ETN - Earnings call transcript Q4 2021

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Operator

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

Yan Jin

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

accessible end The We'll Craig, per other performance reconciled in today will Company's release measures. are That's agenda and including the be questions therefore forward-looking and I presentation A be through the in available Our taking the we'll flow today, comments. adjusted results website. for free the webcast statements posted today and highlighting remind opening include presentation non-GAAP of at expected the and comments our have call our earnings on the future fourth includes you adjusted the press that of on remarks replay. quarter. website Craig's This appendix. by cash to go is related share, will the will the our of statements. this been Company

Our actual wide as of and a in due results projection uncertainties turn release that, and the to differ our presentation With I Craig. to outlined presentation. risks will range over may it

Craig Arnold

Okay. Thanks, Yan.

of ongoing year. quarter saying EPS generated on the performance for issues, Let's chain in by what's QX, a with And $X.XX, and record that, record. the solid a publicized supply in we begin a delivered Page I'll despite and X very quarter, and start few highlights the fourth our adjusted and of quarter results now team well

data in our had say in backlog. businesses to Order in impacted accelerated ended our X% Vehicle industrial growth. $X.X our I'd deliver growth impact continued organically, is and of segment. constraints, I'd were say strong in both Electrical say residential, by news here, and billion aftermarket particular we revenue, and record and aerospace The commercial strong. vehicle an especially our and quarter, And markets. supply Our which and remain had a good We we I'd in also with up strength the centers certainly on chain sales Americas markets year the the

For were our combined Electrical our XX% business, and XX%. a XX-month was basis, up on up orders rolling backlog

up Our also a rolling orders, Aerospace backlog significant basis, up in XX-month and XX% business increase XX%. a had was the on

segment inflation, more part we've record. restructuring we say in electrical mix margins, to We electric a adopt And changes weeks will the performances. the note ago. strong continues of important and Power our market the incremental mitigate in QX margin solutions. eMobility, all our be benefited from say portfolio I'd XX.X% completed quarter contributing also actually changes us in taken And to transaction Royal and portfolio economy to continue I'd strong to our Solutions that Power an have to And strategy. allow that quarter. the the addition I'd accelerate Royal growth to actions pleased the We're continue also the that the to our and as a are the post in broader few favorable here, savings of

strategic we're I'd while operationally not things We're to control say, think agree continuing you'd I that agenda. that the can So our we sitting managing still. advance

additional quarterly highlight on points to results. our X. Page a few Moving I'll

X%, up profit we of revenues by total First, XX%. operating increased

leverage. to continue So strong demonstrate operating

Hydraulics, the the Second, portfolio. pleased a sale headwind. more than And with revenues not which of offset on our by by which acquisitions while X%, certainly was complete, was XX% increased we're progress

of with more earnings and creating our consistency. to changes higher We growth, continue overall drive margins support goals higher company a to

of XX.X% and I as point indicator managing And operationally margins in lastly, guidance both I range again, a our of the once are that our that think noted, dealing significant ability were execute above supply Third, to while been our team's EPS out face XX.X%, adjusted that to XX.X% XX.X% of I'd the just good things records we of the chain second, of noted the QX constraints in control. margins with. we've were $X.XX, of and

and X%. in we markets. financial Lite really our X, organic XX%, QX on Page to acquisition. X% growth on growth a And was Next, organic X% residential, sequential from Americas results step organic show the were driven Electrical strength of our in Revenues The Tripp and X% sales up data the industrial center basis, did up segment. by from

disruptions be and prevent points as decline quarter, down basis still, chain we're but progress. as my up margins. than a We was QX. here also negotiation pipeline, growth and residential And in it progress reached and opening recovery, record, XXX and making QX. in be cases, some markets fast end were the at meet strong, in have momentum to erosion year. XX.X% availability impacted to strong And margin labor good strongest our accelerating way to in we up last that up as in orders price and XX% had Omicron the backlog. operating by quarter. was XX% by year, XX% XX-month market ability reflected to continue margins noted progress some centers. input I'd supply backlog some of some another making the QX say in year-over-year, chain in And costs, in which spike rolling I supply data continue also by plays X% facilities. the certainly remarks, XX%, demand and version, orders demand the beyond our the were noted, from we're impacted certainly also XX% not orders, from inflation to really we up made between the the So which basis, remained the enough was in inefficiencies in on higher in in our The price that's our labor and was And higher Operating through on the of our constraints. In and but good driven net was On

Electrical Page to data summarize was can And particular delivered in in really growth and industrial with regions Organic X. commercial we our strong Global strength as results strength Turning and see, you XX% in this We segment. center segment. all markets.

