CA - Eaton: Moving To The Sidelines After Recent Run-Up (Rating Downgrade)
2024-06-13 09:59:58 ET
Summary
- Eaton Corporation plc (ETN) has seen a 53% increase in stock price since my previous article.
- Revenue and margin growth outlook remain robust.
- However, valuation leaves little room for upside.
Investment Thesis
Eaton Corporation plc ( ETN ) is up over 53% since my previous bullish article in October 2023. Looking forward, ETN should continue to deliver good growth in the coming quarters. The company’s revenues should benefit from a strong backlog of $14.7 billion at the end of Q1 2024, which provides good visibility for future revenue growth. Further, the company is experiencing good secular demand trends in key markets like data centers, utilities, and manufacturing. This demand momentum is driven by increasing usage of AI, multiyear tailwinds from the reshoring trend, and government stimulus such as the Inflation Reduction Act and CHIPS and Science Act. Additionally, demand from the aerospace and defence end markets remains strong, supported by increased flight hours and the recent geopolitical instability. Moreover, the company’s good execution in terms of introducing innovative offerings like the Brightlayer software platform should also help drive revenue growth in the medium to long term....
Eaton: Moving To The Sidelines After Recent Run-Up (Rating Downgrade)