ETN - Earnings call transcript Q1 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Eaton First Quarter 2024 Earnings Call. [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. Please go ahead.

Yan Jin

Good morning. joining Eaton's for Earnings Quarter all Call. you us Fourth for XXXX Thank

are Chairman Officer. Arnold, Olivier me Craig With today our Vice and Leonetti, President and Chief Financial Executive and CEO;

by Our includes it to in who agenda Olivier, performance he highlight company's fourth the remarks over the today will the will Craig, opening turn then quarter.

have questions of end commentary. at done Craig's our calls, past on we the As we'll taking be closing

This and the and posted presentation we'll this includes the today share, are therefore through replay. will per of been website. comments is be today They other and are on like expected will flow the release go on the all the company that have and available I adjusted our of reconciled press webcast related presentation measures. cash statements future our call include earnings adjusted for results in The to our to accessible free A forward-looking appendix. website would remind statements. you non-GAAP

Our range of materially actual wide into uncertainties are that the to and our from projections described due presentation. results our release risks a and forecasted may earnings differ

that, to I over Craig. will With turn it

Craig Arnold

Yan. Thanks, Okay.

we've this I'll start on another we'll highlights noting Page delivered year. quarter that X, off And strong some by and with lead

was our in Our record adjusted up EPS above from range, well year. prior $X.XX for the and our guidance quarter, XX% the quarter

backlogs ratios. be led our raising for Electrical, guidance balance, that in to the that mega our This for and up growth, in growing with orders we're total On Electrical very our Aerospace, for results, ahead should we're orders and segment were came XX% increased come. growth with note margins our basis, orders of Americas XX% market record in both year. of strong year. rolling early the EPS stages for the of quarter our and the to by support on pleased we're with X% and and in On for also and And trends order given strong years book-to-bill QX orders I'd and adjusted the electrical our point of strength XX-month start The growth another up a view to that expectations strong X%. backlog aerospace organic the Global.

last and the we on come. growth few how reflects the think company. impacting framework chart drivers quarters, key quite we for years In for growth trends our shared frankly, to positively business that This today, secular our sixth are about the

businesses see to is continue come. our an We expected are in growth for opportunities of Eaton acceleration to think in most and market-driven to uniquely positioned years

In reindustrialization, the calls, markets. infrastructure of provided spending, last utility on and we X progress summary a data center earnings

excuse and also to and revenue, drivers material for are data, the our a data Aerospace we're when tracking We on center growth have shared me, including expected projects, overview an they the mega our on impact the on -- business. expectations

project moment momentum again Today, mega market update the seeing we'll for construction the in but on you once provide show we'll on projects seeing you billion. we're what a also take that we're $X nonresidential those under an to projects,

data higher a provide lastly, and topic, center we'll outlook because dynamic and on unfolding. growth now it's in a summary Additionally, is expectations you with how growth this updated for we're provide market industrial of we'll positioned market, for our how view such facilities the an the

a but is similar dollars as are of $X are although seeing is mega We that an X of announced the number in a we reminder, North Europe, announced mega value America more, projects. billion a in not XXX Once now this or trend XXXX. have presentation. a January the project of Slide is summarized with the large. project number and And as data, been to the since Turning again, projects

normal vary We've Just by last in does year project. megaprojects, Approximately started but -- type Xx points of surpassed time this projects double over it the have of saw a rate. last trillion the and to now what few note. run we announced XX% $X these

a have around power started, projects rates For to of start large have downstream and And and below semiconductor date. EV center of renewables and historical be percentage the generation, some example, to battery chemical, rates lowest data project projects rates. continue but modest, cancellation XX%

year. the to forecast, $XXX these to start current billion expect over billion $XXX we Using of projects this

projects XXXX, It's number nonresidential represent mega total X starts construction years. the also that next a XX% of expect grow over worth noting in we that to

$X active in won yet electrical started, win not $X.X XX%. projects For on billion another our rate and we've the content. is reached projects of approximately that have Most stage. negotiations negotiation billion of a represented orders remain have here We of

XX% since QX Slide increase is projects largest and X. to a to We through XX% actually to highlight $X market, this This of market XX% CAGR. projected was Turning part of market, over year. U.S. construction the XXXX around billion. The also want of the under market XX% $XXX billion XXXX nonresidential represents and in up be

that so projects rate generation, the primary market. a the set This is The projects again, momentum our million, by billion under approximately starts strength significant projects. than the win well. in $X stimulus and less is mega entire once of grab of in segment wastewater, as while construction lot include XX%. centers. on And here water, And for $XXX strength trends So data renewable, and spending markets seeing manufacturing seeing across mega headlines, up utility, were naturally being this we're same projects we're mega driven power XX%,

to end the Turning market. facilities highlight industrial X, Slide we

and significant markets increase a LNG in driving more At semiconductor lower of to sustainable this terminals. on accounted reported, CapEx impact XX% are having growing particularly total a challenges include plants market are as EV and undergoing large EV revenue Reindustrialization Eaton's nearshoring for investment. cost same market. end approximately in well to industrial this Examples the as These decarbonize pressure time, we've and XXXX. battery As are naturally fabrication, develop operations.

