ETN - Earnings call transcript Q2 2022

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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 time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] And as a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Yan Jin, Senior Vice President of Investor Relations. ahead. go Please

Yan Jin

Tom I'm for morning. me Thank for CEO; you are Chief President Hi, Officer. Financial second Yan quarter us and and Chairman Eaton's Arnold, With Executive XXXX joining Vice Craig and good our Jin. Okray, earnings today call.

agenda opening Craig, remarks Our highlighting in performance company's today quarter. second include the by the

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

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

Craig Arnold

records a Okay. quarter. of we'll X, had number Thanks, noting We Yan. Page start Appreciate posted it. summary by quarter strong all-time the growth. by of we And led organic that on with a and begin a XX% I'll

industrial in markets nearly our supporting the continue I'd to orders Global. next And and year data year. strong, and we Our in Electrical strength we're I'd record end growth, our saw both reflected order in can in Electrical, in basis. And was backlogs, both in And performance And emphasize but was which This business, businesses, and business, aftermarket in was the XX% as in and into particularly growth all the and that you a and backlog XX% the remain and say, strong, commercial, was Aerospace Americas significant OEM. up see, Aerospace seeing and up is our businesses. in which up some strong centers, Electrical for business, residential our rolling strong in cases, say, Electrical Aerospace. and outlook on in we XX% XX% in really, XX-month build our markets commercial of remain I'd in strength, the many

a year delivered adjusted X% impact and of an As the $X.XX, EPS $X.XX headwind prior over all-time increase also reported, than acquisitions divestitures. more we and a from offsetting of record,

we that our You'll high all in recall share owned range close the was as of year. the Hydraulics $X.XX a of guidance well. to business last QX The end

an year the posted basis end our also above all-time guidance. of up of record and over XX.X%, XXX segment We prior points margins high

year addition teams well. range in forecast offset growth, we're managing really our lastly, as increasing adjusted of growth full income. up lower to despite midpoint, year-on-year and our and XX% XX% EPS interest FX, we're higher from growth to guidance So raising of price to XX% pension X% headwinds have from inflation. up at full strong XX%. to year And done our organic $X.XX from to to job a expense an increasing the our effective additional We're And

here. and the just I'll Moving quarter, to results the show a Page X, we for items note financial few

have electronic very this shortages been for pleased in but of revenues by the and our with lockdowns year-over-year better acquisitions impact growth growth we're components X% growth, note but certainly FX. much from organic of COVID-related China. X% of some with offset I XX% level negative of persistent And flat net First, that organic were would divestitures and and also could

year. prior guidance headwinds and we impact than Second, worse our in expected $XXX were currency versus almost million

$X.XX in you'll headwinds we adjusted worse quarter. will by forward this reduce also in The approximately half. As the our guidance, FX EPS to expect the number see in second get our

Lastly, the margins I'd adjusted that achieve including like to profit, emphasize in quarter, all-time we operating and segment operating EPS. segment of really a did number records

X, Americas the quarter have here. results a Next, board on of we business, Page really and Electrical our the across just strong

and commercial some supply range centers from markets, a with growth did you challenges see of and fairly markets. see but organic from up to of commercial, across our with resins all to in utility, continue acceleration rolling electronic improvements delivered data strength anywhere metals in and XX%. end but XX% markets on markets through Orders were As markets. manage in XX% logistics, sequential And growth and to coming We number QX, nearly increases significant can of a a of components. the organic strong basis see, -- in growth up record accelerated up XX-month strength segment all from across residential with margins did XX% chain constraints, up XX.X%. industrial We XX%, particular and up and all with biggest end actually with

that So some end new in backlog, to we pleased XX% be with strong markets seeing a with XX% almost from QX. record On growth level. and up our continue sequential our we're to basis, was demand a our backlog increased which

continue with delivered better-than-expected points this we price half. margins also by And inflation XXX driven second be expect the in successful record note, volumes. in offsetting were largely of and the plus to side to operating on We of up XX.X%,

show quarter, segment, We strong X. which our another sales. of produced results Page Electrical very the all-time Global record including to Turning

In growth in data rolling XX-month in growth with this with from saw with level. new fifth orders And headwind revenue a our up on fact, our backlog were XX%, XX% We currency. regions industrial record to particular markets. quarter some Organic and commercial strength XX%, all in row centers, a X% grew a basis while is double-digit organic was growth.

electrical we We recently Electric, JV third say Huineng markets we'd up acquiring here, expand a in by about this lastly, margins. products of And closed XX.X%, high-growth China what manufactures eight months, At which some profits is us circuit to our venture our very And both basis, the increase is the operating about and offering portfolio outside XX combined for by in margins XX% prior last new and serving market which this energy renewable to QX inside a record operating from our China. $XX low-voltage of points these on joint I'd a market China say breakers participation multi-tiered in also Jiangsu JVs delivered addressable year. market allows three market. operating basis and China were billion. by And -- of in

of growth important out these JVs. strategy really so And part our of future coming

here's a to businesses, the performance And XX% markets. our in of our any margins. sector basis move improvement what in Overall, I'd we strong seen have growth industrial of and a slowdown electrical business. a summarize combined of our note, organic point XXX with we posted not QX, Electrical Before our really

see past, trends to order I'd are in that backlogs strong in energy including clearly continue we've levels. record discussed We growth showing are And the secular the at book. up and our orders transition, growth say that in

