DOW JONES NEWSWIRES
Eaton Corp. (ETN) posted a 36% drop in fourth-quarter net income
on slumping margins and falling demand as the manufacturer
predicted first-quarter results well below Wall Street's
expectations.
Chairman and Chief Executive Alexander M. Cutler noted,
"Forecasting earnings in 2009 is particularly complicated in light
of the uncertain global economic environment." Still it projected a
profit of $4.20 to $5.20 a share. Analysts surveyed by Thomson
Reuters projected $4.59.
The manufacturer for the automotive, aerospace and electrical
industries also said it will see first-quarter results hurt by
auto-plant shutdowns. That will help result in breakeven results,
including 15 cents in integration charges. Analysts were looking
for earnings of $1.02 a share.
Eaton and other industrial manufacturers have seen sharp
declines in market demand as customers cut spending amid the
recession. The company has cut 10% of its work force in the past
year, including the 5,200 jobs announced Wednesday and 3,400 last
year. Other manufacturers that have recently cut jobs to reduce
costs include rival Danaher Corp. (DHR), which announced it would
cut 1,700 jobs in December, and 3M Co. (MMM), which cut 2,300
positions.
Meanwhile, Eaton reported fourth-quarter net income of $163
million, or 98 cents a share, down from $256 million, or $1.71 a
share, a year earlier. Excluding acquisition-related charges,
earnings fell to $1.08 from $1.79. That was in line with Eaton's
December forecast, lowered for the second time in three months, of
$1 to $1.10.
Net sales rose 3.3% to $3.49 billion thanks to acquisitions, as
the stronger dollar cut the growth by 6 percentage points. Organic
revenue dropped 4%. Analysts surveyed by Thomson Reuters were
expecting $3.72 billion.
Gross margin fell to 24.7% from 28%.
Under Cutler, Eaton has diversified from the automotive industry
and into supplying electrical and hydraulic systems to the
construction, agribusiness, energy and aerospace sectors. The
breadth of the recession, however, has affected nearly all of its
businesses. Demand fell sharply in November mainly at the auto,
truck and hydraulics operations and has recently begun to weaken at
the electrical and aerospace units.
In the quarter, sales surged 34% in the electrical segment, its
biggest business. Sales at the hydraulics business fell 11%.
In recent premarket trading, shares were down 1.2% at $44.79.
The stock has lost more than half its value since June.
-By Mike Barris, Dow Jones Newswires; 201-938-5658;
mike.barris@dowjones.com
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