This ability time move at It's provide to time coming saving digitalization a to from uptime, are also them therefore, proactive being and money. software, providing technology operational value and and more to when reactive customers a to allows the energy and managing data intelligence. as service, when

content X% increased price. us, and are For the market both our our project will average we drivers selling per our XXXX. industrial some support and These end facilities that XXXX grow belief by between now, that

part overview products of Slide software of X the provides industrial portfolio. that our sell solutions we an as and

have As broadest in products think portfolio noted, we the we of the market.

discussed page. the and discrete Our solutions in the industries manufacturing are take trends suited well on are prior we both and to process especially advantage sold of

and industrial the increase reducing of data-driven optimize operational lowering by companies safety, help ownership solutions performance enhanced with Our and protecting people predictability cost and complexity. assets. insights They

hardware platform electrical insights our aftermarket to and to provide operational that Brightlayer software, addition services, software service. a In preempt suite commissioning, project full industrial come because management obviously, of including design, equipment. data And and enables we remote monitoring from training, our challenges specifying, customers and the of

XXXX data we've and continued between grow and the and at as to view growth the in edge seen rate see the Last fall, momentum market, provide an market view on data an AI, market highlighted our we Slide certainly computing. XX% earnings X, center this compounded data by rise update QX want XXXX. to big Moving updated expected a in XXXX the you'll We our shared to driven call. We that center of market.

is expected, negotiation is for orders As the AI very the biggest and our data our strong which both from coming pipeline. increase centers in demand reflected in

rate think and than a negotiations data orders the compounded center/IT of We center doubled, now basis our XX-month trailing at and have a our channel more more U.S. we and the last grows the XXXX. on have Here, a growth know, overall between you by accounted And the for market have XXXX increased position market revenue than Xx. XX% year. strong in in data as XX%

to Olivier financials. Now I'll the cover presentation turn the to over

Olivier Leonetti

Craig. Thanks,

I'll XXX profit start represents total stack. segment record record. QX and up and a This grew summary of by profit margins XX.X%. our $X.X expanded basis on points segment QX XX% of billion, posted growth X% of We results. margin organically. quarters posted X to QX and in We XX% sales X-year a a over Operating providing

by a prior on performance up end resulted our million, well record up in $X.XX free QX basis This $XXX and range. of operating year-over-year cash above XX% million, high EPS cash the Adjusted of is increased over prior of yet year. This a of guidance and XX% $XXX year. the XX% flow versus flow

flow year. cash percentage flow both free versus prior year operating are and of As improved a full guidance, cash

Slide we Americas' results. On XX, Electrical very strong summarize

All-time and institutional XX%. new markets stack, strength strength X operating On was basis, management versus record partially of result rolling operating a positive and by offset higher primarily inflection for has raise for records markets. growth impact margins. prior organic volumes, a in at up price margin megatrends. of XXX particular On growth manufacturing XX%, the to continue and as all-time Americas a basis was organic demonstrating bar, effective end generated strong We costs up growth data XX.X% year, quarters. of improved Organic to profit orders benefiting Electrical the industrial, in a efficiency, higher various consecutive center the growth from with sales the which X% cost support points of reflects broad-based initiatives. setting were remained XX-month our X-year end up sales, double-digit

QX end XX-month basis. the growth later XX% market. was major year, backlog robust and was project trends, execution have XXX% Also, XX% in guidance versus and strength X.X book-to-bill XXX% the secular and on prior to year-over-year presentation. results strong pipeline in for particular center tailwinds We us increased a margin up ratio up XXXX. discuss sequentially, had underscore backlog will and resulting from since a negotiations the in we of which in year our rolling that Electrical Americas QX data These increase allowed up

weakness was business. Book-to-bill segment. are flat basis. Regionally, strong. had summarizes Organic up on in partially to results APAC industrial, strength markets. flat XX-month XX.X% X%, continues We end chart on by entirely center in to the well were and year. Global X% data headwinds. as markets. was our our and growth remain FX XX-month Coincidently, EMEA with strength rolling our basis which results in up Electrical a businesses, saw X.X GEIS next we last Global QX institutional as Operating was offset a end to prior margin utility center, Orders offset was the strength year. by The rolling and data commercial for mostly in

electrical Before I'd combined recap our to briefly businesses, like to moving the industrial segments.

growth continued over our X% remains confident in sector X.X. QX, very book-to-bill and strong strongly of ratio On up XX% overall positive, inflected points electrical with quite For our which at XX.X%, posted a orders growth XXX basis year. basis, prior electrical and business. rolling our we XX-month remain positioning strong organic was of our for margins for segment We in margin

