ETN - Earnings call transcript Q3 2024

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Eaton Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to your host, Yan Jin. Please go ahead.

Yan Jin

Good morning. Thank you all for joining us for Eaton's Third Quarter 2024 Earnings Call. Craig Vice Chairman Officer. President are Olivier CEO; today Executive Leonetti, and me Arnold, and our and With Chief Financial

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

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

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

Craig Arnold

start key quarter. $X.XX We'll X, Jin. from summarize year. all-time XX% another prior adjusted a We record EPS Page an the Thanks, we share, highlights where generated on strong of of and up

impacted we're guidance segment couple the XX.X% our the up our that from and And a did for record year. XX adjusted experience events of of delivered margins points also revenue. in segment raising year. We margins EPS quarter We last extraordinary for and basis

which factories several and taking end place the at of quarter. then publicized our we Hurricane the in why Americas strike aerospace the of the Electrical industry impacted Helene, First,

they these events our not impacting timing. QX, and are will on While for both it's have only revenue demand impact outlook our an of

XX% orders to Americas a increased basis, up XX% be our balance, our with rolling with a Aerospace up well Electrical Electrical to Americas, Electrical performance On and of positioned In for for This another into growing pleased book-to-bill with led orders up XX% momentum of year strong to XXXX. were ratios. strong. On record expect XX%, continue strong Aerospace, and quarter record XX-month by backlogs up fact, X%. carry results markets orders and and for are we're

to Page Turning driving once they're sharing end megatrends growth markets. how are X. in our We overview our again and of

of we commercial to I to a the number a how and intend Today, provide projects growing is homes. mega in markets here and is on institutional quarter, for of Eaton during update to And also in unique think market come. Last quarter. residential an number highlighting our as one growth end an transition outlook infrastructure that accelerated on markets. an to segment, for for markets our new message we provided think will megatrends done announced is number we breadth, and update creating allow in earnings years something rate energy impacted, the calls, key positively both residential provide of at in and end us and recent of the the we'll institutional strong are the forecast opportunities we've growth grow

projects Slide shows in North This of since the with summary America. of a been X in on begin let's presentation. XXXX mega announced So that chart have January that

we at are now asked of XX% levels. below or a started project continuing And the number a of continue of with projects record XX% QX, an with these which now the $X out at As value Through point up QX. as last the starts a value of trillion, XXXX. Many XX% reminder, a well to up stands more. billion and announced and also to we monitor accelerate we're mega have To around Approximately historical announcements modest, cancellations, date, backlog in of QX $X.X been cancellations project have from a $X.X is versus XX% cumulative trillion. expect and XXX you have products questions well. about with year. I'd

have orders is and of quarter. we've that of started, active win Of from over won XXX% $X.X we're on XX%. projects another almost negotiations For up billion rate orders, $X note, billion in our last

attention, at of that a While mega in go Dodge on are the XX% institutional million projects quarter. commercial less projects Momentum also Index, the to than continue and record of lot levels deservedly tracks which $XXX so, are

Taken markets. of long-term end outlook provide together, megatrends the our we on strong a validation they view think our of the and support

of And As be capacity investments capacity cover growth from capacity X, estimate. track assembly in which The our allows sites seeing our with starting can us markets. These add up deploy at outlook well second we the of largest with end our is we're I'd product as ramp a across making increase as of stand production. multiyear investments, demand our previous families and modular our now to $X.X markets. confidence increasing we increasing as importantly, which center investments right be the addition billion, coming in our reflects projects in now capital. Overall, and show expansion update half efficient and data that an 'XX. consider to that 'XX Slide million ahead, number several $XXX we capacity we're electrical are also both we of for flexible on investments most what manufacturing of and most in additional up prepare the used the naturally. And on incremental the the

that and will increase facility manufacturing produces For example, new we fuses. Dominican And Wales, XXX,XXX we the also the Republic square opened that controllers in recently our a Bussman supply of in switchboards. meter facility motor Mexico

that impacting which about Slide are talking commercial the include these secular naturally, and X% we've here construction markets of total residential new electrical Eaton on the also sales highlighting markets, renovation. impacting of message our sales. And X. infrastructure both that X% homes. represent We're for electrical is Next, key Residential industrial our are and trends and markets been that

in months are the in electrical result, grow. The to electric requirements content heating And standards the in in the homes home. energy changing continues interest vehicles, and now electrical solar, storage fundamentally housing growth we bottom, next and markets the new now. point see remains, years. a a markets from should a have codes on last turn continuing what's positive this safety years for drag residential IRA been like electrification of doubt, As support over shortage the upgrades cooking should forward. current power. No content. also of incentives positive to Estimated reached been growing growth a the higher from for as more the higher impact electrical electrical are need tax know, designed need of over the feeling you and XX are last X% this With panel to X CAGR the over they've for at couple the growth feeling drive and And rates

within residential positioned. especially is and the -- Eaton well market, the With

electrified, changes to more on which with as sell become homes electrical address our in a and smarter. bigger become We become As grid, generate consumer they also these show Slide power, we including to slide, sometimes X. everything need their electricity, homes

participate a grid act power costs, of selling into own In need simple their terms, systems which more homeowners optimize the new from equipment. Eaton's electrical flowed reduce reality, their as power in thanks as in programs, the allow resiliency, solar to approach vehicles, home run than including now local to back the their on creates outage. from selecting energy and requires addition Producing the homes want electrical utility, a to energy power, during a power, and the a plants top of can all power which central direction loads by response they improved century, to storage, loads hubs. Today, that a run sophisticated electric energy power homes. electrified of islanding For home. all to has there's managing grid X home to smart more more demand electrical

will a over strategy the announced content and be increase we're electrical only So home-as-a-grid trend -- One have home power, in how home, requiring more Today's be a more collaboration grid-ready good of connected seen solution. time the tremendous in fully now of electrical Xx traditional be to example require into recently and addition integrated implementing our be required for Tesla. opportunity to with as a up a Homes intelligent, that now Eaton. to to can homes are to homes a

smart XX needed As provides they XXX-amp important This load that of without homeowners able call with our million you homes edge installers what panel. Together to intelligent storage your a their turn manage storage, allows will your functionality and energy know, Tesla And technology storage, allow simple the is load and to electrical install. a than only to energy and homeowners provide energy market a capabilities. standard home. X service. Eaton's management of systems the homeowners loads. our than and with more It This replacing loads smart cost and solution in biggest it's solar is management in much better names with into home the the existing breakers integration the in especially lower in load we other first of center would simplify solutions. electrical partners, market at your solar, to

cost. solution our will Xx to Xx we fact, In lower be estimate

Our breakers with forward partnership look available we AbleEdge growing XXXX, and smart to be will our early Tesla. in