Yes, but XX% we on We the exposure Americas, significant this a and our And margins XX-month a of on backlog strength step-up I'd this favorable I'd a also year above do in number XX% delivered operating QX. was to our and top growth industrial and in our mix did operating XX%. bit We our -- residential strong lot that posted say basis here In a Electrical of continue. end overall, rolling with strong utility from strong XX.X% XXXX. incremental Like business of have carrying markets. and especially of remained increase orders into strong, centers, a say a expect margins leverage quarter had XX%. is Global from of very and segment, so data remained markets, the momentum really we a order to little strong

our summarize the X, Page segment. Aerospace for we to results Moving

X% year. the of record by up we we incremental solid than favorable were portfolio and see, organic, XX.X%, has Systems. was had recovery strong actions. jet, this you basis a In As XX%, begun. XXX had negative industry mix, increased And from an Mission were Revenues certainly Aftermarket can partially Cobham military acquisition offset quarter. our points all-time and X% quarter, currency in XX%, in had helped more particularly and by of the weakness impact. which XX% The from the growth by biz prior margins a aftermarket

in up our with in backlog. And up markets. strength Another jets XX% XX% commercial from last orders in aftermarket QX QX significantly. up quarter orders particular were spot in bright rolling the commercial were was basis, the transport, all growth was XX-month On and in positive backlog year. Commercial lastly, turned biz in and a

Next, X, organic was currency. our was We and organic, strong offset show Page markets. financial our X%: vehicle South X% North America by X% America down business. global had in on in in the growth which from business, vehicle Revenue weakness results of we light truck

segment, do in As We of executed you're impacted is think customer of we'll our think our worst and the that certainly solid supply including in Overall, number this disruptions team we we margins had well, supply here, chain this chain-related see improvement decremental margins constraints -- revenue. us a shutdowns have I behind XX%. aware, delivering of and significant year. XX.X%

Turning to Page X.

start-up we and invest experienced segment. significant costs R&D have wins. Revenues results vehicle negative And weakness X.X% supply our eMobility in in with and Like partly up shutdowns operating customer We America Asia, chain North by offset in X% as new heavily in to constraints our we associated for and this with were business, continue business. Europe. program growth margins were the

This in we It's acquired As and long-term an be within January, it eMobility strategy Eaton. Solutions mentioned will I segment. our of important reported growth part is the of to improve earlier, rate acquisition. Power Royal the

expands electrical First, for applications. terminal addressable with a it highly market engineered connectors for portfolio of our eMobility

to here, $X wins at which of will a our is and we're Power eMobility new own billion third, to allow a material offer business record program well Eaton. now power continue we're to acquisition, power Royal our more has inside continued you the of when Second, Power. as Royal in Royal our billion $XXX of markets. electrical building include products long-term and conversion in a And Power of million us to the Royal selling And cumulative realize $X are wins strong positioned new that their with from track Completion expand. will revenue mobility products of new impact complete objective growth profitable grow content protection to vehicles

we recap a to to XX. XXXX I'll focus turn just minute performance our Moving Page before XXXX. take to

First, the and up up supply XX%; the of segment delivering a despite margins XX%. XX.X%, Electrical year, proud up environment. XX%, organic the XXX of in I'm for team growth improvement strength strong with XX%; significant record challenging chain up Global our we especially for over basis XXXX point eMobility, Vehicle, And delivered segment,

executed delivered margins level a high at and Our XX%. incremental team of

the execution, were total us for one our And result actions off building consistency. years the acquisition rewarded the of Eaton more a company We high-growth, The value-enhancing history the in actions importantly, of think their year. We start portfolio. our portfolio earnings transformative deliver the with with of Power. disciplined $X good our we're of higher-margin XX% allowed a the also another to commitment Royal you transformative with And XXXX to return had towards adjusted completed of portfolio to this when about in most EPS. XX% of Company shareholder billion in of goal well growth in shareholders for

X% centers, X% to growth growth are challenge, the are Our growth for X%. IT businesses, us what organic expect all markets, for to ourselves to as Americas and X%, others and I'm and years segment. in certainly still with data expect be across strong what to we Yes, these XXXX. But think organic of of best the with guidance XXXX we markets. turn particular and distributed and we results channels. strength with expect industrial both grow Page let's to really us. organic we our OE in growth businesses focus of and to we set our and show XX% expect high bar see of both we're Global continuing well. just aftermarket On so commercial sure to by in XX% a end growth front you XX, In margin Aerospace, expect up Starting expected Electrical we Overall,

the downturns low Our military new impact without markets. travel variant. that any And base assumption from growth to COVID continues expect significant expand single-digit in here we is the

margins, our margin And be we in see and basis expansion with be vehicles midpoint, motor of Vehicle, And turning strength between continued segments. organic strength Eaton all in we're point delivered to eMobility, And XXXX. XXX to a both improvement we markets. expecting expect XX% anticipating electric to to XX.X%. this record driven XX.X% in margins and expect light At vehicles. by growth growth in to we're XX% X.X% of For organic segment truck to we the in the our just X.X% over is that

Page midpoint, of cost our approximately acquisitions to tax will as increase range $X.XX, rate balance be and EPS midpoint the is we noted, at between of At XX% projected be XX%. increase. is Adjusted we $X.XX, a to expected We're a also $X.X in the be XX% Turning be year. X.X%, operating X%, divestitures versus is Operating million. $XXX expected XX, Organic to with $X.XX be $X cover flow cash our subtracting CapEx be XXXX and flat. to expected our billion forecasting the is to and last cash between currency to to and guidance. of be to flat and XX% and growth, billion, to expected flow to is X%

And flow $XXX this to reflects sales million and between be at pivot free be tuck-in of approximately and billion, cash our free and $X.X also expected to to lastly, This really between XXX%. represents and expect we $X.X follows. as acquisitions. think is guidance repurchases increase. midpoint million, cash $XXX is we And to flow XX% the Our income to priority share a to of $X.X flow be net billion a cash approximately higher on XX% free of what is our QX going and billion

and margins XX.X%, to XX%. and we $X.XX our organic in revenue between between be tax XX% X% growth XX.X% to segment rate to expect between up to $X.XX, be and X%, be come and EPS adjusted expect We

this a If with, we should again summary I'd impact could top brief which say, our first, show think is And to line just I once me you the close is most just if of up of secular growth Page about revenue. growth you'd is by I'd just in trends. on strong for supported Company. say XX, note, moment, beginning a think allow our how