XX was up the sales, Operating X.X. up posted XX%, which effective order by basis records. half. Organic price particular volumes remained X% our points X% the in growth XX-month Commercial Aerospace Year-over-year and XX% all patterns operating quarter. a our margin a XX and strength end expect On sequentially. XX% from aftermarket the of increased X%. were at aftermarket respectively. with second increased up across military was higher We segment and and our driven management year-over-year, highlights particularly cost. broad basis, book-to-bill commercial in Aerospace Growth we markets strength Page XX.X% segment. strong, QX operating were and margin normalize of strong OEM OEM for markets, for OEM profit was orders rolling that benefiting and orders On rolling and backlog basis, will was XX-month

down organic segment In X%, Page the Moving Vehicle XX. by revenue Weakness in region on was offset America including of X% a decline, on was quarter, point the a FX. our to North XXX prior partially by total Asia of and efficiencies, above by Pacific. margin driven management effective year improvement XX%, lower Operating in offset by partially at offset manufacturing in in price sales came volume. cost strength points basis favorable

on for business. X% an and were our Page e-mobility Sales we On total up show XX, basis. organic results

significantly growth by driven program organic the Our new market, outperformed ramp-ups.

anticipate remained our forecast. face challenges, to pragmatic and continue have customers we OEM in improvements while throughout Our the we year, execution volume

programs As and full year a discuss that of loss drove result, growth XX% $X we to the million. guidance will operating XX% unchanged. Growth shortly investments of our remains

year our the continue we will we to opportunities of and new technologies, with revenue, electrical over XXXX, to pipeline programs ramp our well above $X.X billion pedigree. continue unique our driven to continue XXXX next mature expected drive expand our by our market. to growth This in quarters. launch than the costs to In programs with We related growth coming new more up won incur of

Moving XX, Aerospace we QX. backlog our to Page updated show through Electrical and

and electrical and to our you total with up As reaching backlog a hyperscale can XX% we secular end within of $XX.X from Aerospace. Versus market. backlog billion have in grown tailwinds see, Electrical center by billion. from to for backlogs acceleration prior backlog $X.X Electrical $XX.X in intake XX% in year, orders benefited trends, order the Aerospace the from billion including stepping continue build data

X.X, X.X our underscores noted in beyond. As earlier, Electrical in backlog for and respectively. and ratios and growth continued our Aerospace book-to-bill XXXX are The confidence

Now I'll Craig updates. to market and end turn it outlook the guidance back for financial

Craig Arnold

Olivier. Thanks,

in not to Turning earnings indicators growth a QX assumptions. expected, shared markets summary our to our call. Page have and show market from of these continue as we of end XX, Overall, most we perform our what changed

the why we commercial our many for in are, is markets however, In are of stronger-than-expected contrast, the numbers end we're is growth growth U.S., and growth in much institutional large expect raising We our seeing the guidance macro backlog data shared. XX% which in year. to markets, Olivier what seeing of revenue in supported center and in economy, and continue this that the by

points to growth operating organic is organic X% to our and Electrical and year Moving to XX% the growth our the be show between is reiterating XXXX the basis growth for remaining in now our expected X% at We're Overall, guidance growth financial segments. guidance guidance. Americas which to raising from to we're of XX% organic we and XX%, XX, the X%, XX increase midpoint. an Page margin

margin by in Americas, XX XX%. seeing demand and range midpoint company's to is Electrical the points of the increasing result guidance we're basis a we're the margins, segment at improved For This outlook strong strong performance. where

margin guidance XX% increase reiterating our midpoint, XXX the outlook basis Here, segments. our a remaining for point to the and increasing and we're at we're

balance the XXXX next On guidance have metric page, we our and for the of QX.

adjusted and EPS year to adjusted $X.XX prior growth increase be a is a initial and our between guidance. expected EPS a represents XXXX, XXXX XX% The For in midpoint $XX.XX share. $XX.XX $XX.XX the over over

are unchanged. The other guidance of our elements

expect $X.XX be to we be range organic a segment $X.XX and QX, margins and EPS between to be adjusted in For XX.X% share. to XX.X%, the X.X%, growth of and between X.X% to

our on and So let as growth again, Electrical continue me business, even better Once just XX. summary close the with data Americas driving the markets to a our driven in expected Page end trends out market. play in by center

strong financial a delivered execution on the also quarter We results back across of strong company. of the

by As by midpoint. XX in result, see growth outlook. and strength growth negotiations, all long-term our to validating especially quarter, all-time our guidance in we a were points medium- pleased which hit raised organic the for adjusted And basis and of the XX by basis at records, the points, our EPS our backlog, orders margins in and our XX% we segment growth

higher level So we margins with higher years growth, of to deliver leave come. the and high quarter Eaton a earnings confidence. growth for consistent will

be. should exactly Our they where expectations are that's and high,

open may that, you up things With have. questions I'll for any

Yan Jin

the instruction. to [Operator I guys give Instructions] that, will to With you the over operator Greg. it turn Thanks,

Operator

first the Instructions] come Ritchie line [Operator The from Sachs. will Joe of Goldman from question

