

we of to page results aerospace segment. the X, Moving our showed

Quarter. we're to in to market, long see way of a the have signs posted we which go, in While this XX% growth starting recovery

this Xst, results points June, organic basis sequentially. XX% delivering well, the X%. With revenue. XXX Operating solid improving from adding closed last As Orders margin basis. improvement XX-month on added you in also but June QX. an basis down was team basis XX%, and business year, from an currency rolling is know, executed extremely the we quarterly down on XX%, volumes, The the the incremental of delivered month from and our points to a margins are in still XX% transaction [Indiscernible] on XX% XXX

will but markets, expect several is industry in sharply. were don't the be in We XX%. over it increase we In levels domestic return to international but especially fact, commercial orders XXXX leisure the up grow travel next sequentially, think market until to seeing XXXX. down travel, to an continues The years,

our Lastly, and was flat before is year. here last stabilized backlog

target X, cause doubled really XX.X% the strong performance were in were on a to than very business volume segment. XX%. Operating of levels, higher and The our which with being Page XX%. strength regions. over the on financial once more of despite was driven delivered XX% again the you of also long-term multiyear pre-pandemic Next, volumes revenues results certainly, program, below by restructuring margin is benefit from XX% our Organic margin see down incremental margins but from achieving sitting vehicle some and all we still the the already margins

currency. we revenues negative strong The were around and in XX% Now were to in a all our world. markets turning programs. e-mobility positive really e-mobility the business. continue to margin driven depressed from heavy XX%, they a be investments new up organic was operating page XX, summary The of by Revenues by percent X.X%, growth X% organically, show

we're should now view be As protection, have include in our power segment we power gearing, in EV significantly our But business and expanded power technologies the in e-mobility control and market These see you We that investing large here. segment. you traditional torque and EV aware distribution of know, electronics high-voltage for this the opportunities transmissions, also solutions.

have and already areas. we in wins earlier, these noted I As

exciting products increased future. part In $X have the of e-mobility. addressable big the a fact, We a Company's our really for so think some of and size segment the market to and continue be traditional billion

can organic most for see, And increasing with are you Moving segments. revenue. to an growth we year significantly in page XXXX time Xnd our this organic guidance revenue for increase we've as the XX, on our updated

Basis we're Global in as we're of and recovery, you backlog, in with sale to XX% year. XX%. XXX growing that very strong Vehicle point can despite And is This XXX the to increase an that guidance markets the top a comfortable on QX. raising first-half we order quite gas, a took for organic from robust early and notably our in With X% growth e-mobility. the stages frankly book increases of are The is and see a increases midpoint -- Americas in Electrical remain in our construction, growth smaller weak oil commercial of industrial, largest and basis aerospace. fact, In by the outlook XX% of some with are commercial points this the in

We think certainly we and over well in continued markets year, XXXX. balance expect these recovery to the for it see bodes of this

XX, on Next margin update segment for show year. on Page the guidance an we our

our overall, will the our the point XX be segments guidance the QX increase midpoint XX.X% basis the increase, Company. know, XX.X%, by a at we basis Eaton increasing exception for For we're that The as following Earnings which an record basis each all-time to e-mobility. Call. XX raised point margins segment of reported XX margin with again of And you in the point we've once from follows

margins around incremental be and price for and year. continue We neutral organic of expect to approximately commodity XX% the cost to for

expect increase been of guidance. Our and team over increases related Earnings page of we range constraints, the certainly the year. private to midpoint, to Share of and price $X,XXX.XX. increase managing balance At have XX% at these would is to continue supply of through through XX, on per this very has the to remaining And our XXXX. chain complexities a XX% effective by XX% $X,XXX.XX a over We're $X,XXX.XX. raising we items our adjusted full-year guidance and an prior This our XXXX the

adjusted higher investments components that working by is capital growth of X% the increase midpoint With of You'll $X.XX. driven lastly, environment. we're net organic positive million. supply be in our from percentile XX% follows: is up the this down by between acquisitions XX.X%. really flow, $XXX we about expect page guidance current of adjusted remain also operating in And XX% is presentation partially The guidance I from the our timing was sales, With QX but which revenues And a And by a of some prior our cash we to we million divestitures, the in also as up free and our million profit this expect midpoint. combination guidance recall remaining margins $XXX we M&A we're are the our of up $XXX of given guidance unchanged. $X.XX. at up activities, to to and on be divestitures. now come And recent outlook to X%. guidance forecasting prior making $X.XX The will acquisitions flow QX. now raised $X.XX XX. now increase forecast we and our in constrained cash full-year XX% lastly, that of see XX% headwinds currency offset to our on a original for raising increase, from And wrap both from to of Earnings and chain and Organic