So us, comfortable to know expand we to planning of growth deliver still of horizon. we've EPS over that its in XX% our proven how margins front are with to and ability our XX% most out

disciplined think allocation priorities We off. we paying a is approach also have which clear M&A, to capital and

different we're transformed company now growth, say higher better today. will a margins, our I'd And again, We've consistency. we're not more a company deliver result, earnings We're once a portfolio. As say, that I'd done.

remains ESG. we forefront of also the every We day. have It what commitment to long-standing a at do

Chief challenges to from Company. him gotten fact, we of we continue to results. disruptions XXXX, was these term, a the have operating is to month. at Officer, us we COVID, the as shortages us you'll of our on a we're be in proud meeting managing you investor and proof the and an In drive our Harold short count how to labor point by part and the things In chain the sustainability can more important Sustainability Jones, of growth can really for think, through on of next Many know journey you manage our transform the control. supply result Company, hearing our

More importantly, again do year. we're it this ready to

to and Yan, address be questions. Now, your to we'll I'll back turn it happy

Yan Jin

Thank you, Craig.

With For one please the Q&A question your section everyone today, Thanks give limit your turn follow-up. the to and corporation. instructions. one guys the to it for will you to I that, over question operator

Operator

Stanley. first Instructions] with the from [Operator Please Pokrzywinski question go of Our line will come Morgan Josh ahead.

Josh Pokrzywinski

historical do of of more or we I a guess conversion. get around to here, on some kind conversion when cash first So, of should pieces free How questions flow back -- working think about to rates? capital And what there, we the you start couple moving think otherwise?

Tom Okray

Josh. we prepared important we conversion. So intentionally close GAAP earnings to our said We when used when multiyear we reason cash our free this M&A. thanks the XXX% is remarks of it. flow look lot going for GAAP Appreciate earnings the And a in restructurings you're through doing to and in were at did it's question,

generate acquisition, is to which conversion. So free in requirements items XXXX. there's cash relates going that about as are think you us integration One it four cash costs, divestiture need flow main really for and to

The is the multiyear other one program. restructuring

at be will end have that, also we requirements, in XXXX. tail we're while Now cash will of the which

in relevant, our as CARES the the up one, for due, grow. is, And have Act. which still pay CapEx a we'll is we're XXXX. to one XX% which it's then smaller element you in million investing but is We probably guide, final Another noted $XX

So the if you're XXs, you low in using mid-XXs. adjusted earnings, got likely

to If for you're mid-XXs. you adjust into going those the well four items, be

So I between we've a what done departure don't think it's historically.

consistent. I think it's

year, $XXX million in The other we're is flow which by thing I significant. would growing is cash the operating note also

Craig Arnold

just not we're these add, number mean supply in obviously challenges. I that, through a of And to Josh, I'd chain-related addition

out do in as where we supply large customers, of a fairly front do certainly, pile chain on we today, these supply these protect of sales capital, we some of with inventory, we're as get how we're so how issues. working sitting specifically in dealing And chain-related constraints, about think of some

Josh Pokrzywinski

volume supply Got Or Electrical. rates growth of think in order guys it. But the do these can just the you guys And of abate, how probably output in held That's in guess here? about about thinking in rate? supply guide, second helpful. exit speaking of hold, is here as what we some specifically XQ you guide or sort And chain half I kind chain, as then guess, are I volume that see that issues if back. of the

Craig Arnold

today that channel? test we're able sits taking that Yes. behind I can how a for there's wrong constraints businesses got tell them. ordering to supply mean underlying to question to appreciate. restocking just this calling I continue inventory We one I'm And would us. the you, distributors is to order than as I the the long the you it's it. is. mean, and of with growth currently that, the a not demand can And believe deliver for we thing have But question to tough extent really address, over certainly certainly, be others you real is our chain proxy the for seeing that do And in terms place sure in good more are this what in where certainly we're

project-driven. our So of is business much

And a so project project. project. a over-ordering on you're is on A not projects,

in our that some there seeing bunch orders place. And sales converge to business, a so at levels if taking the over-ordering isn't point you order extent at of I just and we're the that mean look

strength the feel markets. tremendous this converted We our good is really underlying in to growth about backlog. And so, And eventually, in our sales. see this stuff we

And X%, underlying well X% in our below order the so, our we're is rate which of Electrical talking guidance about we've business. seen to that

And converge. so at things those some point, two

Tom Okray

in Yes. in $XXX lost I about QX, sales Josh, just estimated for we to we million Americas, probably disruption. perspective, guess the related in supplier

Craig Arnold

went think are backlog. didn't you if those XXXX one we -- revenues so timing, the into just thing Right, pushed we that's into

Operator

Thank you.