Joseph Ritchie

in what here? activity like either need And of all of now you Craig, playing next incredible how look, given like just there come to are your see whether the as customers, a what you it's maybe the years? you as additional out curious, if $X on pipeline are just you terms talk to projects. you to over couple you that's like all from think with see products hearing constraint mega labor over about are this your happening market customers the to do the that trillion -- I'm like

Craig Arnold

economy one fact lot at, in time and outlook Joe, our in that's continues a frankly, really it's and to of obviously the of No, looking the believe labor we it's we internally appreciate question, do for year we're the a spending industries and the that bottleneck things one the quite that that certain be tempering overall. is

I what say resolve to going really And itself. to this so extent point, it's to think at early too it's

those participating that long-term looking In are at X%. One industry at what actually you will I have a that to is of been I over -- of that been the a growing labor would a reversing rates. general, things at total the trend we're rate particular numbers, participation time well as we're X% tell in, the industry, had really faster construction growing rate. say,

I economy, And of sign. so think, our mean, really some in jobs around I which today playing contractors, electricians, an at term. good be encouraging in rate are, fact, industries think we're faster than the really And a underlying these growing skilled that terms participation for are it's trade long in whether that labor many out ways, to plumbers, a in jobs going seeing. and is shift that the are welders, of I is

to of become that that once like grow our the item one are industry things, one if a We And fully gating of it's again, we But these obviously resolved it's watch. things continue outlook. really constraints the for the don't faster could and I tempers overall. said,

Joseph Ritchie

Got then know I got a bunch -- And questions growth it. helpful. from of I That's maybe guess super you've others.

I'll maybe second. margins to for So turn a

two on maybe a you the try really Can a right to Is the restructuring Global gap business restructuring There's some Electrical businesses trajectory to today? sense just margin wide you're last Americas the program business. elaborate on stellar the putting a those in more margins versus Electrical narrow now little the up between the announced you maybe bit quarter. pretty gap you're plans? that going there So for

Craig Arnold

gap better. the the needs is business I and We do short intend narrow right two between to significantly gap way, anticipate answer to the mean the the I Global is would think which and Yes. narrow absolutely. businesses those

business. all expectations see Americas at retrenchment in no we'd have our that We

say, or that million about program but X/X the as in restructuring heavy a that, launched, concentration you -- the will more we $XXX segment Electrical with million so I less, be of benefits. in will of spending, think And of Global. $XXX

improve So we hard in are working margins business. the to Electrical clearly Global

One There's and in all aware, kind well of lot doing very right of lot North is activity. a opened now. the There's is why market of growth. we're widened reasons of this market, up gap as that the the U.S. a America

We North overall. strong strategic the have -- position market in very America a margin

to just know, that us And a are really markets weaker there. positive there have European Americas And that you markets margins the of as been so we today the allowing to a lot of things anticipated. are than are expand lot in much continue

of macroeconomic You Germany see out Europe, we are market. the parts have some some segments the and lot of data the in position a Europe specifically, coming of weaker a where the of strong of market

If you companies, electrical automation it the some other some MOEM from market. of the you see residential in think segment, data the about peer of the

margins And opportunity so we Global in look easier margins I better, better. getting well. expand to think today, a there's of doubt, get If margins segment. forward, there's half we're our anticipating in of the year those without obviously comps the second as our plenty will But

Operator

next Research. Vertical from Sprague The Jeff is question from

Jeffrey Sprague

Craig, comment strong center curious you about there. data some on driver yet your and like Just revenue haven't been centers, has mega data there. of a started Obviously, for the projects

you other Are semi and related talking that kind really data in did So that kind you the just interesting on investments you quarter slide. data investments, kind comment. curious on last order can when kind And seen conversion elaborate you an haven't didn't of about AI-oriented centers for Just of of provide maybe through? put you coming that? of

question element So could that of address maybe the you also.

Craig Arnold

data talked for and than center long about, And excess that, order center the data XX%. numbers, our But your say much about the growth strong I'd is center think Jeff, markets I that, in we to as talked time. higher growth much think Yes, good much, of a in we been market, data that. I have point, than higher

outstripping seeing this of that the announced, that our our you growth in we're the negotiations, big in the if in underlying very and think strong we're is negotiations And is orders in projects rate outsized lot of projects, where and one of and data we're growth so obviously these growth big in mega centers seeing about seeing business. contributors a

so already we we find up most a up projects as some forward orders, in somewhat expect talk those data And today the to even to are ensuing and are already just up of is we of negotiations going in to were of not continue in revenue trying revenue, We yet showing center which and showing outsized although see is which of color be those growth to and move it mega years, clearly Xx. contributor. terms about where big in

forward. is grow, bigger -- much to the just if we total piece it a the and we to So that as look company market continues market expect of be

Jeffrey Sprague

And then...

Craig Arnold

What was the second question? I didn't...

