Eaton to Report Q1 Earnings: How Should Investors Play the Stock?

Eaton Corporation ETN is expected to report an improvement in its top and bottom lines when it reports first-quarter 2025 results on May 2, before market open. (See the Zacks Earnings Calendar to stay ahead of market-making news)

The Zacks Consensus Estimate for ETN’s first-quarter revenues is pegged at $6.27 billion, indicating a 5.4% increase from the year-ago reported figure.

The consensus estimate for earnings is pegged at $2.7 per share. The Zacks Consensus Estimate for ETN’s first-quarter earnings indicates year-over-year growth of 12.5%.

Eaton’s Solid Earnings Surprise History

Eaton’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3%.

What the Zacks Model Unveils

Our proven model predicts a likely earnings beat for Eaton this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is the case here, as you can see below.

Eaton Corporation, PLC Price and EPS Surprise

Eaton Corporation, PLC price-eps-surprise | Eaton Corporation, PLC Quote

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: Eaton has an Earnings ESP of +1.41%.

Zacks Rank: Eaton currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other stocks in the same sector that possess these two factors and are likely to come out with earnings surprise this season are Emerson Electric Co. EMR, Illinois Tool Works Inc. ITW and Lincoln Electric Holdings, Inc. LECO are currently having Earnings ESP of +1.96%, +0.15% and +0.81%, respectively. EMR, ITW and LECO currently have a Zacks Rank of 3.

Factors Likely to Have Driven ETN’s Q1 Earnings Performance

Eaton’s consistent investment in research and development enhances the quality of its existing products and assist in the creation of new offerings for its customers. This continuous innovation helps ETN secure additional orders and expand its market presence, contributing to higher earnings. For the first quarter, ETN anticipates organic revenue growth of 5.5-7.5%.

Electrification, major megatrends, the energy transition, and reindustrialization are driving growth across nearly 75% of ETN’s end markets, likely contributing to its first-quarter earnings performance. Meanwhile, the rapid expansion of artificial intelligence-based data centers is generating strong demand. These new facilities require substantial power and advanced energy management solutions, creating fresh opportunities for Eaton and likely providing an additional boost to its first-quarter earnings.

Eaton’s ability to win orders, courtesy of its wide product offering, is steadily boosting its backlog. The backlog provides a predictable stream of future revenues, and Eaton continues to benefit from its bulging backlog.

Eaton’s capability to address critical power management needs has driven organic growth across most of its segments and is likely supporting its earnings performance. Eaton provides the most extensive range of efficient electric solutions for Commercial & Institutional buildings, which continues to make a steady contribution to the company’s earnings every quarter.

The ongoing repurchase of shares, through free cash flow, is also likely to have had a positive impact on the first-quarter earnings of the company.

Eaton Stock Trading at a Premium

Eaton’s stock is currently overvalued compared to its industry on a forward 12-month P/E multiple basis (P/E F12M), as shown in the chart below. ETN is currently trading at 23.12X compared with its industry average of 20.52X.

Investment Thesis

Eaton continues to benefit from strong demand for its products across multiple segments. The company's commitment to innovation, supported by ongoing research and development initiatives, has been key to consistently upgrading the quality and performance of its offerings.

Effective power management is critical for the success of various projects, and Eaton has established itself as a reliable provider of these essential solutions. Its ability to meet urgent and complex customer needs further reinforces its strong position in the market.

With operations in nearly 160 countries and manufacturing facilities spread worldwide, Eaton enjoys a broad and diverse revenue base. However, this extensive global footprint also exposes the company to unpredictable geopolitical risks, which could potentially result in order cancellations and operational challenges.

Summing Up

Eaton’s growing earnings estimates and expanding backlog are expected to further strengthen the company’s performance. The steady demand and increasing backlog point to a healthy flow of new orders.

The stock remains attractive, supported by rising earnings projections and strong contributions from organic growth initiatives.

Yet, considering Eaton’s premium valuation, it may be prudent for investors to hold their positions in this Zacks Rank #3 stock. New investors should wait for a more favorable entry point in the future.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research