Moving to X. Page

of XX% quarter our commercial aftermarket XX% to recap our Mission strong, up the markets, increased currency a OEM add Organic positive XX-month domestic growth X% future XX%, businesses. including acquisition indicator their would commercial and coming organic is and in quarter. Systems basis, of in In market, saw certainly XX% backlog pre-pandemic commercial many while I bookings XX% only in have to XX%. commercial what growth, headwind. we positive was rolling our consistent travel as at show and growth while was continues On the that a know, are segment. improvements growth for from Aerospace orders levels. you and both Revenues of the strong with international increased in aftermarket a particularly XX% We

still to we as read, have in ample this OEM And segment. additional particular commercial growth recover. So continued room you've also for activities,

an segment see increased defense of markets, also in to margin spending to years. defense from in U.S. basis For seen tailwinds operating and already up to pleased over XX uptick several members including with the this military lead NATO to increased this We're XX.X%. we points the profitability as commitments the defense We've renewed European stepped next budgets. expect spending, expect

margins peak the for Aerospace our was that XX%. recall You'll business

continue expect this to to the up over So few next move years. number we

in in X, the which North in summarize China were performance and up the which our vehicle the ability expect growth margin of year. particular in price the segment. due Operating lockdowns. margins light costs primarily Europe half, driven X% was in some had performance our it's COVID and we and the lag Revenues includes Vehicle normal and in by the outlook and compression on by strength to organic America We America from will offset largely X%, in business, the marketplace. Page were points inflation equation X% recover improve price that XXX weakness do South Next, flat basis the to markets inflationary in negative our currency. reflected We second our down partially for

Page to X. business. from impacts. growth, currency acquisition the of our a includes results XX%, negative increased Revenues Power show of Royal XX% We Turning X% eMobility the XX% organic which and

we the to $XX six-month solution a synergies our by billion company During as Power. just certainly quarter, segment by more margins losses I'd including still this goal we the sell protection. negative, delivered volumes of revenues track, steady And note progress -- acquisition And than $X.X had year, generated at we with out to competency narrowed that marketplace $X create the This at margins. core and on improvement delivered to by continue of a the we of also the broader investor deliver million expected by of in as attractive while is we basis a was distribution remains a leverage XX% XXXX power playing XX% our wins Power point, our slightly towards earlier number operating is expect Royal allowing make to integration segment power meeting to and and business material points. our and which some hoped. XXXX. billion billion we $X of the Eaton as to Royal higher Overall, noted that wins, also XXX the

XX, updated guidance Next, have on for the XXXX. Slide we

XX% you our we're in end really As for our all our organic of the strength raising back XXX on increasing XX% and based our see, Global. our to increased continued year, one in basis basis points organic Electrical strength for time of the can upon XX% X% segments We're of to where this points really growth second XXX growth in guidance overall markets. the all by but growth segment, we've to Americas from in

at basis XX full year The two XXXX. guidance margin raising changes versus the to margin our midpoint a which Americas guidance And compression by to XX.X%, XX.X% margin range to talked For XXX include to basis the in at with the improvement associated and for the inflation about, Eaton XXX in points represents, timing we're for over increasing the price and the Electrical for XX.X% XX% midpoint, by really margins, points we lowering the at that Vehicle of vehicle discussed realization we point earlier. our be basis segment midpoint. targets reflects as reduction

strong overall, robust and record So well half, we're and orders, the backlog, very demand including a I'd say positioned of for first levels year.

balance the We our Moving the year. to show XX. for Page guidance of

the raising EPS, outlook is currency, requires prior guidance which partially share. us year, reflected XX% $X.XX forecast our offset stronger is would we're to covered a organic earnings this our our our previous I adjusted and For time million guidance, to which to we this now second is additional offset of between XX%. note doing case, this on clearly of in which we're negative I guidance some And growth and as in versus prior to million. increasing compares of pages, $X.XX by for outlook. be to, dollar The are $XXX $XXX 'XX negative $X.XX our

million will $XX expenses million We levels above XXXX $XX million and to expect between corporate our $XXX million. or also that $XXX now be

offsetting interest primarily to $X.XX higher expense income. another we $X.XX lower the year due is that headwind and this our adjusted for are in So pension to and EPS guidance

highlights by -- and our pension. to So of incremental FX, guidance EPS X% QX unchanged. interest our we're The now on just $X.XX raising recap, $X.XX few headwinds And remains guidance. from our guidance despite between remainder to full $X.XX year a adjusted by of

basis growth to of and margins be expect between points between EPS And $X.XX and of our guidance, to XX.X% share, expected EPS growth margins XX% adjusted midpoint be segment $X and We XX at the and And year. our are to some at a be XX%. $X.XX organic QX. up versus guidance share, QX prior be to per XX%, represents from midpoint XX% between