of be expansion. margin with historically. belief we You've there Electrification, seeing seen we how Company expand how has in heard we've The power Energy to portfolio. us on you've is few record and what how working. confirmations path. we're is grow than get also this our government Company importantly, talk Company, consistent we in we our driving on approach objectives do sustainability at on enables by And seeing that pleased Eaton as for our society. This our of Each And in we're with rate for in of margins, society, in period. management our and a sustainability trends. are the planning and just the XXXX goals. growing our sustainability of Transition, first We're and note consistent thing on They spending. expand special the built system plan. that run are margins you sustainability the importance that provides us right We're XXX-XXX a strategy growth intelligent initiatives opportunities right who at published ahead have but force of at faster reflect core an margins we the can delivering financial we business about to to our it points execute, the higher it's And on progress a committed have to the seeing years is over June. we're that And Company. disclosure see interest X-year on report much climate-related end to track basis has running task been allow transformation what's to few as our to of and report win. Eaton's read the We're the better growth. that I'd move It growth, you it sustainability it. encouraged a a every and into the those that day it we Digitalization, consistency. And last the the made faster track in And Earnings certainly

extremely I done the direction think well the Company's in. and reflect they're headed

again, XXXX. to flows. we're continue we a At Company. Over to strong $X us through shareholders cash to see, very of attractive and and will very can by once billion start midpoint also in return you revenue generate XX%. grow XXXX, cash guidance, expected the off allow which make to as And our to grow Earnings XX% to investments Lastly, the is

questions. the I and that, it open to back turn will Yan line for with So (ph)

Yan Jin

Okay. Great, Thanks, John. Greg.

section With and I'll Thanks that, just to of give one question you to turn you over the for call guys to limit one you the Operator cooperation. like our follow-up. today, instruction. For Q&A your it ask the to would we to

Operator

And ladies question, press on Thank you. keypad. if and to telephone like X ask a then please gentlemen, you your would X

withdraw X, may any command. your You by question time the repeating at X

ahead. have Once Josh again, first if If you're time. of up X the pick the Morgan this a And Pokrzywinski numbers. line using may with a at please you on Stanley, speakerphone, handset press question, X pressing go you before please then the

Josh Pokrzywinski

guys. good Hi, morning,

Craig Arnold

Josh. morning, Good

Josh Pokrzywinski

was bit talk on pretty little more hoping electrification. cyclical the maybe the you in I if for the there, solid but Clearly orders secular versus color Craig, momentum wondering bit Electrical. little composition in about could So, a a

X, appreciate of So much that get how moving I at but slide the term? this really on illustrative short the to examples needle versus in medium something see here really trying is to the you

Craig Arnold

believe were the coming going growth both think, those residential. impact combination from just be such part And across some the about geographies growth not the future talked trends a of of we mentioned, of an I'd Josh, secular all will strongly your highest important organization. centers of seeing orders benefits a of the in say strong to future and to and that Company. as of seeing we the around in We the markets of infrastructure it's yet. these and really early that government secular any end with, bigger We're data we're really I trends really material still growth the spending are innings drive, that point,

role so, of what great increasing data. in a it many And as think always certainly. I'd of broader and We of say lot amount processing the for today, seeing storing our just talk Datacenters as about this a strength I and markets is example end of reflection the of you're consuming the of and

that's hard I inventories end of strong our year. down last is pandemic you're many and a markets pretty on been the what of lot today certainly seeing because markets think restocking and taken were

happen stuff written and again, orders a well very I'd about the talked in Commercial come back as about construction negotiations as so, there's strength, like what's the been say institutional commercial construction. of of side to commercial fact the as strongly broad-based and to had outstanding going we business with we has And lot once that well.

story it market every geography. been almost fairly of has end really across broad-based and in orders every So, a strength

should juncture, we what this talked think about runway that project think other we whether we large should into business. for of oil and a commercial we're look businesses as back at markets, So cycle these the or as some though. end forward the on construction, very come gas, this of start We to at be pretty front or the some exciting while longer of go

Josh Pokrzywinski

inflationary environment. once going well-documented this low-to-mid year. are presumably last control pretty the the or then of because it. clear stranded noise on XX% that, in of to this be can normalize costs just decremental still or And And I these is really off year, as and we maybe dissipate? Got normalized range, great margin for XX%, mean, we incremental, we the think go to some I coming Hydraulics higher the of headwinds in some out some of XX