I'll take the quarter. financial results over us for to through turn it to Olivier the Now

Olivier Leonetti

records. in We organically. which our we by third posted quarter both providing of and start billion, record Thanks, new once QX again $X.X Craig. I'll up of many total in a X% sales set results, summary

cash was Helene above $X.X $XX and increased performance grew million up strong basis a another high on been XX% Americas. and guidance XX.X%. summarize in flow performance, impacts, prior all-time of segment industry. Slide margin XX to negatively flow of However, for cash expanded the a and XX% strikes points $X.X record year. On labor range. prior these the EPS X.X% Electrical This impacted up guidance $X.XX XX% over about year. by This end above record including and of Adjusted would revenue XX, free very quarter midpoint. Operating year-over-year Without Hurricane profit growth in basis the is flow resulted billion, our we have by organic versus operating of XX% our from aerospace cash quarterly billion,

we the go X South significant Americas Before through members the employ and priority. than want and safety people our our our North in results, Helene communities. Electrical team our employees we facilities and [indiscernible] acknowledge the that in Carolina of is impact to X,XXX top more Hurricane

and providing continued essentials our provide employees, including We have communities, assistance. support financial their to to families and affected

XX growth are pleased double-digit are quarter, facilities our growth Despite up for increased X-year up various and prior XX.X% utility sales megatrends. consecutive rolling up record new strong seeing points markets. the margins. consumer our market sales, growth from demand efficiencies institutional initiatives. On a center is a orders increased for partially and these and are reflecting Electrical report in quarters. and continued to benefiting were support profit Americas growth We XXX of has set basis markets. On and higher XX%, to data margin activity We in had Organic challenges, XX-month running we generated to XX% that from to the where to was XX% back operational the we demonstrating growth center end basis, commercial offset costs increasingly organic operating reaccelerated by that organic from sales strength data in was tailwinds support strength stack, Operating higher XX%. robust. last all year, particular versus

bill data that us results levels allowed up strong in presentation. a project approximately pipeline with data to XXXX XX% on years book the robust increased Also, Dodge estimated year, is X.X guidance example, which months, to rates. now our to out in basis. backlog construction shows later year-to-date based QX data center X X up XX% and are of underscore X extend on backlog negotiation the is project center XXXX from build months. Electrical about starts U.S. XX% For XX-month execution XXXX. With secular book-to-bill surpassing discuss raise major for enhanced year-over-year of through These year-to-date with tailwinds Americas we'll ratio a a rolling our the trends, backlog have

growth increased rolling XXX by XX% revenue X% and down of a EMEA. to center with by mid-single-digit Operating our in primarily prior Backlog FX of and of X% in utility markets. residential quarter expectations our X% estate weakness results in generally on XX.X% growth versus center we a line in book-to-bill basis. with growth organic of for was data segment. the utility margin year, markets eletrica real Next and was XX% over strong. included organic XX-month and and then strength data OEM the Global transaction on XX-month double-digit markets. Regionally, in APAC chart in had We XXXX. Orders rolling basis continues in basis were saw summarizes was offset QX Total prior growth points a organic of partially strength continued with and remain driven strength up year X%. tailwind

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

For defense aftermarket. Operating margin basis a X.X. life And which up points strong quarter rolling positioning far for basis, XX-month highlights and strength growth operating higher strong by strength continued and at growth and the XX.X%, X% our XX% QX book-to-bill up organic and growth year. XX increased mix. driven commercial by are posted pleased wins segment remains basis OEM, and billion QX, backlog record and On increased of in also was basis, margins commercial of We rolling at was a up sector basis prior our electrical year. On ratios points X% our up X%, aftermarket up electrical orders Aerospace We so which sales including in overall sequentially, remains basis, margin our our we all-time sequentially. XX Aerospace and sales XX segment for over XX% growth XX% our On confident commercial and OEM, rolling posted organic remain we X.X. with commercial was strong was year-over-year XX-month were XX.X%, aftermarket this strong by in a orders of with was XX-month segment. defense profit. for driven $X.X at of in for program record and business. Page aftermarket. Year-over-year driven book-to-bill points X% Total

XXX by Moving to margin X% Operating market up light on the in efficiencies. a In total our year, operating weakness quarter, improved point effects. vehicle XX. Vehicle by segment prior above X%, unfavorable driven the XX.X%, X points came was and decline, down Page including at revenue primarily organic driven basis of

consumer from our we made commercial were million, show X%, Sales and our progress $X We for related and organic our results target of in to in XX, to business. loss continue growth weakness demand. midterm margins vehicle XX%. product as OEM $XX launches won incur and which increase of including slower new up have to here And quarter across e-mobility to Operating launch X% pleased costs we programs. was million this sales year have exceeded we passenger mature new are Page portfolio. On QX

show we aerospace XX, backlog updated Page electrical to QX. Moving and through our

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

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

thoughts and Now XXXX. on back I financial initial guidance Craig will updates turn for it to our