XX, Page on to just a So up just wrapping recap few points.

the portfolio record say showing we in which of continue up of certainly performance. active is I'd benefits to financial levels our First, realize our management,

our growth say, secular have fully We've and expect And future. rate are Second, for now continue I'd now. discussed the in end into enhancing that energy trends transition this electrification some we we're only time seeing and these really, and accelerated. digitalization market to trends, growth

about one, to in what So be in investing the we're end talk despite market, favorable other the by driven and markets. have and downturn a cycle, and as potential on the all we'll growth we capitalize super ready our we if on the see focused recovery slowdown some of trends

our certainly company will you showing levels. and time resiliency, all at and are every be for hear sustainability, about our orders which on the sales future. opportunities change up results, we're today you're for foreseeable So backlog, hearing is growth And and our climate record really in this our that capitalizing

chain our our Now guidance more building that, us But and the the to we'll in control, we're they I'll resilience controlling In ability say operations more confidence for it disruptions, our up Q&A. for contribute commitments. and delivering that in for back raise to in year. outlook focusing with these turn importantly, factors short supply working really the Yan, term, through to it we open the can But confidence company. things the I'd long-term on obviously our give

Yan Jin

Thanks, Good. Okay. Craig.

the cooperation. to section For give one that, turn follow Thanks will one guys operator your today, in for question advance it the I to the limit your Q&A you instruction. up. and to question please With

Operator

[Operator of first Bank question America. line Obin the our from Instructions] Andrew come of And will from

Andrew Obin

question wrong, economic for investors, So an yes, right is among downturn a Craig. view see The or we that soon. will

contribution? normal Electrical would from where volume Eaton's is So more pricing perform balance of environment and periods sort margins in of versus revenue was how price incremental the growth of an majority

Craig Arnold

an Andrew. certainly in of an those do, of XX% we event the always that performed we that. to much decremental I And recession, And basis our we've than do Appreciate Electrical the economic in say know we of things don't we how in and well how on And a company the economic I'd And one the better And be general to well. business. largely see terms, first in question, company, our certainly, all, in few a is flex downturn. know incremental XX% typical to decremental perform from downturn think business our we a an in some typically than would basis. performance will different

in point, this reduction Electrical our I will to anticipating recession, mild certainly mentioned, think we at that, think as and business I grow. we're not even continue in business our event typical company growth the our in a a of

never the You that negotiation numbers saw some about, of backlog we those has pipeline numbers, talked our been stronger. order

-- a a of that in think so performs result as that we And of portfolio-related a event as of a even there well if an But downturn. economic secular we revenue. company the of an what made trends the we've growth is impacts playbook. the slowdown of overall lot do result these changes one, need understand our to that event in the We in economic we have

identified event if XX% We a ready end the slowdown. could in is decrementals our material case. we have to But but go I'd up not that projects that of about in scenario, say base certainly think XX% slowdown, you to

Andrew Obin

have you the levels? And have and which orders stimulus how speaks this view we but see end just $XXX maybe be and meaningful on both on then Like energy market? just Eaton's can follow-up, to started why spend bills, infrastructure additional U.S. tied Great. news get billion just more potential security? spending your a energy on initial And you're Manchin sizable could for confident, to broadly, Senator U.S.

Craig Arnold

of that come certainly our Yes. say have I be Manchin at compromise up and certainly the this with other mean I'd the members -- positive would company. the House for point

any mean, for juncture, to of That our a If wastewater, naturally company. dollars it's whether to in. some to factored that in this you going company those I it's our additional tailwind transition, of say obviously we've And an out positive critical water, about for EVs, are I'd the at airports, energy think not it related related certainly is whether overall. infrastructure, where it's go becomes net whether that building

All Electrical I'd stimulus off see are approvals certainly the ultimately signed of do have through positive for go of for revenue, a but President. approved bills most kind to timing as final say 'XX we'll seldom the a 'XX, that and in Very from these that especially outlook, long-term spending But results you these overall benefits. standpoint, on the the it's of need be obviously company very by tailwind our a largely projects. becomes really in any stimulus-related impact growth business all the near-term bill most on where of

Andrew Obin

in already? numbers from of impact it's it what's any starting you to reflect Are the see lot Or robust been passed And numbers? it just already? a

Craig Arnold

out Yes. No, But some the something fourth quarter, don't but Andrew, this this I'd get projects, get most on the margin, you we've material some of at there of to maybe that upon 'XX But have been from. say, minor actually say, lead into all you you until the time. most depending I'd I'd stuff, extend benefit minor, say really company. net of them project the in seen and type really get any the some juncture, impact positive and for stimulus all these of 'XX, positive, measures into from

Operator

Wolfe question Coe next The from Research. is from Nigel

Ryan Cooke

Cooke is for on This Ryan Nigel.