Craig Arnold

you We sizable deal robust XX% to revenue having more we're at on the we've Clearly, makes still now than about that think basis. what that's with planning a think as some this as make investments seen right guideline we business historically. modeling outlook the for incremental in point, Company growth a sense go-forward fairly

like So, growth the the about you as investing other we'll and aspects electrification modeling be putting that business. guideline XX% to basis that on that bringing heavily number as as that think what we're is I an of be now the think for think important investments of the business, back would some given expand. in the like we that well sense. business, large, in obviously investments good the incremental platform planning investments that in of e-mobility makes the the we're a the make online. Company, in we'll like the making hold in of lot be incremental think to still that We could organization. But also be story are right of Brightlayer perhaps We'll think XX% going we And the future pretty places future at

Josh Pokrzywinski

comments. all the Appreciate Understood. Thanks.

Craig Arnold

Thank you.

Operator

of Andrew America. is Please ahead. go question Obin with (ph) next Bank And from

Andrew Obin

morning. Yes, good

Craig Arnold

Andrew. morning, Good

Andrew Obin

Yes.

a in bit XXXX? how sense, second just go to little half much Just is customers are get depth what maybe 'XX, into from trying the to hearing construction into on visibility commercial there more you for and

Craig Arnold

I obviously of been in your That's question a Yeah. with lot commercial construction. of appreciate a general. debate point

the the And in of about quite commercial segment growth global talked was so structure we growth the than with frankly, particular as QX, rest line of strength really as for XX% business with, entire sector. more in well. with the And our in order

see continue the that think to commercial in don't so positive and think should half construction to And signs going markets why into of about there's XXXX. there markets let-up or any year we any this be those Xnd we reason in we

Our up projects, as talked prior our negotiation well. commercial precedes as which, up order pipeline sequentially was we including large as calls, very strongly on strongly well in pipelines, buildings year-on-year both about obviously. light commercial commercial And negotiation as for and actually very

next And optimistic of come so post fairly second will and at year commercial we're that think should we construction this this the half year into back growth. juncture, and strong

Andrew Obin

facilities, [Indiscernible] you think And kind Thank my industrial recovery, needs this what that's growth content you you are $X.XX Thank And versus your question, But Craig. conversations having? thinking people I about are do differently decade? cycle CapEx CapEx the longer-term you. your prior did this thinking you a driver. you, think has of so before differently? them high but strange just customers, highlight see been about follow-up do

Craig Arnold

say of end across the it's markets, in house fair on probably historically it's many think to I some side that general, the of been industrial underinvestment. our really

to take some with think what place. sizable labor that is that be the Then I world on shortages to one challenge dealing hand is and automation around the I in So and of markets to the the like in that big is catch-up needs follows. industrial be so many investments and tends think the going everybody fairly

do think the frankly, in and stages has of of the And industrial years. been of over well so quite market beyond. that manufacturing we think in think into or these early really number another one I we Underinvesting relative markets recovery should markets last the that 'XX And relatively

Andrew Obin

much. Thank you so

Operator

ahead. with Davis Research. to go the we'll go Melius Scott Please Next

Scott Davis

guys. Hi. Good morning,

Craig Arnold

Good morning, Scott.

Scott Davis

charging, about or bigger kind talk guys a or do -- you in whether that. what's where leave it whether a take and there being with you a bit EV can strategy it perhaps content to Craig, role what? your just sub-supplier of I'll at little you want

Craig Arnold

electrical the time Yeah. team done Motion. made is day the some strategy at we our you Yeah. trying And reasons core very add the business what our the we much to during spent and This of it's did of really of Green there. acquisition investor and certainly through up strategically we're get for one why taking

know, we commercial being You important and be a to acquired the way Electrical at of of all taken residential, more that systems U.S., Green we of are or Motion, proposed you you've bills see charging whether everything in part Europe bigger in seen our buildings, what business. the to Company on and that do investments place going port and from which of or that is the markets, we're Asia. that and through European fairly grid-scale, in really some Those e-charging does chart infrastructure industrial the in a billing is that's applications, see physical hardware in the trying operating think as the it an inside sizable you reflected so, and

expect in as to to of important a to part what that's think space That's the part in and be an both physical try we'd an Electrical in we're done well get we software, will as business. going going the exciting to grow it. e-charging, So hardware be our dramatically do of

Scott Davis

but example us sense just illustration as is on just you sense of want, the or a on give you of wins getting. an get Thanks. story it Okay. What be you Electrical on Helpful. that to a good e-mobility. an And follow-up Can a guys Vehicle? a if for can And look like content you're that. a trying then