Bank comes next ahead. of Obin Our America. question line go the with Please Andrew from of

Andrew Obin

of backlog. costs does profile play Just How on from from to to your question various message And the currently input how relative backlog? visibility current folks a that's you mixed to margin 'XX? projects because sort of do going have how the look much project as out in those

Craig Arnold

Yes. that in we're we're sitting than the say Global the more I'd ever naturally history -- XX% a -- this we when you visibility growth in not our for of the business, on Electrical businesses. XX% about have backlog think today lot

some we And And into visibility the today so, than the better much have we to say we trend I any inflation Company. where now. in commodity backlog, had anticipate mean, naturally I'd the it We as this inflation. to to was ability with certainly of respect would with have well have history going the seen pricing in respect coming have going year time almost for

not prices. And so and to commodity you've like backlog, don't pricing perhaps our in comfortable a today's reflected have impact backlog guidance margin certainly we some in reflective But of from result have. with others, a the a heard that's of that we as today we're very that's expect

Andrew Obin

the build just on And to Excellent. previous question. maybe

is cash you sort flow close to of But look, one factors conversion XXX%. the think flow of cash are underlying I free So here. the is highlighting that

what how chain investments supply generally sort in what having enter looks demand keep flow of see capacity, growth industrial the And capital of As capital, you with question. period, in kind do up conversion, Thank longer foresee how cash of to an this we about big free needed sort you term? And on think Just managing impact margins, return you. you on like etc.? picture growth, do it? working do

Craig Arnold

historically about growth look talk we our the and had fact businesses than and be a these examples going of to before we you that growth new have trends have into to business important and some secular make to much and booking today the I'd faster to we fairly say do sizable we're we we be that if and future. some about talked will capacity we coming forward deal investments growing with that about, we're be think expect about this some --

as requirements. growing expect look be support you the to And respect bit would to is well. so, spending a into Revenue to in investments capacity going to demand, certainly I would in future, tick-up with say as of see we a capital

And material of bit probably about you a if there'll it of probably tick-up. be think a change, be but sales, won't CapEx so a percentage as a

capital still On working we opportunities. have the today, side, say I'd

can running. to on today We as sites are protect keep and try record investments inventory that we protect customers in sitting our our so they

ensure anticipate And inside I And the would grow in say of source a to have will facilities on items, ability to transitory on investment capacity that of we -- some specific-driven we would inventory Once see resiliency in would that at CapEx that to try protect make But the to cash to side, -- through support so, our coming. I the I anticipate continue point, business. the in in working some we supply to the we me, really it Company get we investments working capital. customers. would a continuing excuse today literally growth have be even the built large not as the the much on we chain hope that capital of

Tom Okray

note That percentage conversion also free it's as a on. walking think of objective free and XXX% we're not I Andrew, XX% sales. our flow remains that flow away cash important of we're to something is focused from cash as

Operator

you. Thank

Vertical Research. go with comes line Jeff Our Please next question of the from ahead. Sprague

Jeff Sprague

you in peel you to if margin of was is realization give you embedded could of that, specifically Craig, just didn't your of part be kind headwind. further. and sense price/cost to wonder, of also quarter in bit just what some guide. price/cost a the And expect mentioned us part as the a price, just what I kind can we little the If on

dollar clarify So, -- if rate impact, probably positive on like perhaps. sounds a it are margin could confirm that just we you the Maybe and we're you will?

Craig Arnold

one question, the that inflation is Jeff, seeing and spending our we're all ensuring that on of we're Appreciate internally commodity we're Yes. of that business. in lot a recovering obviously the time this

about my saw margin fact and in as largely so talked business, my but the are, we a fact, -- recovery. a margin because that recovering of I top a the Electrical impact fourth margin it And the comment price not not we our opening recent get we're cost, to commentary, Americas getting in specifically relates dollars, quarter, we did on

the And so, a it on rate. obviously had impact dilutive margin

As we we'll this and from look do to expect in just forward, about that positive think that XXXX we continue build point price will slightly We be forward. cost.

So expect be we better will from we earnings. experienced sure an it'll And It year. than EPS XXXX. a a EPS standpoint less in of be headwind positive for that would to certainly XXXX will our be

call, about in you businesses, variable. talked dollar versus very has as the and one which other different the really quite inflation everybody we last rates. a that's understand specific When the the inflation earnings is are in heavy and we're of rates that what businesses, know different I steel something about on content a for, and Jeff, so we But have think can in of why. On percentage, on many something our and so number Crouse-Hinds, looking I question it's

as our number about so we're that talking customers what on to so seeing earnings call. confuse to around And provide not they're prices versus not chosen we have

Jeff Sprague

us the maybe Perhaps perhaps system. deflation of mentioned steel, lot through go with follow-up. you the coming update a likely give on I'll lower. are pointing there futures an just Obviously, you effects steel could the lag my Since on

through. have some work do backlogs You big to

take certainly, commodity So eye on suspect on here? specifically to quarters. other we're keeping there steel the But of a an it's couple color going I inputs that any all would just or key

Craig Arnold

type the from be in they appreciate like a of days, where time certainly depending commodities to of XX the quarter. them, suppliers. were fact, essentially year really which costs are We And not The in steel say where improve. commodities overall still to and is little get typical semiconductors, up with I versus of lag what well. overall have But upon we and of were we're the last they dramatically. that is you if days seeing would are Copper we fourth on XX high. business you question our segment Yes. with retrench seeing are, And agreement up. as cost can prices bit the that can kind anywhere Resin mentioned, respect

input that good terms to that where right inflation offsetting guys still other steel. now, we're than Steel are but so, there in bad still living elevated we XXXX we the much anticipate are enough environment in the in And seeing operate would more And are guy to this kind out continue that for inflationary there of benefits we're environment. going of we this of costs. is one see of from