Electrical might improvements quarter? productivity? segment, chain during talk seen the bottlenecks supply more you could just labor or what have So about changed factory the just in you bit Americas Have expanding on a little

Craig Arnold

for across Americas been of the course as chain, during supply the say commodities really been the our electronic and quarter, board. quarter, based. And to we that course still and during I'd with components have the copper, talked some with very strong the of segment. important some chain-related us, really Electrical about issues have Yes. certainly, we've whether to it's And of the semiconductor the had when of better. comes supply year I'd we that's that materially it that steel, respect logistics constrained We aluminum, anything dealing pretty issues say significant in gotten

into of not the certainly improvement some of half issues the do so And of really the themselves. We those latter sometime to to woods part there. going modest we're see out in most second be the likely but expect resolve year, 'XX before of

say in Americas well big end is the business as here I'd very so in business, the the to as is. it markets strong perform across that are the and end And message growth allowing our our our that it's markets that it's board

Ryan Cooke

an And just segment. That's commercial a dig follow-up you few Aerospace little for Okay. aftermarket? just then uptick years. and in versus great. growth at more my know defense you I Could shifting mentioned gears next over the the in OEM that looking the spending military versus on into

supply just and So I that end that thinking back guess of we of on the the touching in should any be year? constraints other

Craig Arnold

all, acquisition the Aerospace our that of Cobham, about between business think with First commercial balanced just of as XX-XX defense. you say I'd we're about and now

the as the about the talked seeing we outbound well commentary, on some side. in side commercial in as aftermarket of a recovery my very of business, strong the OEM in both As we're

And XXXX. so we pre-COVID mentioned, in still, back that as -- well but levels experienced I below

well, come with up We in frankly, of their around higher the spending. in commit we've Europeans being we we budget side, on next what and on of year U.S. still to to years a a was go the over expectation those originally markets or are some long increasing side, expect defense the performing into defense with already markets happening we them but certainly, those that the an few continue to seen, the And really see defense And saw the to way to the world, so in conflicts businesses so. quite anticipated. flat the than are And commercial those recover have slightly. come

the coming few that over we were into equation, So more will the believe markets think we defense on next years side favorably do than that the the the that of even we year. certainly thinking grow defense

I for, spending really geopolitical of is growth these aerospace one the And challenges another that's up the cyclical think in go businesses world, and so side is giving defense of world. let's some around likely say, commercial on to the poised the

in years an I market feeling Aerospace, about we're think to very to and for so be that's way And good some for the going us we're attractive come. positioned

Operator

And our next line Scott of Davis the from question from is Melius Research.

Scott Davis

in each of ask going positive, markets in of have I you It too a are there? your is do and a where have question, sense all end the super -- a inventories key fact, there on of bit at buildup positive. sounds almost if there's little to

Craig Arnold

certainly passenger to some I it positive, all sometimes cases, as in our the things Electrical Inventory I the the a talked well cyclical levels. I appreciate across now. given Scott, the top the heard, defense orders in world around low car in a too then as positive. that the mean even could mentioned quite Yes. right about, aerospace, are would facts And on inventory. thought, that you mean, higher given the levels in I inventory, I question historically geopolitical pinch spending around and recovery market as of frankly, you In mean, level kind we because, strength in and events are suggest you ourselves the feels the of that market, the data our want of vehicle board, factor good business. at

vector an for of the that's certainly, the have of vehicle starting inventories there's event take organization. just markets rebuilding material you world. a channel. around slowdown, in to And economic the that is of to become have even needs in more so in Then eMobility, rebuild company global part you a real to lot the place which And the growth a

like being test And think -- that's in we And say question positive channel? is doesn't a as question. breakers. likely the in the To have concerned going this as all that answer place? like, their for ordering goes project-based. that I our keep we double do as specific up -- to channel are it's We'll a that distributors the mean electrical really much there circuit products have taking out well coming or for. channel, case. around electrical ordering. I question for circuit they'd in lot in comes the for test our have project of organization. an oftentimes business color inventory today So inventory breakers fact, we new not is panel ordering it, about and probably their Is the same, and I'd in -- the double obviously especially what things of every Electrical little we there tied nobody on back out, XX% Electrical mind answer replaces the And in inventory a it's boards there because the all we're we a built there's So time customers at that because right? in products

base obviously, are year. actually numbers can the some forward levels good would a backlog, Americas, XX% the We solid. But right confidence continue I and we a of have in expect at comping and some for up we the that be -- indefinite so the you into an grow quite these to can't next much period as move is markets slowdown. we bigger lot do And you now. effect, mean,