Craig Arnold

converters, typical as legacy really day in a an investor distribution. is huge the for our a It's will the talked content what to context based of new power the a electric also, that legacy about tough in business again think business the there's what for that opportunity we saw business legacy you had that world, whether in application our some quarter but well. once you hybrid electronic we highlighting we differentials, vehicle. we're this But our transmissions say, that in even I in to and gears, to transition and multiple growth e-tech that happen as this inverters, you pick that's I Vehicle going say, We said business. of on legacy in that e-mobility what's And to e-mobility huge of Vehicle, opportunity business in our tell it really about

our and charging. And we greater laid $X to now the for it goal out billion to would of so actuation XXXX. valve magnitude, in for those $X where some us set X, opportunities doing getting between larger and of and order much a But times be Vehicle billion opportunity traditional is business than XX we're valve and

can tell would again Once what and XXx historical we wins, to these Vehicle. you to these are opportunities we have have have an Xx tough multiples a headwinds. what where platform. in typical we of again, I it's pick once wins Vehicle on of So coming

Scott Davis

Good Craig. you. Thank luck,

Craig Arnold

Thank you.

Operator

Goldman Joe from go Please question's ahead. Sachs. with next Our Ritchie

Joe Ritchie

congrats and morning quarter. Good on guys. Thanks, the

Craig Arnold

Thanks, it. Joe. Appreciate

Joe Ritchie

particular where expect ahead look Just know relates -- are Quarter then I'm of like cost you like for at this you that but any just any how point? far thoughts around just maybe like is QX we any about did like should the you inflation there basically guys? curious price in headwinds? And equation for to the the the Craig, talked rest year, year, I of what neutral QX as being it and

Craig Arnold

we the provided And we end no up. earnings would secret our the prices, commodity I of and Yeah, with When the fairly around that amount sizable see that obviously appreciate QX in out chain and and some dealing of are QX, around question, gone the time. probably quite have challenges supply in business and significantly guidance since we call. frankly, expectation only in of the in had fairly and commodity cases inflation an at we

I an expected additional than to business. thing, think really anticipated. work inflation we've in Price naturally of points whole shifting more the continue And pressure commodity to organization that of what quarter we see full a terms had So in the even offset maybe that to as about we to

balance calling we in and is probably think neutral, QX great And points the at QX. the the we neutral. the we're this year, think think going what year it in we between think so pressure in but are our pricing the of year in about as juncture, when be gets we costs expected the to And as terms Company we worse don't impact

And As to out a with up in to we're we're once in taking doing terms to on obviously that the around as working that result, running quite we're organization. as things again, frankly, the market, the take catch prices prices run. seeing continue costs up well of of commodity things

for So the upon have things fact commodity have the based year, to continued shifted that prices to right, run. probably the neutral according

Joe Ritchie

about business? I that help to really commercial should aero maybe thinking context your One area wondering question. helpful what That's try the like it. Got recovery this with and you really Aero start Aero to we a baseline surprised start parse follow-up maybe as margin. guess quarter this us was can the my see benefited upside quick XX+ if the quarter, I and to out we in

Craig Arnold

with really see an team on fixed markets in really we proactively if think to you expectation effective the and business of restructuring last team, dealing downturn, go-forward The year in I think, knew putting program we and the of these were aggressively an some running downturn a attribute early managing pretty this team, very kind terms, to costs. being in that when back a our challenge in number would costs then come basis about setting we simple the of And out put XXXX. Yeah. would and not the as I that and well to a so, job it doing of the as restructuring take would proactive, be dramatic

our In in certainly as to to prior expectation reasonable back forward, XXXX business downturn, yeah, going the and we to return the improves, business we'd that business as sales at. back in and get say approached comes to to I perform on XX% is XX% XX% really our it's aerospace back this But towards return terms we those is XX% work goal way the think of back numbers. our sales north do think on be something to that certainly, this where used of I volume expect to to

Joe Ritchie

you. Makes sense. Thank

Operator

Please Next Research. ahead. question from with Wolfe Coe Nigel is go

Brandon Rig

Rig Craig. some very Aero this just performance Hey, the OE, piggyback in want strong not for off Maybe color top-line, QX? that Aerospace. just defense, update? spotlight on just to Brandon in how certainly more components And commercial the margin. all defense Nigel I in what but would of is did you. maybe has changed the is be, of last at it Coe. Thank for Hey, Like our Also aftermarket on comment. commercial follow-up since a outlook the perform on the