Craig Arnold

Olivier. Thanks,

fiscal we've provide on our continue summarize of organic number with margin to we close X% guidance quarter our X%. a to XX, made XXXX to year between to operating adjustments a expect growth forecast less than ago, year. Overall, our and organic we Page the we be best to expect Turning growth how and

and our with markets, aerospace growth low end we our organic to points range in XX% However, the e-mobility -- to labor to basis now to in of X% XXX -- to basis XX.X% Electrical industry range. We're to growth down vehicle XX.X%. be the points raising to XXX XX% given revenue lowering X% XX% strike. outlook. guidance growth to from XX% X% widely We're our lowering vehicle our from the of flat and labor an by expect also by down the to to continuing our the from strikes Americas down the and to from to business We're aerospace X% X% on industry business weakness to due slowdown reported growth

outlook XX basis guidance outlook additional we're well. On the of driven by points, the midpoint the we Aerospace our metrics XXX primarily by Electrical points guidance. and in XXX risk In XXXX Americas e-mobility the Global, our range is total, company's margin the segment XX.X% we're at by and we're For at outlook increasing to our QX. also guidance and where points for positioned deliver respectively. by Page This increasing XX, and XX our basis basis to performance XX%. We're lowering well for margin vehicle is where to XX XX.X% midpoint at margin margin Electrical basis continue the company out year strong by our to to financial increasing our to close points XX, business, margins, and the outlook midpoint

our $XX.XX our the our XX% $XXX midpoint also expected to prior is a for 'XX, raise and $X.XX a year. guide original increase over in represents share, growth $X.XX adjusted and EPS adjusted and $XX.XX be For is between versus EPS guidance the

already. For between range EPS QX, Hurricane the labor industry and and we to growth in be expect X% QX aerospace and revenue $X.XX on organic and impact We XX%, X%, segment it's the share. to embedded XX.X% do and of between a $X.XX guidance in have our strike be to line adjusted expect our margins and an to

market in range. our behind As low end impact to X%, us of our we your end Aerospace, is line expect while provide in the XXXX, is based to and have in impact Hurricane expectations year Page the and they of be I the an don't view we growth EPS. If now initial full growth sites we shift running. XX, on and from year. next impact outlook, still impact from for our range we what's on to have upon The and of an on based upon up while attention our X% at noted, revenues our could ongoing, The aerospace strike organic Hurricane can are expect industry labor reaffirmed the strikes we the all Helene

we growth growth in vehicles, projected attractive electric commercial our double-digit and growth decline. modest nearly across all growth end Commercial of to see aerospace only can you in solid distributed is here, As our market We're IT, the markets. of expecting and anticipate that's utility data centers in markets. vehicle most in other

by book, So of growth favorable. be of than with a that another growth. And positive secular be more to as trends strong year our should is order XX% overall, seeing know, own significant you and our markets supported end growth continue XXXX record backlogs outlook

forecast our company expect provide markets. we The our revenue differentiated February faster in XXXX will do We to grow well in than but deliver growth to end think positioned beyond. we and is

we our XX% While incremental our on more expense $X.XX details and some margins in roughly February, to anticipate items end be interest tax for upon of and XX%. to expect provide last rate to provide XX%. Due and a $X.XX total and cross lower income, between -- want XXXX initial below $X.XX to the chart, high a in pension headwind our below the line we approximately between and grow for we guidance. assumptions Based did we'll the markets

expected Our and be approximately roughly program million to million, between be savings. costs to spending expect multiyear $XX restructuring $X And are capital billion. million we with $XX of $XXX

$X the repurchase billion. and we number continue we're be Lastly, to shares, estimating approximately to

phases planning, we While of the earnings we're still another also expect in year strong of our growth. early

Electrical trends driven industries. as out we're growth by and better let Americas market driving data that multiple reindustrialization in markets across business, again, to XX. on Once the continue end Page center the seeing and our trend expected So in play close our me even

to outstanding across results key a see of strong our company. We also on financial initiatives delivered the execution and continue quarter

EPS to for validating negotiations quarter, and margins the points of result, levels, our basis the we've $X.XX midpoint. And the a orders and which we're in all record As growth segment backlog, long-term our by medium- and at pleased are growth by our see outlook. in XX especially our the our strength in guidance our raised at

with and for have. quarter high when with we open questions level a years improving higher say Eaton come. And So will growth for consistent confidence free may we cash of to I margins that and growth, that, Thank higher the will leave you up flow things you. earnings deliver

Yan Jin

everyone turn the Thanks, it give cooperation. Thanks Craig. you operator to that, [Operator Instructions] to instructions. I'll your guys for With the over

Operator

question first Our of line Instructions] America. Obin the from comes from [Operator Bank Andrew from

Andrew Obin

Yes.

without So data it be question. a wouldn't call Eaton center an

center negotiations So more did maybe us organic in on orders could give perform the and business if detail third on you data growth pipeline how quarter? your

Craig Arnold

perform In the appreciate market in by imagined. even way, and much we Andrew, the quarter reported, up XX%, data the were just center the itself, No, XX% as question than to our widely up from our been sales has center net, data the quarter. better continues prior we

rate the is So accelerating. of growth

rolling up were XX-month orders up are negotiations XX%. on some a Our basis, XX% and

from think to continue in as data so very the And you is we can we've And said, for market. data, momentum to center come. build just going market this as be that years strong tell we to strong

Andrew Obin

a follow-up just question. And Terrific.