Jeffrey Sprague

provided those... put to it you showing to order When quarter chart. on that centers differ you timeline. conversion handy negotiation sales of not Yes. that significantly did Actually, last data chart kind from Does the

Craig Arnold

I -- thought embedded correct we data room you. data. the I I data, what -- think were were the centers me wrong, and gave I'm centers around think you gave in aggregate if the in embedded We data team can correct that

Jeffrey Sprague

at Yes, I'm slides... looking

Craig Arnold

kinds I of included were in you some kinds data Different different think overall definitely showing projects. projects, but centers. And of that we of data, embedded the examples

Yan Jin

after call. we up this Yes, can follow

Jeffrey Sprague

just a question, sorry. I'm Yes. second And then

sequentially, to go would the there step that margins, quarter would in revenue is lowest what the Americas on something Usually, cause It's the year. Electrical down cause lowest it Is down value. in or the dollar levels? actually margin of to otherwise margins from quarter right? these Just QX mix

Craig Arnold

front announcements as we've as made commercial you We're a we in We're investments technology. in say, making of around I'd some expansion. end. look capacity forward, know, making investments number

in So this be of we've last and that that in factor terms a of there's margin a year gating a of investing bit that number expansion. certainly made will announcements year programs we're

really expansion to and that in number the see but the revenue that of do more it's investments typically but spending what business. we absolute in QX, out see implied function volume of your it take I the point making the close terms was quarters, we're in I a think expansion, in certainly margin is we'll

Operator

Deane from from is question next the Dray RBC Capital Markets. And

Deane Dray

demand the idea that is you they're is the on electrical backbone Just we're about all want about nervous talking providing. side on to And center in some and that here labor the basic industry circle bottlenecks data to constraints. center of data the back But talk the the here. folks the planning you

we saw an so this agreement And signing your quarter one center Europe operators. these in announcement supply of one to X-year a of data competitors with European

So then for we've they've heard about -- and also transformers years. backlogged being X --

there transformers, for you? looking So are agreements? but opportunities I know of are longer-term supply you're these increasing any in you capacity at

Craig Arnold

Yes. absolutely The is, short yes. answer Deane, it's

bottlenecks those that living environment with today the we our the billion deal seeing given where that $X that are of number we We the specific of that frankly, making reasons we one equipment. that so electrical will address of market in constraints, an us. now operations in even investments the why the announced have of we're right the up. in to can has see we're a in demand company It's we demand go business, manufacturing incremental own numbers the quite And front likely in including

have continues to I to other earlier to grow. equipment, capacity we that your are, that demand multiyear responding in specific customers they place was the So around electrical agreements to our labor. support and with are in constraints data point, around ensure fact, signing centers question But there from to us. need we a

not we in that the industry. the will confident bottleneck we so are be And fully

of say equipment, have We constraints where in to own will that difficult bottlenecks those terms electrical the our will resolve surface. we other

Deane Dray

helpful. you just versus going do from really And centers, for That's these you of distribution? the direct change through just right. are doing ship away All data mix projects, anticipate mega in then any what idea

Craig Arnold

part and to of important strategy, really we have distributor I'd our say will of terms way partnerships an we go-to-market in an market. be of the always distribution that strong go really important is our part formula

in of served served market are that to who some a to do that cases, of where through a projects data dynamics suggest distribution. certain that, is center want be great of that certain market market centers be customers than direct-serve there are, some in there Now tend kinds data fact, there markets more are a In example that certain direct. are

so as piece bit be a a certain of be are to approach a that mix not of market that, think is that direct do our big much it there'll growing, changing And more strategically, a we're of tend mega much segments because served so projects I function as because markets. are it's there being shift,

Operator

from from question Mitchell Julian is Next Barclays.

Julian Mitchell

I wanted just with Maybe start to Global. Electrical

You sort out fairly year topline the started there. of soft a with

acceleration, in help getting organic that's the maybe Just or we sort on lifting do heavy of year. us that particular the confidence of region understand there's mid-single-digit that How for second expect growth low if quickly the of market in to And any sort that say, sales doing the quarter EG? end growth improvement?

Craig Arnold

our we but the largely say, expectations, our with what expected, have, QX, a the growth in appreciate than quite line I we And segment. really, Europe I performed weaker, Yes. that relatively outbound our we in for Global in question, modest second We Julian. in a Electrical frankly, today, China year I largely growth say assumptions I'd growing commentary, mean little we're in for bit in would line. in the Pacific Asia And business as I mentioned, overall. of Asia. nice say my half But easier the I'd as Global. well comps in and had get

is Our doing fine. just GEIS growing, business

we happening European than you I that say of data. today, markets like is been weaker where what's we second half. the comps in spot, our Those much business anticipated. in we're change trajectory the fairly our would the terms some the in business we business some in Electrical set largely But balance the of peer from improvement modest today We're Europe and we're getting the but significant have a The what of function overall, of the really, global overall, about, anticipating saw assumptions conservative a throughout weak what talked of very of internally not continue business anticipating the in as easier year. using it's as

Julian Mitchell

on to just was That's question outlook. And second margin my circle really back the helpful.

of sort total So bps sequentially company yes, sequentially. the your growth second quarter, margin some you've with sales implied XX down got

in that pulling is delta sequentially. Americas all sort going what's Is investments So there that in down of higher QX? margin in the on Electrical that