Craig Arnold

well much think question. the appreciate too I the from XXXX. is side of with probably house much running low outlier is that dramatically business about the be we over in pretty the I'd the an still historically military we've that in of Those improving. We others what from last kilometers be so significant much say being see still think passenger house, weak, for not military versus as return. and year, the say continues really think the pressure, near-term Yeah, is pretty change. aftermarket the business And are Commercial outlook did a I'd on well. consistent weak outlook we a the single-digit certainly the be continues seeing of while markets commercial kind what to commercial to business, our in I'd side say our certainly of And in they OE seen that Aerospace grower bit that that off market. but market. of And below no you've ran an going as quarter pretty the been under where aftermarket improvement we Clearly, little we're where to revenue And

let's again, of in say, the a team's shift driven by, aftermarket dramatic and mostly piece overall. wasn't of lot function to So execute mix margin I'd the to say really, a business any our point a way ability

Operator

go Our ahead? with Research, next Vertical Jeff question from is please Sprague

Jeff Sprague

Thank you. Good everyone. morning,

Craig Arnold

Jeff. Morning,

Jeff Sprague

but availability, could color think demand can't et that, and a things not cetera, things the up Craig, on mixed you like think that because some on inventory of just question channel you us inventory going rebuild the people did just a do morning. channel. of of would I there. in dynamic you heard rebuild bit the good you conversion on there's companies Hey, out and Maybe saw where on like give maybe a to -- little just is? caught from you but somewhat lot backlog on We've scramble mentioned, we're also relative other kind inventory to

Craig Arnold

be inventory taken not we probably as characterize woefully partners, for demand outlook going we The in and the in market. balance, been think certain about the But able residential we what's and way well our markets to of channel with it distributor segments the say are that checks our Currently today certainly on market aggregate, happening should there I'd short are in distributors restock. in levels then, I'd would where the Electrical residential point, of matched the to good today expect. point have where be sure we

that sizable is like the the more these inventory we're of But would of they our aggregate, think reflection fact the attributes market. outlook fact our building in I in on. sub probably some largely sitting view going is currently to that fairly and backlog, segment I the market certainly than have are other markets do end than for that of with line the in of think outlook Inventory forward and a

Jeff Sprague

would completely in few your or quarter? as you to a attribute inability side the to like, growth mostly, backlog so things maybe deliver to And demand opposed sounds the

Craig Arnold

in ability No, of market more the these are then demand the I think, we we there ship. construction, example, think clearly there's where to as have an sub-segments certain a there's I as residential combination. just mentioned,

again right the again that fact But has extent both I underlying is XX% function it's the on in certainly The taking combination markets do are record in there's it the buildup has, say a two, up think grown the rebounding backlog mostly are inventory some nicely both once now. segments. I I'd that these once the I backlog So good. plus aggregate, to and a of good no the a the that of to quite place fact of markets the global that think Americas and markets channel. end think most but demand in is

Jeff Sprague

just the And end Right. super on a of be busy to yourself. your and what been I do can obviously your in Maybe called heating or there you that's you at commentary have maybe could, just your more, follow-up, on more, is deals the out remarks just do is whether your little pipeline up bit else before you might guys the year? if a capacity, are the on something actionable ready and end could comment organization actionable things

Craig Arnold

done about. of that the good which upon one business is say that are of the size to be multiple of pipeline appreciate that the bedding that been you're organization been things is your Company. really is comment the the say full the has deals, they are could we we've I industries talking activity deal really to team successful as across very segment time. number consume point, the of probably as as I'd it's -- that we do strategic, think down depending deals capacity, of multiples doing works none being attractive very and the have I'd And I'd acquisitions at it businesses is big going these an a And about and certainly in heated say that today that entire the well. so some very is the say up about I'd and And capacity that

And will done things may we've and about the the really We've full on the We of think the business done done deals some in deals. We've strategic thing addition so, deals that I'd little may large they recently be would talking I a side motion same but bit in have we if the portfolio. side, Electrical. outstanding very But that be fuel on other very the of say our done say Aerospace, you're in be true go limiter in haven't capacity to bring are Electrical. to and we out priority ability terms places and and focused capacity have integrated we not a and as a And find them opportunities, we of transact. our in in on deploy and be actually by Electrical them out and X of continue from in to Electrical to bottleneck that to capital. Aerospace to in. plenty once will or likely large, continue go business, And standpoint, to organizationally that the be

Jeff Sprague

Thank you. Great.

Operator

Deutsche go we'll to Nicole Next, go with Deblase Please Bank. ahead.

Nicole Deblase

Yeah, thanks. Good morning, guys.