You have impact But you quarter much the you why have quarter? do you do Carolinas, that willing past just any the on quantify. impact say sort the fourth that's highlighting. and third you're You of fourth the it's of an in there to quarter highlighted but impact you, the lingering the put in in we're that hurricane, is and did expect how a point presence finer maybe could in I understand that if

Craig Arnold

question of appreciate well, I that we the investors Carolinas. a No. fairly the have sizable footprint know think in as most as Andrew. I And

in that In all our and fact, storm. X,XXX facilities the report that of up facilities to actually path have were multiple back Pleased some we employees the in are running.

accounted and our employees have of for All been safe.

and the certainly actually quite quarter well. And now, a the of behind at and was beginning the the it business sites a so challenge quarter, and performing of this are us of it's bit the end all at while

a it saving This timing. Americas is the stronger, Electrical backlog. put could little well. And for what business. results not they simply in is it's bit of but just been But lost that is strong tell in This the revenue quarter growth off business as have without QX, into the the yes, for I'd went you Americas fourth the really certainly, doubt, So a up hurricane. of

in the As the certainly community team our you the and supporting quarter can did food providing saw It's just just shelter, team, our a growth from timing. of job quarter, I revenue. in And employees just extraordinary for here, orders generators. recognize growth supporting that an and backlog realize the minute will our if our we

team Our just our need to represented we'd both of be the the crisis community. employees rose all and they company way our this of occasion and the proud and in moment for very

Operator

a from We'll Nigel now take call Coe at Wolfe Research.

Nigel Coe

Thanks. Craig, Good thanks the 'XX morning, for And everyone. early indications.

think, Just maybe a Olivier. question, I for

On Obviously, a Americas tend a I to bit here, XQ little from margins, but the XQ. bit tick Electrical think considerate you does be little down

we little seasonally, bit higher. normally, a So see

question Americas a that operating got be that We just the there. But How the Americas. huge do spending. going operating amount leverage and margin forward? XX%, a some seen be above think of leverage going materials we level do sort can investment broader in So question XX% of you construct, about would forward? think we've the Within

Craig Arnold

Thank you Nigel. for your question,

believe as you programs but discussed asked Electrical existing new should question, margin of deliver as a improvement performance you our for reached finally, efficiencies two, and the with in improving business, I well Americas room X for business, both our directly, the we believe volume know, the margin. those we restructuring have operating manufacturing the your not answer the one, in before pleased believe facilities; we America. Also, ongoing, we haven't have leverage but Aerospace we very on are have we Global our our would do maximum potential. We that line of growth; in our Electrical and Nigel. top in business, and question our still mention margin We improvement. We To to opportunities. and levers: both higher program have on

Nigel Coe

Okay. be would 'XX Great. XQ But helpful. on question is Any around comments framework. my the follow-up

to said growth in You market X% end X% 'XX.

outgrow got markets points. end an by X about you've ambition think I to your

the kind that? a than or start higher and frame X% we or to X% do So little the think about year, next of bit maybe

Craig Arnold

And faster we planning very end XXXX. our an it's both our imagine, through And we're will will QX do lay early, provide as more year. and for you have can for in for that working and a you're you expect -- our investor more long-term earnings year. strategic business we markets. And framework obviously, at next that as correct, call an that out wholesome next I question. QX their you and still can a grow to appreciate the grow ambition get you And [indiscernible] absolutely businesses still meeting framework details expectation we'll mid- than will

we're working -- specifically, your question this but of outgrow our exact markets point say to to end So to prepared at plans. not which the should expect magnitude we're we as still through internal

Operator

We will now Sprague Jeffrey take a from Vertical Partners. Research call from

Jeffrey Sprague

going in today some lot A on time.

back more just it and attention if you're buy stock. But So put question of a little is deployment, the with you quite making data on right, I and getting Schneider organic like is wonder bit the continue to capital Craig, liquid there. talk nature verde my the bet a the comfortable more about up looks to side. could sizable what saying on share you're repo, cooling growth center

-- you do I from the an be else to so view periphery might of to -- know on M&A might some But or filled as an partnership you important or standpoint? of anyhow. that have got part this where of of sort maybe need holes offering you're alliance kind speak of You've that kind your just

Craig Arnold

of in hot I as attention is getting one centers I'd to appreciate point, the to as is market our your center space you we business also a increase question, our own a and more Jeff. topics. a say in cooling a numbers lot XX% if just growth, of data growing And data XX% about obviously, broadly us, in have think talked it around quarter, the growth these opportunities about everywhere. We negotiations.

the we adjacency just deliberate post significant other data I'm data us to to and consider way without it that saying at so center required in more to And just cooling not for continue an would opportunities like never we in center something in any market. to grow tremendous and continue in growth but markets have win doing looking not there, is

that And against We're what executing tell front focusing the organic focusing you of on is I growth. well today on opportunities essentially in would so we're us.

in question broader to from is certainly we're for and deal are deployment capital Our is certainly, on. us today. areas. a market key pipeline pipeline And focused But good lots the certainly, different centers general, those coming of that is around the opportunities with data growing opportunities,

Jeffrey Sprague

on switch of this looking other and in just you points then speaking big transformers that side. towards kind oriented you? portfolio of front tight And just the gear? capital of kind that is of are the growth additional of CapEx Is into Or the see pinch deployment, out parts still given CapEx those the of broadening of sort

Craig Arnold

As data to growth and of I to last investment, pound originally centers, $X into number requirements the having make of CapEx asking up needs. frankly, faster multiyear their than commitments increment we markets us up now transformers $X.X lot we've come mentioned the talked to anticipated. And what multiyear fact, commentary, for markets, about call, kinds us these customers provide some even we've their where And to we're taken billion billion. of my just signing seen that these agreements we in quite incremental earnings a in is, of investment going that incremental in and

business much on it's just mean where our overinvesting. us, not this for that risk more case willingness I to in and underlying of of the so side we're today the strength seeing a the our indicative underinvesting, And is is invest.