Craig Arnold

is. say Yes. really that's spending the would margins business. the what other that No, -- suggest incremental that than that off investments else There's that difference and embedded fall nothing in we're making should the in I'd our it's assumptions

execution saw team, incrementals. in our results, by you QX very strong percent As XX-plus the

it executing we're future that of execution investments really the anticipate the so really in for well. continue year, the simply reflection making business that balance of growth. is the And the team We will and that for is a

Operator

Our Tusa next JPMorgan. Steve question is from from

C. Stephen Tusa

Just last you maybe can from Maybe on start-up more what I amount cost headwind. of and just investments. one quantify be like these bit just that on a specific something? guys of the maybe is color a or abrupt headwinds little facilities there little in about mean -- there you mean, you question, an more that these

Craig Arnold

But to you I Yes. an know, start come those we start-up as cost. announcements it capacity wouldn't online. some call year abrupt And expansions. capacity new made around last expansions

commercial opportunities making we've commissioning talked in about. on you the outlook new these turn obviously, new and lines deal better So growth costs with additional all to investments have depreciation, start-up the you associated some with plants. of We're that

I exact And so for we And going the QX. you specifics, tied mean not frankly, in the obviously, supporting we better do an of quite really to to you amount. specifically reality But tell growth. I better. give it's is could outlook we're terms in did the would dollar that

well. executing is team Our extremely

reflective currently do better reflected, So of it than our we but could best today is thinking. what's

C. Stephen Tusa

about bit order some it. being then front, out. delivered Got your peers of orders just on these And little one talked a further the of

the adding capacity. You're

more in an of quarter we a about of the expedited this can are at orders converting than kind further So next Or way think couple maybe bit of of a of deliver years. over a time, couple Should we are that's time you out now the more been a at but relatively albeit of time, still still long we a lead over lead established years? lead consistent last consistent probably kind normal?

Craig Arnold

today, depending progress I in has, over that and overall. fact, last but strong our orders I we've talked you we've And times the in couple backlogs extended would seeing also for not would pushed data, further. the with the seen, surge times have of We QX fact say saw the I in upon grow. to that would line, of in times, we're some the lead a lead markets say orders continue that years, say as many of in that quite orders product in of resurgence terms that lead very also made frankly, out

So have that would times they've not They've say, lead not worse, in materially. gotten I better. gotten materially changed materially general, not

C. Stephen Tusa

Yes.

convert of type booked other So same thing? the at lead the words, should kind X.X time that we've in years in last quarter the orders as of you seen this

Craig Arnold

pattern. are in the to Yes. guys varies I for are they But trying center would. some mean the we in normally -- been part, mean I'd are front placing data orders no some in cases, I maybe get there say significant for upon order out earlier getting depending segment. the some market it which change of than there's and hyperscale most

Operator

from is question from Melius next Scott The Research. Davis

Scott Davis

this by these you -- industry. Schneider contracts? vision I for are past seen agreements forming of long-term sure I that really announcement in believe ago, you're the in like exactly But but not guys something here, concept kind because to this what willing can whatever that's don't you are What Compass a we've doing. been intrigued share haven't in supply the us Kind help few these the is of take-or-pay -- saw understand, type partnerships. months of type of

Craig Arnold

where growing environment in industries today capacity Scott, and better an and much as many you constraints. than and -- for cases, strengthen continues to mean, imagine, get have growth can outlook and, they and where have are you I living historically, in the these we're faster

many that us. different are to what's contract today of with our very and we in support respect customers. in a front customers world have work that's really out with our suppliers we our to to ensuring so and multiyear And we we that's ensure this in demand a capacity that partner with the And driving way change the on basis of

but it's perfectly that to of I a thing in the environment. So capacity structured ensure I a your we're they needed. that protections think won't to needed for And not that do do. that we're or so we putting thing that take contracts that's this necessarily exactly while way making a mean, ensures these in investments are most have they be to in are logical not point, It's that pay, contracts

way that protected. good company the the contracts, very ensure to feel we of So is the the about nature they're structured,

Scott Davis

Wow, that's interesting, and congrats on that.

So to looking this an is I'm for get a not -- exact I'm number. trying sense. just

you SKUs know some But I kind right or are percentage transformers that's that all just guess of -- SKUs? majority when think I If SKUs? sub-XX% could the out but gear, sold of of are know your it's XX%, there? you about now, just switch estimate kind sort number of any the think that we is there of and times transformers see lead you still of curious it's along. XX% if broader to I'm your than about mean

Craig Arnold

generally maybe haven't with have constraints And say portfolio in stuff our stuff, you, split our you long-cycle and about percent. tell much. short-cycle I'd roughly of the to long that and parts today, to short the think the run honest Scott, that cycle cycle the it what long Yes, between an of math, I we terms on we I that capacity think really XX-XX so be is not will easy cycle. way is on

good where where So capacity or out we're close sold proxy maybe a that's to not. at for and actually we're