Operator

you. Thank

comes Bank. go ahead. of Deutsche DeBlase next question Nicole the line from Please Our with

Nicole DeBlase

of capital to to I back just the flow go and want discussion. working kind cash free

weeks. over capital So completely But source we a kind guidance, anticipating cash build? about and that's I that understand few have will XXXX is of your area opportunity, from working the companies heard continued for year? we've an embedded when this reflected of think be that Or guess a past of been are over this of you lot that you it

Craig Arnold

but wrong, a me Tom, -- our think what's it's I I think I'm embedded what's if in positive embedded forecast. correct slight

Tom Okray

improvement to right? We're looking networking at some it relates inventory, as primarily capital

Craig Arnold

anticipating, of positive for through challenges be once area currently could an I'd it what some generate stronger be the flow. chain-related a and us It slight XXXX. And of supply is we're needle So more say. to mover free big we an it's than not in it again, get is quickly certainly a opportunity could cash opportunity. If

Nicole DeBlase

And price/cost Of predominantly I Americas, this headwinds out other the just it. then isolated kind is specifically Or line having of you following Thank in an segments? just discussion. up course. Got your up Craig, and Are any sense. really makes issue? called which Americas guess, finishing margin as you. you of the price/cost at

Craig Arnold

all in headwinds most most part. our of the price/cost having we're for is acute Americas. It in say just I'd the businesses

side. if we And interesting we've every I'd the what so it's U.S.-based seen has kind general having, going most what's we experienced say, just on But world. biggest The have in significantly other businesses think haven't place. about businesses inflation had our just we're pressures of U.S.-based it's our that the in And the that been around businesses. you and the around that's It's let's in than input -- inflationary markets going around and Americas U.S. really on what's the higher world, say challenges largely the today -- price/cost. acute we've on, in businesses

Operator

you. Thank

the Our line next with from question John Walsh go of Suisse. ahead. Please Credit comes

John Walsh

Maybe one, us data projects? a of on actually those you're center now market are booking to if globally some you and the can on in XXXX seeing give out first detail you more little the what

Craig Arnold

strong Yes. John, on-prem, general. whether look at really we're at the multiyear data the of been course looking what's channel has of the strong as even been And the on looking been colocations, during IT those markets for we're have market. extraordinarily hyperscale, strong of year center back us and market has and each of a extremely really we in trend whether at whether been the

of customer for large And some to demand. we very strong we And to today, strong say of that market, those going of investments deal up growth centers, service keep data I'd we're it like time link stay our long to earlier it's And have markets backlogs. quite residential need really make capital going really markets to the think these of really trends, continues. demand with challenged longer-term time. think a which struggling certainly if period we're of in the ability around that some think you be period a conversations as you to we with built today, is these to and so about to where where frankly, to some going are for very long And centers very back data world to be of strong

said generate, amounts just I've of as increasing before, process, store So data. consume,

about we autonomous sitting think vehicles. on the when of XG, of growth -- we're another think so And wave and kind about I you verge big when

keep continue going very time, going the think and we're so market to And strong long that to invest we to growth. have with to be for is a up to

John Walsh

maybe that I numbers a like math little a did Obviously, improvement. the something there? happening looks is pressure mix? margins. it If then one there Or And nice conversion. the Great. on else there's Is Aerospace absolute right, on

Craig Arnold

say pressure talking about when So you incremental on in conversion, you're the margins quarter?

John Walsh

the OE mid- in or commercial, faster XXs. upper XXs growing margins, upper just with to maybe military. Yes, like I'm something incremental happening, mix calculating the that's something

Craig Arnold

X-X. margins was for Incremental business Aerospace XX%,

John Walsh

I'm for in forward sorry, the saying guide, in look the XXXX.

Craig Arnold

to you back of incremental you acquisition let don't have I in that us as you on in the the an Why on terms guidance? margins think well. get that impact

stripping acquisitions, -- assuming not of underlying margin They obviously which I'm normal don't rate you're of and the at come in incremental. the terms sure out out So what come of business.

don't why and that back let to on get with deal So you maybe one us off-line. you that

John Walsh

Sure.

Operator

you. Thank

comes Our next from with go Goldman ahead. Please Joe Sachs. question of the line Ritchie

Joe Ritchie

side. inventories inventory being of But able building saying the is What's market right this want the market which the is in the occurring on to inventories on Because distributor still square no quarter, makes dynamic inventories companies try are interesting of look, your that also now build there. I but if OEMs? to you the of sense ton market. kind And guys on sense, the hearing from a some comments that our they out lean very we supply project. inventories, you're doing lean. to saw Clearly, everybody be obviously, a Craig, So, to are

Craig Arnold

we -- I'd And distributors. requests to everybody fair OEs to and inventory of to where our don't, many in some inventory, not do. there. any obviously, them with say of of much so of get we're I And them inventory, mind, build business finding, of today are back would that lots keep our what mean, But levels build you historical projects, say project think electrical. inventory like to getting it's Yes. do And carry is typically I in

like not one been been that over-inventory is concerned the say system. or And system, that we've it's there for this I I'd We've or been been that whether about. not the so whether engaged to would And one double testing like certainly below in and in ordering watching. growth. terms distributors, and there's can of We've tell in that's is -- with our or talked them more teams they'd been a of having you, forward seeing. and our we're just their They revenue be number what given hearing today look not where levels are with their on inventory, inventory

Joe Ritchie

this Yes. That margins. Americas makes sense, that I the question, guess, quarter. Electrical follow-on Craig. I understand clearly pressures guess my like one more you're would be And feeling around

on you just XXXX. turn would baked feeling margin companies then and And that that I of same. color helpful. have providing expansion point lots know guys start be -- think year-over-year? pretty think maybe cadence do more what little the At I bit you to a the healthy How -- positive other into does perhaps were

Craig Arnold

year-over-year? I margins what do positive quarter the mean, do when margins turn positive? So turn

Joe Ritchie

Yes.