Operator

next Stanley. Snyder from our a We'll for Chris take question. now Morgan One at moment call

Christopher Snyder

the all I Maybe appreciate the on on if ask could the color outlook. mega projects. And

projects still below said started. see suggest progressing they are XX% to the on related to guys the those is ago? only guess, levels. extended the surprising years or slowly a maybe similarly pretty you of I of that of does that lag these But versus know orders it's the that thought couple -- that projects announcement historical cancellation of trillion we $X.X then between more I think XX% the horizon. And are order around XX% what in and maybe has I have that

Craig Arnold

projects are No, still X% Chris, started, XX% part, Yes. of of into so the the got right, that does have mean terms you most think, out the future. the it the or of for and in projects I

at to historical yes, so big historically. around And lower. point color to relates to pretty these and that's XX% we math. And been provide that and always there's I projects cancellations it's some mean running tried in on XX%, cancellations, a cancellations, how And straightforward roughly mega they're the

digest And really so is look more for as And projects, data, that of dramatically, always us in a the there's question why to in quite continues and ability lower And that see the capacity like of going in the obviously which industry's specifically. on progression question there enough will the bullish grow be is you to you the to and we're growth. projects the frame all continue rates, cancellation XXX% they'd so bigger progression tell positive. in terms up The -- numbers of around really, quarter-over-quarter. I to the terms time projects these labor. the

going You've be centers? Is power. heard enough the debate there data in to

of projects power that in quarter But institutional cycle these the lot the in what EV so of you as an and a process frankly, really seen we've extended in generally projects, they overall. diverse with, pretty battery. What -- projects. longer I were And through might well. is last a lot of and are a mean projects the they're lot projects, It days. early up cutting of commercial last lot in is just the data a center end was pivot quite

broad different nicely going to starts just so projects And of that that and year, and outlook. which into be think are are that, essentially long-term next a announced being up we're turns growth we certainly a base hopeful

Christopher Snyder

transitioning that. market, Eaton's commercial a those companies on get those little their better relationships center. brings talk as with more plans appreciate hyperscalers? that bit I on then capacity CapEx you agreements the data forward big about the maybe just enter clarity to change does to with customers? Could over can into And And you maybe way that

Craig Arnold

Yes.

faster as relationship point, growing obviously with we agreements, customers the right that's to market, with of visibility one -- as very well. our commercial that, the and growing ensure before, marketplace, with about with challenged hyperscalers customers. place that the your on-prem, the nature but markets center and which with projects, hyperscalers bit there in with now we're I is within center hyperscalers, the general commitments We're a and agreements capacity point so result -- to has working around to discussions, more led of hyperscalers. And as data most a capacity the to the more growing are the growing of everybody the around more than around quickly have place commercial colo we taking hyperscale with all, a of data we're forward clearly, to have in today, but mean, capacity. even little and in as first in of And of and a others better their outlook talked So and changed fastest-growing strong all it's relationship our they competing transparent, have our deal growth. their committed dynamic is for the

Operator

from take Steve now Tusa a from We'll call JPMorgan.

C. Stephen Tusa

little going utility the raising on with all customers were mean, budgets. on results a just So bit But these I lot a side, Hubbell's there weak.

below You guys actually are digit year. guiding double next just

talk outlook, I the just you participate of in generation maybe think And how what you is how what seeing about market in in participate, you there? could applications? lastly, us you're this and just utility remind slowing then kind initial

Craig Arnold

Yes.

business continued perform I'd The mean our is to I thing in say that QX, well. first utility

revenues Our and Americas mid-teens utilities in teens increased Global. low Electrical Electrical and

a perform continuing think customers, talked So We our the to I different rate that of around mean, year. But utility actually market different our business different about have about portfolios, you different product obviously, is XX% remain companies, they well, growth grow confident. you have would you at we have expectation a and when quite mix.

growth. to to this in continue support customers CapEx invest Our

expansion where they to very to years we of be would we've market And periods play, while There's pause to and always temporary for so a the sit, hiccups that going utility seen suggest come. be strong capacity. nothing there's digest from at we continue won't as that that where in least market,

ramifications the think in X U.S. unfortunate certainly big of around these about that seeing world, ones you we're the storms If the

spend where to money centers continue you undergrounding increased data a the is takes they backing a continues places power that having go like like are place is market important then underground, So by up of being creating in demand Coast, things on infrastructure utility for And place as really for that's big Obviously, consumption to which -- resiliency the have utility the us. hardening the lot way, also taking for to the put that's capacity. And to into customers. and do West growth up. utilities grid opportunities

these upon to an a read I once and based perhaps difficult it's And while is what are get doing, well. strong on exact again, peers utility so know markets our sometimes but doing business

C. Stephen Tusa

obviously nice next bringing are sequentially just Electrical Do lumpy, Why my capacity? So year-over-year. Is them to here? to things And should actually a basis, Okay. you're In bit from more you at would a here backlog went level then up that third a you up bounce up pick for the is next And of wouldn't XX% a backlog backlog revenue on a able you of see continue stable These It's backlog becoming lastly least where had first quarter, today, it and release a more XX% bit the math. be side. from on and up orders? on much the quarter, year. business? your huge order kind orders like back this of year volume-wise accelerate why sequentially really the like year-over-year, then nicely.

Craig Arnold

And smoothing. But a these of that's orders, we're the reasons tied all, of of the projects, become XX time investors of lot lot projects, with once smooth characterize in of rolling to into lumpiness why the around a you that and in started a a went what orders big the anyway shift these to orders when successful And about now give to that have first to try our size lumpy be but in patterns. to a the investors transparency they've than the seeing dissect a in it's general. of that terms is to creates mean we And been months will projects of I'd then we quarter, business. And lot to question as for fundamental are continue to a of X more to has tried that projects with the just -- message in mega talk that lumpy. where try mega Electrical we period orders reasons that, these we is mega to your again, why these the out on say living I in we these calls historically. haven't X projects. And in exactly been it

say be to me so the not try multiple other as big It's we of world end in what to about I'd And we're that, right? the projects. to say, to orders. We will As these living try you mega views, do try mega these give long orders projects, tell "Hey, continue you just of thing we let lumpy. the is front

give orders. tell you going obviously, We on we give negotiations." about what's revenue Let and me with you our you,

view try going like look to things confidence of all is the underlie in a to forward. that that you our we at on give And look going that the view what composite so we the world

forward. could the acceleration. on around possible it's volume in very long question growth as volume say, I'd we line, the as that see from this comes the capacity point should Now accelerate side, yes,

of that the over relative now, year, lot caveat the versus we've most And from quite a by now business from of would years. the couple the had I of that with Now this historically we've the of price last as even contributions volume changed saying volume. most have significantly growth in coming price volume transitioned

have And forward. price so look you're growth that not had you've as going the same we tailwind in growth to the