Operator

is And Bank. from Deutsche from Nicole next DeBlase the question

Nicole DeBlase

this quarter. Americas, obviously, growth organic Just XX% maybe impressive starting really Electrical with

the raised the guidance guys throughout pretty embeds big You decel still but year.

in respect of to -- down? the that conservatism, kind up just can of seeing that year, you Or are is kind to Craig? growth is we causes there So of the rest something that with that chalk step guys that

Craig Arnold

a really the And our Americas in the was they year. I And get really maybe it appreciate as really, with There's little and numbers. the a strong upside that goes could year positive as Nicole. early start in business, challenging. about And one that posted be some if rest well think number. we've for us, you comps early to cases, question, it's would just Electrical to obviously, in I'd it's there more what the say bit year unfolds. point, the we to that I year as given on, thought year seen, let's the say is across from it's Certainly, of less which see once in the contribution a the the this behind in prudent some and fact the business side at price of the But quarter little board how obviously outperformed QX. have most again, volume we things subsequent continue of bit the on our expectation quarters. the

that potential better currently forecasting. business what does is than there the so And certainly the we're

Nicole DeBlase

That's it. question Got very free then fair. cash. similar And on

raise bit the didn't line guidance working trends? despite it in or with capital causes some that the earnings. You just line something year there other and of that for is Is a want offset? item you kind Or the to on early full net higher the going year, see item how

Craig Arnold

just No, year. not I'd say at the largely, early up. to number through year. revisit just it's juncture this the we prudent in just it's And QX, get obviously we thought as the but it's in take really, We'll early it

Operator

from the line question is of of Andrew Obin from Bank And next the America.

Andrew Obin

China How strategy specific everybody on seeing? I a Electrical Electrical different business is is direction. there very And your you performing the guess asking have we is maybe centers, Yes. within data question Global? China, but what a in slightly are JVs. about

how maybe about performing are relative Just the your just to -- expectations. deals talk

two-part question. the So

Craig Arnold

China perform very No, well. to And question, the I continues business I appreciate Andrew. would say our

some way, in to play you look for just QX joint at joint take our this grew do in ventures. XXXX. but in venture cases, as joint minority XX% our single you we your ventures. revenue, joint we And consolidate don't China our know, are a high And how ventures, point, have the fact, we by if these through performance, obviously a grew they strategy market specifically in many the very business. In digits we China specific And

So we're China. in ventures of in the getting a growth great lot joint

a And world. ability portfolio broaden in as partner X strategically, give finding both really Chinese what our Tier local China markets, the tried the know, you compete with to us is then in do Tier we there and and companies to X way around to to who

us are just absolutely and growth And with of gives thrilled the additional how of well playing we're and it JVs our so lot team we executing, capabilities future a is about these think company. as out,

Andrew Obin

Excellent. I just just technical it, more inventories if product electrical but missed Where side? talk know a the I can channel if -- on I we? apologize And about don't you question. are

Craig Arnold

I which well to great I we not backlogs, grow continue backlogs our mean, again, are once and the our would a today by say in X.X well are where balanced inventories as better Electrical, is can Yes. that, of respect in think you I our and in I largely lead with book-to-bill, getting the and think indicator right tell times now. aligned channel. sit inventory to growth

for continue build we that dealer to. can little backlogs balanced for to So today, they're I'm is customers that deliver to think, and or looking given could product But all it's more lead times I shorter distributors well very line long. the the obviously be they're a certainly I would say odd we and our than and in that the conversations the be stuff X looking with going that where today inventories sooner, are currently inventories, and overall,

Operator

from question next Jeff from is of the Hammond KeyBanc. Our line

Jeffrey Hammond

think like today? constraints deck just the capacity the kind data to numbers growth but So versus isn't time you labor differently XX.X% this frame, pushback in technology think -- how slides, on maybe constraints from why just the I XX%. or the center how of think curve, Craig, different XX% you it put of you in was higher? And there had kind should it I of about we the and kind XX that growth the XX.X% to bump of a wondering incorporate

Craig Arnold

happening that before, center been just just generate market data which about The posted see other quite with starting this talked explosive frankly magnitude has to those and center, say to processed those or AI was we've what's have come certainly increasing AI that, And data in we're seen would consume centers what and we've continue seen fundamental and you a numbers, negotiations as trend bit a of since just require power of on now. orders I amounts little we obviously training data. were we independent accelerating. that through top stale, then data and of just orders these more those than traditional world, of AI have

resolved. market, what's constraints change of so or the so the that that between It's any what fact number have and been orders negotiations, the for a that And our that the old in really new much much number. have decided the what particular not constraints the outlook function seeing resolved, power overall we've labor driving been particularly in accelerated that's our really simply in have just the we're we're seeing

Jeffrey Hammond

any helpful. you're laid of the you Can And I expansion, talk you what kind for investment. about just in year? That's get capacity online kind this capacity more this you into baked capacity bucketing this the if just to for XQ, areas is of on Do earlier? starts into out anything phase And the in 'XX? then year? Okay. these guide adds is think Or then

