Diversified manufacturer Eaton Corp. (ETN) said Friday its markets have deteriorated more than anticipated a month ago, causing the company to slash its 2009 earnings outlook.

The company sees 2009 operating earnings per share at $4 to $4.60 a share. In January, the company forecast 2009 operating earnings, which excludes special charges, at $4.20 to $5.20 a share.

The company expects 2009 diluted earnings per share at $3.60 to $4.20.

Eaton also lowered its first quarter guidance to a loss of 25 cents to 35 cents from a break-even level previously.

The revisions were prompted by downward revisions in the sales outlooks for the Cleveland-based company's end markets, which include electrical, aerospace and truck and auto manufacturing.

The company now expects sales to decline by 10% to 11% this year from 2008, compared with a decrease of 7% to 8% previously.

During an investor conference in New York, Eaton executives said the steep declines in order volume and spending seen in the fourth quarter have persisted.

"We're going to see a first quarter that is pretty much a mirror image of what went on in the fourth quarter," said James Meil, Eaton's chief economist.

Eaton has initiated several cost-reduction strategies to align its operations with diminished customer demand.

The company has already announced plans to trim its workforce by 8,600 employees, saving Eaton an estimated $165 million.

For those employees still on the job, Sandy Cutler, chairman and chief executive, said wages will be frozen for the year. He said all Eaton employees also will take one-week furloughs during the first quarter to further reduce payroll costs.

The company revised its 2009 sales outlooks for all its end markets, with the biggest declines seen in automotive, down 16% from 2008; and trucking, down 20%. The company also now expects the aerospace sales to slip 1%, from its previous estimate of a 2% increase.

"It is very difficult to call where markets are going," Cutler said.

Eaton's stock was last up 0.09% at $36.30.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com