Operator

Mitchell We'll call at Julian take from a Barclays. now

Unknown Analyst

coal trending at is base are Julian how the times for constrained [indiscernible] stream? categories lead what many [indiscernible] present UPS, is Mitchell. which How can more much This switchgear, product on the like is in come capacity capacity

Craig Arnold

in said but last part I you of... broke didn't hear. It up, You broke terms which of the up quite

Unknown Analyst

ahead. go sorry, [indiscernible]

Craig Arnold

into really markets where transformers cuts across the business the data like Your in or the first with of in -- phone, is it maybe constrained, specific come serve. I our in going that -- be with around we've of investments those part question Bussman that deal things are lot many in A as -- that I'll we made we some outbound like to commentary, some most then and electrical of are as the and center switchgear your circuit of $X.X constrained. We trouble about me we're of and where with deal that you back electrical having of billion capacity part areas second let we capacity and of breakers different things making end markets this well talk we're the about can but talked the that in incremental fuses. to we my markets connection, how can capacity. investment

growth we ideally. capacity front to look forward strength, And revenue you our across those them those Americas in fact still a continue revenue, making be No where the take investments up businesses proactively Electrical that so not trying this quite are coming question potential are original are Largely negotiations function really business to the where out than it. Having capacity we versus even constraints, we get to so significantly, of board. our be orders, had our and look said both of today forecasted. times if for lead numbers into stronger we guide. at year, we the see what we'd the and have mean where we've a in I in like that,

as don't constraint in And closely the just tell we customers are had you so a we front the a that so with are we of needed working ever and capacity make requirements to that being getting today end for sure I industry. we would as that out up bottleneck

of half or address your that second not. So question, it maybe

Unknown Analyst

thinking Is about it. it very gap that outlook, versus how year guided a again wide Americas next addressed growth that in a And Yes, filled basis X,XXX next you year, there's gap the are global in? 'XX. on 'XX Electrical point

Craig Arnold

of mega last trends us kind that a for too disproportionate Americas for had them. we've early a you various benefit, segments big I'd it's the say over said number that, of to our to having of business guidance think provide talking But about these specific on has couple about Yes, the been you disproportionate XXXX. years, if

the XX% U.S. these basically about on in center amount is that lot today, of but data capacity. in coming everywhere, centers growth the being If put manufacturing and data increasing you of that's place benefiting the U.S. what's reindustrialization being A data talk are into taking think of there's the U.S. We going money disproportionately projects about center

to lot the extent in continue mega that a so what you'll from be And they do so of to disproportionate those year. in and more you next to trends details short we'll comes and bottoming the said through in continue today are, early that, see the we it a fact, But working cycle, these markets. are, we seeing to saying, what growth of coming the business. Having probably a to give be a -- lot way we're a long Americas more of Europe still when color tends

Operator

now We'll Davis take a from Research. Scott Melius at call

Scott Davis

XX% capacity would And generally like high get context. that you out seems the pretty have given about imagine sense you rate. to earlier just I you Craig, wanted number odds winning. guys want I of It constraints a of a threw to, a win where

reading Is less are so right normal? I XX% of all, on maybe but it bidding there's that higher? -- less them. around that going some there color first that? is is does just reflect so any And any and of context, aggressive you're -- the historical Is that that projects Am it to be just kind profitable,

that's or little bad a whether a scenes that it's And hard better behind so is it's know but number, a the bit than be us for number -- historical? -- that the number perhaps is number can to good

Craig Arnold

in don't we've appreciate given team the order. our we to ground to every to tell win that would instructions you on today, Scott. want is I Yes. the see We question, want I And Americas. share any yes, question any be segment business. than the or rate, win rate to would Electrical market order around our specific of win your XX% higher But underlying the the in

higher a that And say see you future. be thing than think win be so have And the and good over are likely alternatives. certainly it's I we solutions why? the can bodes the that project, is you the you going that's would for a going read at And the historically. I you we're other we're project, that then I mean, more and to say, to well rate tell because bigger the chosen to it that our largely, more winning complex

And across of of across the just business so for the But complex different projects I mega that residential. not -- verticals I of mega exception, the of and broad. They mission-critical, of the these the the win think the data, winning. about but with -- frankly rate at about this and X rate quite project, guess market. it historically every talk there the the increases that's not more various are would we And various you the -- that XX% win segments, true our if our say, segments been say looked almost projects the our rate let's context the across more terribly of is my is are

Scott Davis

of But of know adds. adding kind kind thing. And That's versus just a been helpful. lot then capacity there's rooftops new bit Okay. I that of can the a little questions of give about breakdown you of us of lines a sense

capacity a just sense like what of So that looks footprint? . in

Craig Arnold

adding in an -- And And greenfield we lines it cases, cases, where we our some space land on build out you in footprint cases, the have some I of in is, tell brand-new really some a always it's it existing to available where facilities. can both. context it's is capacity. In I facilities. combination in of And it's Yes. would many say fact, -- expanding can

those I so where much limitations. consistent particular can very with And mixture you we of a of requirements that see and have our only we all and tell where it's X

sure I all tell I'm really through of just you I'm that it those And specific can your addressing X if cut not areas. but so question, does

Operator

at call Sachs. Joe Goldman We'll Ritchie a now take from

Joseph Ritchie

morning. guys, Good good Hey morning.

try that's moderated. going Craig, I next curious, a pricing seems you I'm do So it though know what rather to. that XXXX? than year, still said pricing to Would the in framework get you to portfolio across standpoint, double-digit to like that's you're just growth the to pointing like say expect from get even is you portfolio