Just Americas? takes like through progress cadence on puts the in and as Electrical we margins around XXXX

Craig Arnold

a result getting of We the part pretty end our the opening expect this absentees issues as year, say margins that dealing commentary can supply my the plants, in I we're significant mentioned is I'd and issues. had QX, I you of part what's we're now I that of also right that at labor-related a large as obviously, now COVID. we time facilities tell in would of our And lot the positive. -- too. speaking in Yes. inefficiencies year the our of number number at turn last chain-related challenge, hit seeing a beginning right a certainly, would mean, with by we But business. of obviously, attention of factors

Our suppliers same are the thing. seeing

today extent, we of labor And results inefficiencies all certain And so in get our so, get were in factories a and it's to to to cases, many not and of supply just run in as kind efficiently, the into can't are QX built these and and, challenged we well. parts. chain, QX

continues in So supply we're get components copper, the better like that's think get better chain we for with think dealing that some But semiconductors. really about steel by beyond quarter. challenges we inefficiencies. it's other every components, of be But to QX quarter. the going to I every things or some entire do We year those continue do when get resins, time whether you think supply labor to cases, really think chain think the we

Tom Okray

to XX year we're prepared margins midpoint, the in which you remarks, at prior note saw our Electrical important the Americas. It's bps in above

we bullishness feel reflects the about that that things throughout So year. correcting

Operator

Thank you.

from of comes the question go next ahead. Julian line Our Mitchell with Barclays. Please

Julian Mitchell

was wanted perhaps residential that the how One the ahead, just obviously there? think as I multi-industry last was residential just business much of up within understand in And other the as today? about people proportion cautious Electrical side a a in of number are dialing right business. you about you're And when sort was how categories resi-facing are whole that, thinking starting a Americas of year? on and year business of this to kind try slowdown any of product point pretty I strongly now.

Craig Arnold

Sure. Appreciate up I digit. the of probably mean we'd that into And of today, grow that say our question. go XX% business would I double say XXXX. resi course did the during think I'd markets. residential was roughly market business strongly

Tom Okray

XX%. around yes, XX%, around It's

Craig Arnold

Double digit, yes.

that guidance not slowdown, that XXXX. still the expecting we're heavy into but So somewhat on experienced of course is to -- the XXXX, market, market which baked at of for in our growth the levels we clearly a and see

electric taking it's whether not the trends Now growth all is to It that that multifamily content adopt garages place seriously that additional transition, electrical you for they to think, are be transition-related think electrical think residential though, home, broadly consumers as just going content. longer seen is over cars to impact the attractive really their at think say, that what a we the the the their near in in the keep the as to infrastructure all the of ability these new back to as this the That's of look it's codes, even change content we dramatically, buildings, electric the stock. didn't to last, solar, an some at thing as are important, housing have even ability grow consumers the grow in we the we've trends to And also electrical of buildings market. And in sell have grid, electrical think growth and as these the think numbers kind opportunities energy is also their in grow continue resi let's the it some really to as to on to rate they support over island to are vehicles, the the in And to I multiple to you continue resiliency, residential. energy market energy going really these the economy residential we buildings, about talking say, more though, secular years. really impact we're attractive going electrical housing the growth term that's mind, the moving into really at things have improve other not of really about markets start that. requires and The continues have about. XX let's us, of of a XX things, put

it's residential, to invest position continue and in have one we'll in. We great

Julian Mitchell

touching vehicles light earlier I or at say, second Because -- we've guess about inventories. if what where is I one guess, there liquidate this constraints. I on automotive And they But my Joe was could very mentioned said volumes is area question, then who had all inventory in up plus earlier week large are early the year. and in XX% the heard about OEM look wholesale a XXXX,

massive thought feels it I that have that's a on enough they So because double-digit year. goods like was interesting to OEM this growth satisfy suggests who hand

regions has your inventory different inventory less end And to built your on and had markets good up? think you norms there a bit point been relative so on broad there of of when there's or markets a views as I that any kind may across where Are don't areas today. you salespeople ask. more push had channel different or of partners any little maybe amount if I that just look or sort want look know you to