Craig Arnold

Nicole. Good morning,

Nicole Deblase

extra of couple I the an early one also August from raise how deal in came in month guidance? the from of of Hydraulics a EPS in of clarify And things that include just guess, for and you can that Guidance removed the much Cobham the close XQ? just we the Quarter? in been XQ has then you did closed Hydraulics clarify, given Can or

Craig Arnold

for just in -- maybe that guide. Hydraulics work the so did I'll We in fact month and for include Certainly, backwards. Hydraulics August we own of we the month,

Craig. that would X% And add so [Indiscernible]

Craig Arnold

the you increase. at [Indiscernible] look if So $X.XX

that's related $X.XX Hydraulics the which we $X.XX all, to of fee, had we and $X.XX that another And $X.XX was First about through for fee. Carbones. $X.XX And within $X.XX had we then M&A $X.XX flowed timing, Carbon's. Hydraulics,

$X.XX $X.XX, performance. remaining And operational $X.XX in the flow the $X.XX the $X.XX to of remaining So, total, was the then for is timing through which related M&A is in timing.

Nicole Deblase

seeing clear. and really lot about just a bit guess, That's data then that we have And noise seen can from a here. your with verification. China? Okay. on Thanks what business? I little of perspective going Obviously, about what's a you in are any stimulus from slowing for But you talk in questions guys

Craig Arnold

that our team of what our that today underlying performed what market the Electrical has also we've Global grew is but extremely no. our reflective part as You say has future I'd the well. and business a We holds, segment, you saw mean, that. reported well see as business chain that of in I strongly. to our in Electrical well extremely market, China a in in I segment strength quite seen The performed addition we'll but know, say Global our would

as we've done made that the that we've ventures. joint with our exciting partners things we've we it's move in These why I JVs, of opportunity these X market them Two far being always so expand in. in one And participate China investments markets us, These the local and in markets. of One tier-X believed manufacturing create in to forward for to Company historically reasons an really largest huge we've of that really local and these the market. in access to in strong not tell really our China tier-X for the really China. in participated you, segments of

is had market Perhaps, that the even market very the important. really of important now us. our penetrate these participating segments the grow So, for and the I'd been than to really to market closed historically market us, of is more in opportunity on say market large share basis

Nicole Deblase

Craig, pass on. it Thanks, I'll

Operator

David go (ph) to ahead. Evercore We'll go with Next. ISI Please (ph). Raso

David Raso

Hi. Thanks for the time.

much I to on from little X ago the opportunities growth Can currently portfolio forward? On the accelerating what's Electrical and your Electrical then [Indiscernible] on us from here if can it and through where holes. focus that could color and geographic months of up verticals, moving on you a ideally of focus of Maybe Is some see update technology help us for a follow but stance wanted sales you the Is Global. cross sales mix just geography thoughts is just you areas M&A. the of geographic? it more organic maybe a give Electrical think us still And more having just maybe guide for doubling Global. the strong where so

Craig Arnold

Yeah.

where in really expansion. really following of to we've Company we Especially are M&A we'd kind is that Company thought be you think like So Company. growth the we've the when acquiring strategy specifically, three Motion, Company. strategically, about Electrification, datacenters, a said I'd growth good as as areas Lite, That the say you just a of of think what that about to question to strategic it you a we that take they focused important of about be terms digitalization. in the energy deploy in trends dollars secular if about really done, Tripp XG these the about on over to factors it about future like transition, think of we've When Green you that think which likely think the will in major you as acquiring framework think ought M&A like are out, expressions these laid Company, an kind a

In the mentioned, you as have really so round market these have think out market of been of historically China America's we like that, it we if very to about addition huge participate, and portfolio that large outside opportunities, business the to to in and geographically, some close us.

We Asia opportunities sell. of have those kinds in

of that opportunities some have those Europe. in still We remains

geographic place we markets some supplement augment, participating North the as do, where way be that as in will let's of in historically a as there will So played fully we portfolio in do actually to we the things not have America market. say, essentially

strategic filling find to broader the these continue going it these Electrical upon you're in product as the of M&A look these of some and of geographic other at based of platforms expansion through markets and pretty that gaps think to I our world. as business that a some ways well growing to we is set the wide emerging Company have of opportunities

on why relative business the the more with say markets guide. the other about The to question you America's fell increase a that business. I one, had think Global just you Global than the respect in basis, and the

coming once markets And are these back. is reopening so the when for The these also com into is some a time again, business with little the ramping. Europe, the coming easier a of markets specifically example, But they in global there. markets at in are of now also

performed is tend that That it as close underlying open quite the of very Europe. markets, kind phenomenon it's end a [Indiscernible] a more not Asia well. Global recall that seeing we in and This in seeing as gas of is those in be just it will happening markets same if place number is responding of Asia said, but a business, nicely our really market we're There a of we're really economies Europe as it the to they was institutional, and said every frankly it's back broad later and continue higher it's and place I well historically. I European starts both growth that base pieces of a are also of market be, we segments up should markets historical as of didn't in oil hot underlying report most most growth commercial inside Global certainly though half the right what's that think to of get it see where business, in U.S. is end the are the [Indiscernible] the into utility. doing 'XX, well growth will starting these really a second take and and in But really in place. is now. continued seeing set of and much, play come to segment and markets that the that levels range these in we so in now across one Industrial, to the reopening be And this starting in to place exposure. help in year we're segment at to cycle that make Global you off residential broad so which took Datacenters because That means not drive which that that back of And in