Thomas Okray

up business single was markets, And significantly our markets bit of Yes. well in both just sales if end story. as that little the a more to Electrical significantly. one pinch-me And of orders, you color every in more. to as growing them some I Scott, within end those add look mean

it's strength So across board. really the

Operator

is question from next Pokrzywinski from Stanley. line the Josh The of Morgan

Joshua Pokrzywinski

for foreign willing of of maybe presume the I high you really how on as Electrical maybe the and later pretty next ask here, months? Craig, for those kind Or They're margins. think year. just to year let deflation start ceiling to pedal to maybe metals Where the XX, next wanted we Americas putting differently, this XX or primed kind kind still sort into before of said those impressive would about go health should over are you reinvestment? of the about

Craig Arnold

we and maybe question we second that higher business ever a reinvesting say are at invested. than that we end that's the reinvesting the absolutely I'd No, -- Yes. reinvesting and are first, of in we've take rate

was in invest. materially Our to the and continue R&D quite quarter we'll spending up

And so investments. we not are back way in on any holding

investing those To concerned, we historically, and go what margin margins you the they targets practice deliver high point how face business. can and say one you the on requires business. about secular investing about is in important do Every in that factories the we done We're that growth you become building when energy raise. of trends this clearly outlook transition, and the so And targets looking growth we've about digitalization, I'd to -- and of capitalizing for have these electrification. that initiatives think R&D. As our set long-term then support we've we're and we're in talk really the think new the we next

I for as we absorbing do this whether to it's it once investor raise those in year lot we'll take longer-term mean not Electrical were numbers. consistently I'd point, But about as say look I -- these we we're and we that so the meeting, get targets, of our -- say today would said And at the or that which have plateau every today, we I about a believe if to execution business. XX% that inefficiencies appropriate even in performance you at took business, we our we the a then we'll think deliver Americas think

issues supply facilities. these some manage our As our plants have and in disruptions significant you of fairly created can chain

efficiency. And so we're to not peak operating today anywhere close our

inefficiencies getting disimproving execution, to and margins these room raise through And some supply chain by issues some our working there so out. is of of the

the own So the terms I'd destiny, near controlling say top marketplace. what in independent we're of that happens in of not our

Thomas Okray

addition nuance our R&D., because also look Just lot less truckload doing well. And investing better, I our on one we're supply of distribution, disruption. a if as mean, selling to freight, resources to we're the doing in than -- investment. We're in you at our

a So definitely better. get can lot

Joshua Pokrzywinski

end notice terms that to post the this markets, on kind you step-up that not guys Got that mentioned unusual performance in it. if broad-based of comps the specific the point at or Attributable price comp drove trying pretty then comped played of hard pandemic. kind you in but specific That's role. kind that comp sort big versus growth, that any the have of kind of of helpful. there's if orders market an to tease front, any And of to order out

Craig Arnold

and numbers it's XX% we're No, close but side, big XX% numbers. about, to we'd on price, trust to I'd to that that these that nowhere getting we're talking say the those order love think me,

And economic real markets, in so order segment And the utility growth this really talked many centers, in in cases, really commercial that in activity. people a just growth. It's order about. even order is as in which growth were strong data growth strong is volume order we really about the concerned strong real

Thomas Okray

well. as Residential

Craig Arnold

resi. of very in And very that's in I orders strong quarter Yes. resi, gloom resi all growth and strong But had well. some the at in sales and we mean, resi, turn. despite point even will the forecasted doom as in been

Operator

The is from Walsh John from next question Credit Suisse.

John Walsh

line that build Americas on I wanted of to questioning. Electrical

next gives it. year-over-year margin into XX% then be And you I would anything what of looks cycle. as always a trying because of assume of much deliver going kind Just backlog that shorter in like you a Kind thought around that's maybe means? conceptualize year, backlog just already that up that tailwind to price the I've of what how as really to visibility

Craig Arnold

reflection, the No, in XX% appreciate think, we we strong as I increase backlog, we the mean markets. question. it's clearly, have talked about, is a I

have would place than a we've we're getting that But receive and earlier gotten we're that other taking orders otherwise. today we not that probably The project orders them. getting we thing seen believe we would little probably in that's we the is not evidence historically

So do of that backlog I maybe that function if the that in to in October now you're going this fact get order getting some you're September. believe a order of is

your wanted a would a the it. year, XXXX. certainly news more projects operations they us So it into do if to it's of -- in earlier don't have. these little this point, gives visibility lot terms deliver to we the And coming have certainly we we But good projects Even are gives as and our be of in I orders mean than confidence in about is will us think capacity them lot delivered visibility. a it XXXX. in to

better so impact price the do going the we at the into in to this a don't in material on price, XXXX perhaps visibility the on to have we've margins. had expect point I have ever than And And backlog year. question

very our reflected think today. in much we're with underlying margin margin the I performance is consistent that the in guidance seeing business

very strong second of percent a the You saw in quarter the Americas XX-plus number posted segment. in we

XX.X%, backlog cases, I even of number, margins commodity go out and But one as in would a So this of the implied And certainly to year. of that's part we're underlying many in result price. delivering the to the be today certainly expect seeing that we a the had in assumptions to XX.X% we have of have, that benefit half not -- accretive the seeing versus on margins reprice kind the the not of drag or backlog. things of second