Craig Arnold

mean And under X XX industry specifically, place, some more. customers of inventory there, can relates to I drowned of side XXX asking Julian. it continue today tell out that as an inventory being voices think the S. of inventory if days typically record-low by inventory. at for their run the levels, XX out has us they're in levels U. the you I they're to sure you been probably there, to are mean automotive I'm I run on other that levels. running has days about out

say so surprised OEM And from that levels any with hearing our not that customers. that of would We're I'm of the automotive any inventories. they're comfortable

think, a outlier. I is of that, so an bit And

Operator

you. Thank

Our next Coe question go with ahead. comes from Wolfe Research. Please Nigel

Nigel Coe

'XX. in Electrical across growth X% did You

X% 'XX. to forecasting You're X% in

long-term Your target X%. is X% to

don't to thinking -- to beyond strength I Day, is center, I'm industrial resi. 'XX Electrical? March and in March X% But the of of growth want but -- So A far it X%. allied commercial some might you're in how turning that and above you're be then kind assuming you ahead about Investor institutional are we to too not are seeing there. bit data little around highlighting highlighting utility, surprised orders get because

those in end seeing just markets. So two specific what wondering you're

Craig Arnold

it's I'd are our being we've outlook say doing strong to it to certainly fair about Investor and that anticipate than strength question seen for And slightly. your that is do that in one I month. we Yes. and talk longer-term reasonable as to I businesses. around us going number at be of respect next -- move our we markets, in to point, growth of markets Day mean, anticipated, assume industrial. the us, would Industrial that, appreciate will we more Electrical well. be And And we talk markets up about end addressing that we first all, your the think certainly, With general. the for to

things also talked in we're activity commercial, world like we've and there's single-digit if goes move are Amazons segment. again, building is that an as of we into store, continue you much think I'd strength be higher, continued to in -- what the online. certainly strength office commercial warehouses. And resi, positive growth. the more to low centers. of say, than We're warehouse this to seeing positive there, so in in we but still seeing retail of think have the about growth not with segments seeing huge intensity electrical about we but And and It's the more going a expansion about office before. our still as And you data commercial, continue in that office seeing think retail We're Even -- mix associated utility, once industrial. the the growth or

in we be said, But as data positive of think markets, in next utility some would -- in to growth. markets what markets. year. industrial strength so think centers, all outsized see would growing we And we will be the we But see are going we every anticipate would market,

Tom Okray

point, for and saw commercial very so industrial, in market. I the overall And saw growth, single institutional, mean to Craig's we growth we high mid-teens year digit strong. this

Nigel Coe

And That's great. a follow-on on That's then color. great Tom for cash free conversion.

But you coming Sorry to see cash wrapped charge kind on up out also in you one. year? accounting I restructuring and to headline $X.XX the this the call called $X.XX more acquisition sheet a of is make of this issue? sense. charges total outflow go purchase going there things stuff on GAAP purchase Is have accounting that's four earnings. in it, balance the to this back the or things, But to what orders

Tom Okray

to the you're of Nothing alluding and that and things. And there. the acquisition, the divestiture; restructuring; integration probably I No. No, things described: four it's really pension Act. funding types I CARES multiyear and think the CapEx; extraordinary the those

Operator

you. Thank

with Melius of line the from Research. Please comes question next ahead. go Our Scott Davis

Scott Davis

we book kind like would world? -- And it's since Is color in us of a perhaps upcycle what's last part that some but in Most taken I an you And peak. have imagine business of on Crouse-Hinds. look questions I'm a been been bit little specific probably since costs just you've the the give of out that business. of order while your of that have -- asked, curious, my how can

Craig Arnold

an industry went that, very Coupa Appreciate the you business, cyclical when who but acquired many business And for downturn. follow ago Yes. Crouse-Hinds mean oil through today they the we is, about that goes. a I a when was you question, you know where Crouse-Hinds industrial those in strengthening, over industrial, we think think lot industrial years from fact, business do profitable growing. But year what as and of of it a talk a that that's business, Scott. goes about of lot many markets. into that And of gas about business the

the so clearly of And seeing business. markets industrial A are serve nicely. are the and a lot that rebound we in growing support Crouse-Hinds they

recovery pretty should we again, certainly once attractive at in front the, of markets. so be And what those end the think we're a

Scott Davis

the changed that are there of in the you're then out? projects Okay. Good. out ago kind today than competitive as much? -- less projects on there a is of has Or thinking people are that a of years sold terms the bidding on, really follow-on, bidding just And everybody's reality that couple dynamic not perhaps given just

Craig Arnold

the that that out in is the say sold everybody that around means they take, more the being projects changes think would I and obviously I everybody price that selective fact dynamic the it marketplace.

it's on dealing I but speak seeing be selective well-known necessarily today bidders understands And And more seeing companies. like I so less for included projects. say a But that But not there ourselves fewer the to being capacity. than recover probably been or environment more ever and really company bit say where, it's can't say is, demand every to is as times it I'd we're that career easy projects. because with. given of whether my think said, are there's issue we're how fact we're is in of professional an as the how I given competition everybody can't we're it's what today ability I'd the to in I have Lead kind that and inflation, pushed out public visible never lots on easy

Operator

Thank you.

comes Mizuho the line question Brett America. of Our ahead. from Linzey next Please go with

Brett Linzey

looking back the lowest the years, just sizes deployment. moment focus in of probably capital This understand shopping? spend number and the seen actionability a portfolio. a a where just share you repo of and the bolt-ons. Could to we've guide come talk to of on trying wanted is And mentioned the I to pipeline, within you're you about some you're

Craig Arnold

talked observed the over I we've of in to in bit of And are months, that transition. certainly transformation, we've Lighting, big business selling number making last really quite And digitalization, XX look we've to the Hydraulics. businesses, Electrical these investments our of done tied acquisitions. second trends prioritize question. that portfolio done the Electrical of we mean energy probably you've electrification, about and a for continue we'll course Appreciate that And a things continue to growth Yes. space.