Craig Arnold

of industry mean, I and in has historically say industry and our our we're think each about short extraordinary but inflation. Yes. period when that historical go answer, price, would that a drove you pattern more this historically, period a last The probably back not is the of gotten back I Joe, getting if year, price the what of over came disruptions happened few years, to chain supply -- during time had you we if you yes. COVID-driven

so then get to recover in had you the of that front and had issue. scarcity And we inflation, can out

we're into we XXXX. go as the market price for rearview so the mirror, assumptions continue you to back number incorporate gave XXXX, think going be And is numbers. market price way, for of those to what well. a do will in get still issues level in by going . And to we price realization business. But in that we to the more market and normal do of embedded the as price the those We is in absolutely,

Joseph Ritchie

comments your around expecting understand XXXX just then the project hit it. negotiation Got Okay. being between starts trying then a That's And linkage to up helpful. new to And I'm XX%. the pipeline high.

you And what the haven't is -- kind think of next that we about about talking Or of ground? starts of that that projects year? bidding pipeline, be As that just kind the started? the are broken will some even on like additives what's include higher does today is already you're of kind or

Craig Arnold

dramatically I'd answer X to projects completion quite we completion. And the and projects the years that X that type the time are vary start from in of said terms -- question projects calls prior really these in say to they an are and of of announcement tough a that because it's what out. that between is standpoint, these

of of some itself. size widely which announcements some announcements today had, 'XX, of period and I a the XX% updated what to is, mean, period going I over at are XXXX. that numbers a longer become start yes, a embedded what could be if upon construction to in it in naturally these a depending And project these fact, -- time, you so seeing in would we're we starts last does answer an not But increase 'XX say, projects. we take think at in the look vary expect in point to simple forecasting become number. is clearly, XXXX that the certainly, in starts beginning point, given our But we it over announced We've XXXX. And lot up will, were of starts, data the let's fact,

Operator

Raymond a take from James. at We'll now Tim call Thein

Timothy Thein

the or aftermarket. And and fairly on that and sectors on data some you're the as between pretty OEM Great. as being I'll of aerospace, actual continues also I you maybe there, it's then you side, about talk on extent terms In the talk power growth whether -- the intensive. just obviously, the like for but the more of the maybe is commercial impact what together, X of implications Craig, in just you've centers, through maybe B navigate sales interest the just, and of I in side the just time, kind switch this to orders of that trends project mix on pipeline strike part X you equipment kind guess, between industrial big the highlighted, seeing electrical

if you changes content how just that thumb kind of just pipeline. the of the think So of of complexion any seeing traditional in project? terms given per electrical about that you're rule And the in

Craig Arnold

that's course these know. we strikes resolved. We're that the are around first, the as think maybe going during actually assumptions -- specifically, made know aerospace going be it we the we the I specifically in question this but rather what we than when why later, don't what sooner we QX. And commentary, happens we happen mentioned have strike to impact. to is -- have to it relates don't point, At hopeful of and to Yes, some the

bigger And the assumption outlook. But If but like impact strikes the under an We'll who baked have outlook. some at disjunction. the but do QX, that's it's could into going so course over our will resolve If we're we've our made on a wrong, feel that's signed. these that revenue at why probably said, an right, impact earnings. on either we to slightly deliver have we're at circumstances, it knows QX of industry earnings our not point

the service, it aircraft existing at In run the impact aircraft, you as get Eaton be doesn't as fleet need they terms is has mix, we'll having operating. mean built the of tends as ultimately additional on not speaking, effect away. happen to in of and a older lag continue And these consumers being for mean aftermarket long a I are to aftermarket that. But extent to means well. components. fly positive additional That on the of and other fleet are new and And some planes is mix harder. for it know, you're very are, to that right point, companies right. There the fleet I and as favorable

data in just to it's to numbers it. how reduce our account simply needed timing once have see wait talk aircraft kind project. And electrical built. project. again, of data These And needed, that the certain pipeline you it others. if disappointing centers, versus kinds intensity if certain X%. taking gives be about certainly XX% I there, so XXXX construction the market, that just look center, to and of aircraft XX% lot, But to projects of for your we let's And electrical industry. To we'll a that of plays accounts range that sense it, electrical intensity of about on in different example, of, X% matter the and you very of and the of projects construction of at out, pushes intensity Yet firmly the for are some market, it take the we these that take it's And are business. nonres believe the will a example, and beyond our projects project the a that demand your Electrical, for we call based gist the issues the only question in nonres into electrical question for a I of of when is does yes, current the place types for get upon mean

the low. center Data quite the is nicely high. intensity the on growing on are is And good electrical stream, very you where being intensity you that so whether projects built have about for about think the electrical a the electrical is us, is other of extreme, the think where kinds is office intensity news if commercial you very utilities today, if high. that X the

our of for the So project continue type be matters outlook to will to favorable our greatly. that And we company. and sit where today mix

Operator

now at Deutsche will We a call Nicole take from DeBlase Bank.

Nicole DeBlase

fitting kind We've short heard a a I things this China? kind worse be time. bit of cycle quarter. And Actually, in. a few Europe mentioned good Craig, could of say afternoon now. seeing, bottoming. bit there in in companies got guess Could hope Thanks you're what me for little X then in you ask I that interest the you just the about guess talk I'll of

expand if recovery seeing can there you of today? maybe So are any evidence you on

Craig Arnold

Yes. question, Nicole. the Appreciate

First, on China.

look very we mean business QX, well. Our saw specifically China at I business in our actually good very has China if we growth. performed

capability our think a was digits I our in of function to had ventures in you context that's China our of specifically done that do business. I of think just gave capacity growth a and have things And China, that close of is China in in of we for us in as double additional industry we the mostly winning. best that, the going robust China we our X that growth pretty in signed forward, a think QX. even the our we team joint lot outlook just business. And know, and in number

and like But to some those business well in to That that would short-cycle our we continues embedded China helps a well. residential at see for So market some more of cycle, moderate as bottom resi stuff, bit. as for continue this as kind forward, lift months, and are own off And we from can summer that strong. To be the outlook means well, business look doing to the outlook our as think positive forward. of short we exposed on along interest we out, is bit point, in rates point call to we to of little industrial China point, which QX the feels and the bottomed perhaps -- around more is helps and outlook where, that we IT, the think in think bumped say and example, our do is Europe the residential it your markets a we for start the to as that's your we we of and that's for today markets, least the to our as specifically, in MOEM look markets and general. distributed grow QX. We started I'd throughout MOEM Europe