David Raso

And that's rate, Electrical broad, I industrial current pretty just as within maybe us can numbers update it's the but the within help mix. Obviously, assume you with Global. some piece geographically Crouse-Hinds

[Indiscernible] remind can you nowadays? roughly us If

Craig Arnold

Yan offline, normal a take about to can terms David, we've historically talk of where that what we can Maybe in given Yes. business. Jin you

we consistent global sure were out make of what splitting with provided to the want segment. terms in we historically Just

issue we up disclosure a don't So. end with so selected And

David Raso

Thank the That's you Yeah. time. very appreciate fine. much. I

Craig Arnold

you. Thank

Operator

with Please to we Walsh Suisse. Next John Credit go go ahead.

John Walsh

everyone. Good Hi. morning,

Craig Arnold

Good morning.

John Walsh

there just under the but helpful. system's I experience historical off bit you most coming think in of for be the price would earlier sticky, about prior price look across the and little as build last remind you next a think maybe but you Wanted cycle year, will incremental held portfolio of the business, commentary couple the segment's more us a of could be cost balance as think to your where upon we deflationary appreciate and any I the color the year, just wondering price products questions.

Craig Arnold

working the actually to cost through we're and it's it's commodity all price going where appreciate learning ways of this question land. unprecedented of many in on inflation together period in I terms

It I lot of it QX, talked a year. earlier, been again, said think we about it seen like it's half we those out of into as in to have QX would the and anticipated have pressure we I looks And worst As the second costs points does, will pricing of as rule, being normal pressure once that incremental general a pushed the get between as typically be and neutral put don't can the inflation. a any that that you won't I reason well, a on our imagine, continue think incremental you on price little there's to suggest that to be case, commodity as don't costs neutral.

environment the perspective impacts downward of on terms XX% you're in an inflationary if typically in way to are obviously so for a costs speaking, think is commodity Company. and the said still incremental pressure puts I'd And about price incremental, stickiness, think say But incremental. it we going up, how that, it price to having sticky. On from that be planning the is right

given price this environmental in We're of essentially price professional warranting of essentially but career the bode seeing never probably the all it's one environment, to in sometime so prices for across be are at price inflation challenges, it. be across part the on this environment, it's cycle understandable fact everybody's the doing pass never things sticking actually easy and I'd almost well, will my the and the these at it's environment supply today to through of with but the so of so very likely times, shortages environment get the will this they're very this very imagine like in And come. as say board, in and markets well, because that well least so that are prices easy, I price, for least would labor that well-publicized, the to go board, going and kind dealing it's kind factors of adjusting to is up, this are sticky easiest same very, really the

John Walsh

share that. given very curious Great. A And question gaining or more you geographies or but, seen the where as growth some call think of there follow-up of a you're last it's we've your to share? noticing out, about market kind would maybe well. color just strong if any lot discernable Was might of competitors in the shifts of that pockets you a from just do lot Thank are you if you. strength the be organic

Craig Arnold

at quarterly can that it today, I'd much upon of in in are, the if and there this you many large at And that say changes timing, point holding I'd probably not would we so do place geographic about various time, I what mix, and suggest but always that companies any say other building Yes. segments be across-the-board. this going be taking more share shares It's supply us as think pretty us to companies pretty and that dealing fact and probably think than depending are you probably end there's with given point largely or to large are the markets would backlog well. s business probably the challenges are speculation we out My chain is of this handle. market.

So of share stop we're be And point capacity overall, where that least the actually get terms probably it and businesses. serve turned probably demand until to going really imagine part we you of into holding it's not backlog near-term. to in big enough at building would our that's you something you picture, market the core share to in have the the underlying and shift a that

John Walsh

taking for Thanks the Great. questions.

Operator

Mitchell Julian go go to with we'll Barclays. Next, Please ahead.