You saw play Motion charging last a Green which infrastructure. is called year, this us acquire into company electric vehicle

You've and participate where in Tier in fast-growing call have of seen the historically Asia in really not us played. do we Chinese Tier market a we number a region X transactions the market, X Pacific very participate what to

going us that penetrate do markets. geographically you're see So underserved to us things allow to

channel. important acquisition, data You've IT Lite seen in obviously us which the do the into is an Tripp play centers

of think highly growth a on these said really aspects Aerospace. the And We future so, of for you and that composition and done differentiated is important technology, in We a is can where kind to. I Aerospace think as transactions this and us important Aerospace the really in we do of priority, going we've businesses. to size we of of kind number continue focus move These are forward what expect to to be continues businesses. like acquisitions scale

business profitable platforms, programs on want already $XXX a outlook and from make on virtually to a paid a that with with we're Cobham. They that takes every on. essentially was play won. that have sole-sourced $X get aftermarkets. billion that they're for aftermarket. technology. very for very the that they've upon it growth They're strong have million to business growth They it's based You your sure platform And strong We that

for about over looking seeing at our And the look and to spaces what much with what consistent anything. for seen And on last anything that continue a while. say us I'd in acquisitions to about. of you've than it's Obviously, or is so But we're these to talked that number you us from really are a pipeline a We're around of is the than not fair into very we a buttress towards, said us about we how we If position find and do generate how create been capital today in to value not announce can talk think sheet. years. the on price buying we get you're before, that, in cash we capabilities back count pivot our back shareholders, as our to the deploy we buy better opportunities few some our most having value balance that can for done, more value-creating stock. we perhaps back. incrementally acquisitions, But said a do will and deals let can think go and today them we stock can't build up we're the going to we market pay

we of it we us. we're just towards has what And either from capital hope deploy buyback similar more been seen value-creating us, to be create great shareholders. time capital or looking in so just do we're M&A. to like would I've we And M&A through at How able and or off. to front always shareholders, way of returning for value But the trading most stock

Tom Okray

can really Aerospace I Royal Electrical our would thing some trends exciting only as give opportunities, across eMobility, the that and add sectors. that Power such And is leverage secular we us

seeing it's and read So we're exciting, across.

Brett Linzey

That's noted within one one me you a Americas utility the order driver as the last in T&D didn't I get call-out a great. for activity just international. business. And then on of

CapEx? all? hearing customers what there tone are from change So curious, around in at you I'm just Any

Craig Arnold

Yes. attractive I'd to an T&D be the say market. that market continues

of a need you also, one and the hand, investments of I significant about nature some significant grid in need aging grid, it's think requirement desperate driving and in again, infrastructure the the also where in resiliency. on changing which think place as but once and some fairly grid upgrades is for the investments the

continues And Americas to story so, to yes, the be in years well a positive some that come. think as really we for

Tom Okray

same expect to Grew year, XXXX. last mid-single grow we in it the digits

Operator

line And Please Thank will Markus of UBS. question from final our you. come Mittermaier ahead. the with go today

Markus Mittermaier

right. some from the mentioned there's some in some builders up the there Is in machine Electrical pipeline opening heard I you number on activity Americas, We've we XX%, early the activity anything there your is that that semiconductor see? remarks Craig, remember negotiation of in there. if your already

wanted part check that's to already that of pipeline? Just if

Craig Arnold

the can't really where now I don't answer. -- the from negotiations additional Yes. I coming appreciate question terms fingertips you to color mean of are negotiations down coming we'll -- composition on information that have to the you that up that level with to don't question a are on of my question. I Yan from. Jin Yan of specificity. But I I follow maybe, give -- those in where on it's right the ask

Markus Mittermaier

Absolutely, opportunity remains but still interesting an of one. sort the semiconductor obviously

Craig Arnold

end sizable reshoring to markets There's mean those and extent are you that with semiconductors all fairly no and infrastructure, like, I electrical the question. build-out, switch up a that gear. need our the

growth us. for certainly they great so opportunities create And

Markus Mittermaier

then And maybe one a very quick on Electrical Great. just Global.

growth, in an broad-based strong quarter? of more obviously, that here see you Should strong You Global mentioned on there. Crouse-Hinds inside margin it largely Electrical I earlier very is interpret the the the profile Crouse-Hinds? as effect of Or

Craig Arnold

job is Europe Crouse-Hinds doing Electrical business helping, broad-based. a is of definitely great margins. our but Electrical and It's expanding

and as it's really years. dramatic of I profitability in in And And improvement all-time as The contributions both for last so from well, record team XX.X% from the, quite them well. we're the Global it mean, as seeing well. it. business and the contributions seeing is Asia business, we're the an our really Electrical it, it number which and, quarter, I frankly, our Asia in mean, we're margins seeing over our call in traditional let's Crouse-Hinds

improvement saw If you what what it's do regionally up be businesses But these of it that is regionally we the course all to global do XXXX. think three of Global, business tend about a significant we those profitability Asia, businesses. what Crouse-Hinds global the makes during in in

Yan Jin

guys. Thanks, Good.

your I will Chip a to follow-up day. always, Have questions. As address be good and Thanks. available

Craig Arnold

you. Thank

Operator

and does today. that for Service. Ladies thank and Conferencing for our conclude gentlemen, We participation conference using for you AT&T your

now disconnect. may You

Eaton (ETN) 4 Feb 222021 Q4 Earnings call transcript