Operator

Kaplowitz We'll now call at from Citi. take Andy a

Andrew Kaplowitz

Craig, can to you weakness. ongoing offset color on ability vehicles give market-related TE's more

given strong obviously, XX.X% long stays you that a in cost? Is tractor, of end weak? reflection last growth that the how vehicles, impressive. declining could your variable If was the that vehicle at of positioning versus And market price in margin look market

Craig Arnold

I question. appreciate the

can. some vehicle business We execution operational our in first also our through weren't the business active team we facilities in time to, our very and have the business and better supply as a inefficiencies executing business just the that drive and of where our done we inside know period our And as really went we of sorting own our vehicle worked out portfolio. essentially all, know, chain in hard and factories of run been business other you run we through business. And on better in the in great has our of way challenges managing well job as disruptions improving plant. We've we operational a

not to things business we've talked portfolio of the a of One fix a you'd has a and where it. the Every margins. the business a a has great and expect has to of that a Every head. about is businesses to to we have business X investors we say, growth make it got we be of tail. We have here. It's piece address every competitive don't business, plan advantage piece don't Every manager. our

well. have And we of our control vehicle things active in as in the business the terms managing portfolio in very so been that we

quarter, this our team move fact extremely posted them we I well we a to of that we is executing that would the forward. think to expect margins the well, and execute so continue And reflection as

Andrew Kaplowitz

follow-up us a how is quick electrical I would the think going gap to amount to a that. help for of with assume and efforts, million XXXX. is start think Electrical relation that restructuring about you Or In that your . to just that? in you to Global, close gave And sizable I $XX we Americas? should

Craig Arnold

markets, as I Yes, formula if in think just more other today than have of Europe companies the the the of in are Andy, and we the be without the is in and seeing the getting going generally as the company it's that seen we're Eaton, I peers of doubt, from not margins markets. where piece the businesses restructuring, global is to you've big in China. not you those but is from that level the and big rest that in Europe mean, well. But other growth most in U.S. in just world not and mean thing restructuring, about region do that, of at the the we're is a our regions certainly a challenge that we'll

anything, growth than to need more think we I So return in Europe. a

Our high, of back are a incremental margins on growth. the bit quite little of

with that, that's for of our in is margins have Europe, we the Americas see going that ultimately grow so on is in close the focused most business. and us, the the we business some to that to gap thing And we're that

Operator

Wells Joseph a Fargo. We'll now from O'Dea at take call

Joseph O'Dea

the just think expect timing you the look even faster in more the quickly coming through the of to capacity to of online? capacity it instances, color investments down keep capacity of work Eaton sequentially to again next to by that year, do significant can trying have want you is, online? And some I'll the sure at the up it's to one. that we some I I'm reason billion, coming little question next most online, comes can bottleneck. How that online. which middle $XX.X with But pretty staggered. Craig, Americas degree all a additions on moving year as degree is the bit that backlog electrical at the for when grow the

Craig Arnold

Yes.

help to next years. counting X the I year answer really of your in the let's growth will come part to say, absolutely on in think over question, volume of our capacity and addition most the that next, we're coming X second to capacity

a has commentary. just maybe is would is coming it's address backlog. of Backlog you now maybe But our to my a good the about broader actually we thing. backlog bad past that due down. tell of Some around the And thing. I as talked in question in some Past-due come backlog

expectation. a orders. growing and longer doing much better we're getting against markets we are in ensuring But And getting So have customers' we're we're largely of backlog growing, into that requirements. visibility our visibility job delivering cases, our time we're many on better today because lead our customers'

backlog general, in the a as I so a in today competitive due of general, bottleneck the being tell our us would But would think are problem with industry. I would that And most for growing you times, not for a A say, suggest lead would I backlog about past very in our peers. industry.

Operator

We'll Mizuho. Linzey now from question last Brett at take our

Brett Linzey

margins. I I just on incremental to the appreciate wanted follow on up the thoughts 'XX.

the restructuring that? of and be to savings top XX% the this restructuring this level Or the OpEx there pieces. So the organic, those base on some as want should offsets to relative would we some to on square Just XX% are on then of of investment ramp savings? Think

Craig Arnold

said about that. What we've and said on that given an be but we've restructuring the you to we think all-in No, ought Yes. top about of not you range as XX% really that a incremental historically, putting of to XX% XX%, I incrementals. thinking should

for we And of of working for so where we've restructuring be. you tried come you think have through of in we a and benefits midpoint the But are couple to say account as incrementals forces this obviously against different I'd terms the that in ramp. going to you

new getting we're always adding up one right on volume deal ramps with working leverage, very the the volume hand, also On start-ups. helpful. and we're We're other and that's hand, resources there's the that starting now. obviously, inefficiencies through to commercial But we're with factories factory

of that both was as lot the ramp-ups same what in we or level delivered our what we purposes just this below form we than what of activities. the so out on plans. to this this XX% I'd delivered range. a our XX% for point And there planning in and midpoint would as that I have That's commercial most say, price start-ups incrementals better of of didn't in the take sure. of balance, year, the So used year factory certainly year, for and It's for we've well

Yan Jin

Thanks, guys.

I think I everybody's really appreciate questions.

As as your available of to follow-up always, rest is have team any you the enjoy day. IR questions the guys

Operator

for concludes you participating. This Thank call. today's conference

disconnect. now may You

Eaton (ETN) 31 Oct 242024 Q3 Earnings call transcript