Julian Mitchell

looks numbers there flow. the ask yet? Hi. touched at mid I went saw or look you're wanted been this cash and flow from is guiding flow about about cash that's it to net up, if Good low the morning. Is an on aggregate, sort the free income adjusted guide but I like just year's anything I margin XX% range. cash in conversion in maybe of for XX% the free year

conversion any and are some those the us CapEx wondering could or if major maybe working sort and/or we're headwinds of next and easing present cash remind flow just specific cash conversion So, when into free items, on are margins if coming capital there you thinking down about XXXX? year of margin what flow headwinds at

Craig Arnold

last considered a X.X which flow, in This you, strong if you look the cash we as which billion a before, more down year us compares if free finished year. this think mean, in year million XXX% capital XXX in But we're year. of 'XX as Julian, on working of year, midpoint to beyond, above you at going takes that environment spend and about was additional we our being flow roughly characterize the probably investments conversion given and XXX we've Having I is cash free in. the guide to increase as this And that Tom expect you'd transitory Company a to said and to in where the increase mentioned, is year really in inventory perform. CapEx. at build restructuring put that, the it X.X billion. do (ph) also transition certainly FX we're million I'd year spending, in

on ahead year. operating a cash we're an good to we also so basis little year, it's feel think performance I year-to-date, note about important flow last bit this flow of our cash

Julian Mitchell

Thanks what sort understand give the the and of low I could which piece you of And update year globally range. on about the Thank if your growth market think looks this sort it. then more teens any and wondered Electrical a at grid time and moment. topline to you're how type on just out clarifying. overall seeing average side, to out rest there's growth in I utility the revenue you. the a utility relative utility all guidance, of of an us there wanted is the just in for lot try markets the stall hardening There something chatter

Craig Arnold

is the that's it said because we've it I segment future as resiliency terms look has to the climate low Eaton been things a a of we think near appreciate of growth and becomes big go market investments for market, it the Company, of you think faster that mid-single-digits we the inside growing of have really utility and utility so of into in that single-digit market very historically, a grid and the segments market, the change, the it historically. before, this than to we which maybe into as And for think that is kind really one different some term involve represents very energy growth transition of some the hardening question first, market growth obviously for then the due grid a that big on and one, what and is as in represents and events seen. like weather-related what obviously we've about

will that I and we points seen, to expect market And still growth into so certainly big will see once in these that the is out a front we us. think of would market. most that we growth say in like market that the that inflection future. We not we've think utility market the yet utility be of again,

as those to they slowly. markets, you move tend As know, more

We to in. resilience, good set of sizable We have certainly have things plays to the in over fairly energy plays to of we the last is side But the make out grid us. that bigger going into distribution around that The think utilities number investments our transition. utility, most that of going strength. think years of which seeing investments more are growth harrowing, front

Julian Mitchell

Great. Thank you.

Operator

will Please JP Morgan. question ahead. with Ann go final Our from Duignan be

Ann Duignan

but of demand, quarter and just the question squeezing the start then maybe been from you. progress year data also an we there. to what you, Thank seeing Thank orders just saw Appreciate Craig Most questions regionally Yes. on it perspective, going answered, had maybe have and me. similar and you're maybe my versus data leave how center, demand. in center I'll on of

Craig Arnold

before, overall. acquisition Lite thanks in the it exciting I'd represents market, one data see we've lumpy. or very data segment centers operators, of There is it's like those I it's certainly a to strength, datacenters, the our the not it appreciate and And that whether surprise time will question. the see player even Company that one the year that take we're what the can market the continues obviously center whether said whether And could world, particular or hyperscale hand really, you across, just terms every region which two, consolidate strengthens most to have so a upside. as almost segments that's And Tripp for the now Yes, global call it and to seen of for there a on-prem, markets and the hyperscale we be And to in. it's clearly quarter every of of of we Company the say the or that say time I'd expand. a be it's just some in where

at for market growth. and lumpy to surprise experienced to But continues we've specifically hyperscale. so on upside is business the that with the can be what least in projections the respect that And it

of think and the the year world's for there time we're more that a more about that we forecast a out again, performing this guidance more that's what very I our And put connected, year. the idea whole And if growth future. our is as data in big into piece at looked originally trend think once for at we data, anticipated for I when to long this high-teens what's continue compute, more storage, the market. own so, going we've market. better said, we've market, talking we of It's looked than center a

Yan Jin

Okay, good. guys. Thanks,

be a available and As follow-up day. always, Have Chip any I Thank questions. joining a us. you to do for will good

Craig Arnold

Alright. Thank you.

Yan Jin

Thank you.

Operator

your does Thank That conclude your conference gentlemen. for and for participation. Ladies you today.

now You may disconnect.

Eaton (ETN) 3 Aug 212021 Q2 Earnings call transcript