Operator

from from Sachs. question Goldman Joe And Ritchie the next is

Joseph Ritchie

Yes.

out of has versus to expecting from that on are price business, you the what So like first impact to a then, the parsing -- second was think And or of organic you half? year Craig, the volume impact like kind half the about those the growth of kind much comments a maybe see as and little of basis dollar just positive price a either margin price? How quarter cost perspective this the bit. how

Craig Arnold

an cost, a on now we plus mentioned of price terms out my businesses appreciate different have we of in well and And are the our versus really as that question, we've businesses many from think which to terms in about we're makeups I that in order say outlook. it volume, really so number, both And so things tell been say of on results of today Joe, in you our of different we're one not as I do in given said because one commentary. if volume. we are would certainly all-in have price in versus that I I'd as we not will terms versus today, you this company side, in many is a significant separating basis, either that price different before the getting contributions and the and going our I'd asked

our are do today, of we And we business some we have some where mentioned, still work as Vehicle to to up, businesses, the catch in recovering inflation.

For the it's getting we're on on most margin compressing our not part, inflation. as sales. And result, a return

have price not I'd as a expect basically segment So positive our impact be overall -- say on margins. we commodities we versus -- forward, to would and look

Joseph Ritchie

no around sounded follow-on have And demand concern Okay. quick there's it. my lot just a Craig. Like all Clearly, since Helpful. of one's trends good. asked really the question, Europe.

markets some I'm just color Europe? additional what the you're provide seeing so across on just end on specifically And in you maybe margin, your wondering, can

Craig Arnold

of Yes. they're flat. the appreciate continue through both concerned war which our having macro as watching I we're But sales strong Ukraine the continues demand. our that us, our impact orders, well business, dealing QX Having given Europe, perform were quite Vehicle would what for markets question. well hold what essentially to I with. in of And place, that better said Europe is to in do all the quarter the say, issues. watching, in a the that up every mentioned had issues And expect, certainly perhaps than to Vehicle other obviously, can we I in sales outside about our that where I'd same in which as and and the could be say you of potentially good business, all is that, We're in than

in to down. the well. as about markets, data the are far, as the prepared optimistic look hang always the turn strength things in I Europe frankly, We're quite so And to as that continue in forward. orders But going remain are like we mentioned, be there. so event we And we in We're there these well, electrical It's Americas. as strong the markets, commercial and in these in we're Europe just seeing types same seeing strength of centers, markets. in markets end place strength every not in

Operator

is Volkmann Stephen And from the next from Jefferies. question

Stephen Volkmann

industrial well. give markets? and a harsh Just color of couple for Crouse-Hinds end you're on kind questions as just end in me heavy of seeing Can of type hazardous real little us a what the sort market you

Craig Arnold

gas, we below are those and in performing markets Yes. that global still report well. tell And business, is doing we peak talk happening business. would I Crouse-Hinds industrial. you that and the well very and our business I in about oil mean Crouse-Hinds well. And that's where what's we're I mean

whether in today to the business. and both the that so below reality If going more as I'd markets, to place to renewables. are of levels, availability 'XX, of going renewables I but traditional our is, businesses come, what sources, well. for we're energy, would to the that the of see we both investment that in what's sources And from timeframe back or to going the macro those think the with, still see we're of strong see we're broader say, outlook in and in more that we took time those on things industrial of see implications more of growth seeing in energy to 'XX given We're specifically more expect the Crouse-Hinds and and the as investment issues traditional think whether some continue investment think be comes some the are certainly our We're more growth back of about issues for happening you side sides. for to business Europe, reliable that double-digit good dealing those sources

Thomas Okray

is one Yes. our just Crouse board it's the across as that well. broad of businesses another

at If significantly markets, in end you all sales this our up of look quarter.

Stephen Volkmann

or then anything more assume visibility call that's the one locations well. to Anything just of And out data have you there as Super. or on to to centers, size where call time sort of bit lead a relative out? little I data centers

Craig Arnold

than very strong. basis seeing data world we're to No, XX-month growth in data a data look continue take say I'd on to centers our the be everywhere say markets up quarter. strength in order growth specifically, at centers. our And we XX% center no, in some if was other the around that order rolling really a

we it's Electrical on business XX%, current a centers. And going in is so one I think company. these the It's positive basis, it's markets for think be data maybe comes mean, I of -- some to that really the XX% of from our business,

data more very of is And I so center personally it's consume as for to there's be to segment one us grow. continues continues amounts believe And just to of that's that come. And an the time just important autonomous market overall. going computing increasing and it's some these the a to world edge one I as data for markets attractive vehicles, think

Operator

question next Barclays. Our Julian from from Mitchell is

Julian Mitchell

Tom. Maybe just a perhaps for question first

try versus or implies try just of year-on-year bridge versus flow to guidance XX% underlying attributing XX%, just midpoint at flow earnings Maybe of here. and sort half the sort that increase a repeats capital in increase? onetime to Because help Just free any us big earnings you're sort non-repeats that, bridge the -- of free and the second much cash understand cash sort guide. hit to think the the how of working to versus I