Craig Arnold

of is the the holds I back are, on to that in margin We new facilities as kind of lines up starting in do new expansion little mentioned, see, what of fact, we start terms bringing and the bit but and we a fact where year, the of to come free the some in lot have the QX, deliver a certainly the of start actually in second ability we point to see certainly, capacity to spending beginning that more. half

XXXX into year So it's then really second in and half of earnest. this

Operator

next Buller from Phil from Our question Berenberg. is

Philip Buller

We've on sufficient with as really sure investments. yours kinds flagged to you're investment. actually places. know And like of -- constraints you I wondering $X that's making this guess, to pretty I capture if of capacity return I'm several is in those that that billion I capacity at It get I'm you sounds $X nice talked billion times. growth about much a guess lose,

need CapEx and instead an more do meaning do expansion? bottlenecks for That's you $X can to like question invest today other you these because necessarily perhaps to more of billion not side? to do the opportunity a choosing so Or labor, beyond pricing invest So on you see don't people's bit are one.

Craig Arnold

an billion, I as internally now spending incremental appreciate reevaluating whether The of lot we're question. can and you not number we're enough. doing way, the right of that's $X base. top that's time a the reassessing by the And or imagine, on

here. we forecast that -- growth customers. want be all just see, make the I clarify the make I we to the So with intend But deal place of we the capacity we that to We our getting in to have want don't that. bottleneck that we're sure sure to from don't

constraining we not ourselves So investments. respect are . the to with

business the One do to group lot overall, asset I of we the we electrical good in remind A things about is model do tend what and that and is our business relatively of be the test. light. assembly

a So dollars. we relatively can bring for of of significant not speaking, on lot CapEx amounts relatively capacity

we our we up revisit so do intend in number to do And to especially make the are going center forecasts verticals sure data that fact enough that certain given like the have capacity.

Philip Buller

to competitive this, markets Are by new to a perhaps And are great on players from tries way from seeing as extension adding capacity. normally that you an shares the topic, of or entrants, as play traditional when it, either landscapes someone please? in market any I guess, shift find

Craig Arnold

now. Yes. obviously adding mean The mean, market particularly. good not No. everyone I is is everybody for right capacity. I

these tried of things mega you win that projects, to you providing One doing we of that by numbers some that the for is we're rate sense some from a how give we showed market. expanding that context the in projects fact showed the of you this indicator we of win construction well we rate numbers think for the we're that is non-res an doing very of

our around new market. the material impact really say competitors others and we providers are market. not that in into Chinese from, let's other And entrants, I North the question Chinese the seeing would period America anticipate in terms oftentimes industry don't the many I -- out you I when would sold of dramatic share is places. And the not a -- I'm so shifts we the in time so in of other market, thing in tell especially say, get or equipment electrical any coming And

We have a strong position here.

more complex We have well pick absolutely in outstanding are known the market. project, a Eaton. the likely the they more company like to The channel. the an We're bigger,

positioned for So very well I just think the here. future we're

Operator

from Nigel Research. Wolfe is from Our Coe next question

Nigel Coe

understand are definitions. make just the The I piece I to extraordinary. sure negotiation want numbers just

number negotiation. especially So with in say, think you given data place And into and under or negotiation permitted center of the would then, this power permitting a situation? center about, and you dollar when the negotiation be that be where before you have challenges, a -- a RFP contracts or fully a data project an represents active negotiation would get potential

Craig Arnold

already about is would these certainly, tend The Yes. down where be think request request if yes actually proposal in And we quote. road. answer response yes. RFP, to are a in Negotiation an the be others, you projects again, for once a and permitted data an to centers and negotiation place active for

around some and rate you at to these tend in that we As there's these my of cancellation is actually or we're been a seen data, some cancellations, but be a I commentary especially about is certain seeing there's these always historically, talked projects, projects but did the below to a what of to in of negotiation. outbound cancellations they of that That in absolutely when any going mega the be XX%. level always level look we've rate outbound mention we of -- generally approved before get projects,

Nigel Coe

on Okay. about capacity. And questions I know got XX you've

be your just So just to time on away thinking the add or and are let's opportunities not extend in capacity, about increase Or constraint throw is that's another over but table? another existing another to from greenfield the to there shift existing new line footprints? one. there capacity footprint, Get

Craig Arnold

is, talking assets. additional and do deal existing up you're cases, footprint facility, fact, it's greenfield in it some to line we're because In think with means some I some about. existing product adding shifts, line we have to, in capacity new the do fact, stand mean seeing. which a to cases, us it. that we've I additional adding cases, But upon it depending in in utilizing had a Yes. it plants growth manufacturing In varies some

really of line and to. product which varies a particular it's combination depending upon you're those So business referring of all or

Yan Jin

Okay. Thanks, guys.

to end call. reached of the have the We

team our and joining address any to available always, have for will a follow-up As us, be guys. great questions. Thanks day,

Craig Arnold

All you. right. Thank

Operator

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

disconnect. now may You

Eaton (ETN) 30 Apr 242024 Q1 Earnings call transcript