Eaton Corporation plc Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Q2 Highlights: Adjusted earnings per share up 8% vs Q2 2024, segment margins at Q2 record, organic growth 8%. Electrical Americas backlog hit new all-time record, Aerospace order and backlog growth, data center orders up ~55% vs Q2 2024.
• Investments: Acquired Ultra PCS (strengthens aerospace/defense), Resilient Power Systems (solid-state transformer tech for data centers). Partnerships with NVIDIA, Siemens Energy, ChargePoint to drive growth in data centers, utilities, and EV charging.
• Financial Performance: Record revenue of $7 billion, adjusted EPS of $2.95 up 8%, Electrical Americas backlog grew 17% YOY, Aerospace book-to-bill 1.1.

Segment Performance

• Electrical Americas: Organic sales growth of 12% driven by data centers (up ~50%) and commercial/institutional. Operating margin was 29.5%, down 40 basis points. Orders accelerated to up 2% on a trailing 12-month basis from down 4%, with backlog growing 17% year-over-year.
• Electrical Global: Total growth of 9% included 7% organic growth and 2 points FX tailwind. Strength in data center and machine OEM. APAC had double-digit organic growth, EMEA mid-single digits. Operating margin was 20.1%, up 110 basis points.
• Aerospace: Organic sales growth of 11%, all end markets strong. Operating margin expanded by 70 basis points to 22.2%. Orders increased 10% on a rolling 12-month basis, book-to-bill remained strong at 1.1, backlog up 16% year-over-year.
• Vehicle: Declined 8% total and organic, driven by North America truck market weakness. Margin was 17%, up from 15.5% in Q1.
• eMobility: Revenue decreased 4% (7% lower organic, partially offset by 3% favorable FX). Operating loss was $10 million.

Guidance

• Raised 2025 organic growth guidance to a range of 8.5% to 9.5% (50 basis points increase). Adjusted EPS guidance midpoint increased. Electrical Americas, Electrical Global, and Aerospace guidance raised; Vehicle and eMobility weaker. Q3 EPS guidance $3.01 to $3.07, organic growth between 8% and 9%, segment margins 24.1% to 24.5%.

Risks

• Uncertainties from macroeconomic factors, including potential impacts on end markets. Tariff impacts on margins in Electrical Americas. Execution risks related to acquisitions and strategic partnerships. Market dynamics affecting Vehicle and eMobility segments.

Question and Answer

• Q: Joe Ritchie from Goldman Sachs asks about orders and backlog in Electrical Americas A: Paulo Ruiz Sternadt responds that there is strong order momentum, a strong negotiation pipeline, and confidence in book-to-bill higher than 1 for the year.
• Q: Andrew Obin from Bank of America asks about market share in Electrical Americas A: Paulo Ruiz Sternadt states that Electrical Americas is gaining market share in North America end markets, with data center performance as a key proof point.
• Q: Christopher Snyder from Morgan Stanley asks about growth in Electrical Americas A: Paulo Ruiz Sternadt and Olivier Leonetti mention that growth is driven by capacity coming online, with projects on track and new capacity contributing to future growth.