Thomas Okray

Thanks Sure. question, Julian. for the

at the slightly this we've really And make step our the conversion as DSO the me an been protecting growth the favorable. choppiness being investment cycle. a Where relates to DPO significant choice made on we've as as back our First of sure intentional well call we The take our favorable. talking was with let for an that supply look on about inventory, and all, prepared our hand. days it to are disruption. in cash was is is that customers

do As the it the first second half versus more the to first the historically, generate in free we than of cash the in half. relates second half year we half, significantly flow

comfortable to going with now. feel and we better, second we right our So the think is guide get half

Julian Mitchell

cash yes, lever of behind biggest very so is flow that kind inventory up? the that the back sort And there'll be of the that a in driving view liquidation -- substantial half, is earnings the

Thomas Okray

don't happening liquidating we to order with that chain. hypothetically working that, balance year. But talk going back I want be to obviously, and Well, potentially, with will half We're flow what's supply about of the some capital in the right now.

Craig Arnold

Yes.

that be now of mentioned that expensive electrical an we're commentary, think of of a I of number because about today, from gear. our in you you some right supply inefficiencies just dealing chain we electrical you I'd enormous one with And switch operations have shipping prevents only a large in imagine, If it, piece very disruption. of takes it inexpensive and piece as Julian, say component, my very as can that could component,

some with. of so that orders these clearly And result at disruptions but about, our some supply putting talked of Tom living the some inventory cases, we've all the increase when also this look been we're in at you of with forward customers consciously chain to to you as demand. is inefficiencies protect deal a backlog, as When in just look

Thomas Okray

Yes.

Craig Arnold

And team be better year. of clearly. the if we -- my disappointed second know the half the much don't we in is And listening I on call in a I would and so job do DOH

Thomas Okray

product. in we've Absolutely. those the Absolutely. our we related to got of one also I so inventory work-in-process mean in come And can a and labor creates for anecdotal just disruption, ship or in components of supply the manufacturing. to the lot we're factories. an terms disruption And the waiting two That

and in on that half can second we're it. yes, of a the do of the improvement lot year, we So there's

Julian Mitchell

then vehicle? follow-up. I Vehicle quick sales color growth to sustained the different The teens versus in that help be or in is turnaround just kind And just think on up are two? big in much if between guided a the something how organically. high Any growth helpful. of those outlook like, sort a understand back year-on-year light you truck, there the segment, That's so half us Maybe of

Craig Arnold

say our Yes. XXX,XXX. prior to market, had the guidance. We we've XXX,XXX to Appreciate our now North closer taken that going think I'd question, actually anticipated America it's truck done units in Julian. in of down. be be the would we've terms actually commercial what roughly outlook truck market We

China. of mean and but in China, we these of China. for first disruptions growth we've of many but taken And So in down as been a supply especially essentially And business much was certainly, really have have a sizable lot our of a I lot that vehicle shut vehicle abate. you to down of we market, difficult the those starting truck very then -- actually know, have return, in the chain light business all, in you piece a is are the QX.

we're in so the will first second better that light see the And half half. than vehicle the performance anticipating much market in

Operator

from question Deutsche Bank. is DeBlase from Nicole The next

Nicole DeBlase

order cycle back electrical versus Can guys seeing the activity. the what have component shorter Just to like just been maybe comment, you respect projects of with Craig, orders? circling to you on large

Craig Arnold

stratifying we're Yes. frankly, team the and end that And Nicole, just a place that in general some negotiations, project are of XX% point on I'd our up quite before But I mentioned, of specifically the restate say seeing get an our Electrical the sizes to on I would obviously at that have making, versus XX% fingertips, don't negotiations order, kind get as various has the even you and QX. data which my broad-based the some say, in around business. of back side. last back at our kind piece we're and versus I project strength to every across to we'll more year you comes board

but data the sets, seeing in strength tough data. large, but seeing see wait have just really we're we're broad-based we'll and business. imagine to that exact so And we'll in to it medium get and projects, the And you what the Electrical small not

Thomas Okray

previous the seeing we're last quarter. those And strong both and negotiations, versus commercial growth in Yes. on and very both industrial, year

Nicole DeBlase

as the up. of about just the follow-up, That's great pipeline this continued guys bolt-ons are a obviously I to How hear. M&A and macro a volatility guess, environment? has maybe feeling market sort picked potential And for you in quick then

Craig Arnold

and we have we as this to are has really still call. that still modest up the right the opportunities teams that respect guidance our said forward, it buyback we the share certainly the despite to as of and some looked at held fact that with year. market that's pipeline prioritize to in looking as at, cases, in a this our Valuations, the retreated. that, reflected No, believe relatively intention M&A year And look we Yes. was

market and earnings and that future always As does time retrenchment internalize a to you the it between before know, what that. little takes sellers rising rates interest

But think announcements it's no with working still we're say for we today, obviously, still I'd be priority a make company. interesting. could key to So opportunities but the certainly that some

Operator

question Brett is Linzey next The from Mizuho. from

Brett Linzey

Just and come wanted specifically to stickiness. to back pricing

better. playing of price any guess, tend fair last it out quarters, assessment solutions the from seen we've that historically around I'm the Just have be And deflationary some several payback, a curious getting in you all price the are a larger to distribution? of environment. you at you just in see how compounding back a that terms that for push investments I industry the hold in would then,

Craig Arnold

Yes.

that ever The like any our this I would thing not environment first that is lifetimes. is in inflationary acknowledge seen we've

to XX% the well. the distributors price, we'll point gives there, as business in market all of a through plays very I And as them be distribution. in an raised, distribution, today, wait through hang price how is tends so our opportunity know, that it to don't to see said revalue And some goes you historically you inventories. it, having as But sticky And to long our distributors thing has as And it know world good continues for what and that, been to have speaking, and our to like because we business. through. go

side. commodity I'd material But a up. up, having of are up, seeing And energy and that in are say generally are logistics bit we little is costs costs business And labor be sticky. that would so what to that, we're on expect very the our price obviously costs costs said the retrenchment

little just of that prices come commodity if factors lot costs we're higher say and would almost are at these seeing so going imagine off probably inflation than even you would other levels aspect keep economy, blush. a probably of bit, I every inflation the first that And to in at a

story fairly historically. think the to we it's it's with way sticky, which So consistent is long behaved say going be I'd short,

Brett Linzey

And appreciate kind No, the then new made. Are selectively business? about capacity? investment selling talked force is Electrical some current you've But talk I capital secular R&D and where could some these utilization about your just that. of capture brick-and-mortar you a to follow-up, additions capacity for and you the plant of of in And investing just and you trends? enhancing

Craig Arnold

question answer is I'd to the say the short absolutely Yes. yes.

to future We years. outlook are, see well as with making our coming, brick-and-mortar fact, the that investments that we for to with in as -- the strong already in have growth deal growth trends order this deal secular we

And investments Electrical principally our so we capital business. point, are having in to to your make

the And and so digital world. up think We'll both that And and them products with as in going the be investing that the some it's these to reflection building technology up and charging I today. confidence continue that markets come out And across which to we're we're of the solutions, those and infrastructure a electrical in, the to of to deal making play selling I markets, that we talked have solutions come are about with the for into to the in U.S. energy of offerings these we're ready to new transition with rest originally make future. expected. investments out we R&D,

cycle investment definitely into probably we an capital and we're in I'd more putting say... the have than so years. And many today in many, business

Brett Linzey

Very encouraging...

Craig Arnold

it’s Vehicle and different. Aerospace In largely

-- in capacity have business, we're peak there really volume need the without below making we investments we Electrical big still We well have in the we're a levels. doubt, investments expansion. But because

Operator

RBC Deane next The Capital question is from from Dray Markets.

Deane Dray

that's companies covered businesses. Just having because directly breaker electrical How but scarcity I circuit badly kind then your guess a about gradual heard related of one core in on the of this and of it's lot on quarter But point impacted improvement and my a you semiconductor is has shortages. interested number in the ground that availability. talking And have was here, breakers? of side from about to expand circuit we all semiconductor you specifically

Craig Arnold

this now we industrial where have home look year. increasing residential as rate, right, are And we that's biggest is of faster They're and absolutely The you're gotten we're been a in the anything on certainly, say, we're we circuit in Deane. takes point or better. the intelligent and challenges the building, have microprocessor a I'd have in that's things that challenged, a world growing -- having what that's and whether this a demand. places up breakers to where commercial protection, No, whether right forward, circuit in at finding

markets We from of earth In that find many high circled have trying component by distributor find. we basically every breaker the stuff cases, that we prices, circuit to crawled available very and electrical way. -- the at can buying

shortages. comes by pretty improved. supply, definitely have component. dramatically, when it to no that it say things so of have we comes out to electronic I has of woods means But shortness and Lead are And would gone have we to out the times an continue anything when

the backlog don't the that it's is of rate at to One why we're reasons that the demand our growing just serve we is growing all have ability that the seeing.

the it's so been. as demand And that's as one on have ever hand, you good

that things. these the probably On -- around you China the to have Europe and exacerbating are industry other in hand, war dealing that we've underinvested. then you of been supply a as And disruptions as other parts an and have that now result well with all chain

we're no better, in say, of out but by that the means I'd getting woods. So short, it's

Yan Jin

guys. Thanks, Okay.

we to call, reached questions. and have appreciate dialing do We of end the the in everybody ask

day. you. available good will I Have and Chip a guys' follow-up always, questions. you to address be As Thank

Operator

and conference Event Thank your AT&T does for that today. Conference. for for conclude you using you, our Thank and participation

may disconnect. now You

Eaton (ETN) 2 Aug 222022 Q2 Earnings call transcript