Eaton Corporation plc Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Demand Strength: Electrical Americas orders up 7% LTM, backlog record; Aerospace orders up 11% LTM, backlog up 15% YOY. Data center orders accelerated 70% vs Q3 2024.
• Acquisition of Boyd: Bolsters data center portfolio, a global liquid cooling leader. Boyd's business expected to generate $1.7B sales next year with 25% adjusted EBITDA margin. Enhances Eaton's ability to offer end-to-end data center solutions from chip to grid.
• Strategy: Focus on lead, invest, execute for growth. Data center market growth and portfolio acquisitions (e.g., Fibrebond, Resilient Power) align with megatrends.

Segment Performance

• Electrical Americas: Organic sales growth of 9%, driven by data center strength (up ~40%). Orders accelerated to 7% on a trailing 12-month basis, backlog grew 20% YOY to $12 billion. Operating margin 30.3%, up 20 basis points.
• Electrical Global: Total growth 10% (organic 8%). Strength in data center, residential, commercial, and machine OEM. Operating margin 19.1%, up 40 basis points. Orders up 2% LTM, backlog up 7% YOY.
• Aerospace: Organic sales growth 13%, operating margin 25.9%, up 150 basis points. Orders up 11% LTM, backlog up 15% YOY.
• Vehicle: Declined 9% organic, eMobility revenue down 19%.

Guidance

• 2025: Reaffirmed organic growth 8.5%-9.5%, margin 24.1%-24.5%.
• Q4: EPS $3.23-$3.43 (18% YOY growth), organic growth 10%-12%.
• Full Year 2025: Adjusted EPS $11.97-$12.17, midpoint 12% growth.
• 2026: End market growth assumptions, expecting 7% market growth, over 70% of portfolio to grow.

Risks

• Actual results may differ from forward-looking statements due to a wide range of risks and uncertainties as described in the earnings release and presentation.

Question and Answer

• Q: About Electrical Americas LTM orders outlook A: Bullish on Q4 orders due to momentum in Q3 and strong October orders, with a growth in negotiations pipeline.
• Q: On Boyd acquisition and data center sales per megawatt A: Eaton's portfolio positions well for DC power shift, Boyd acquisition enhances data center solutions, with Eaton able to offer end-to-end power and cooling solutions.
• Q: On EPS guidance A: Tax rate benefit (15% vs 17.4% last year) and compare benefits contribute to higher Q4 EPS.
• Q: On Boyd history and business A: Boyd has strong data center focus, over 80% revenue from data centers, leading liquid cooling technology with ~500 engineers.
• Q: On EA backlog and 2026 A: EA backlog grew 20% YOY, bullish on Q4 orders, 2026 guidance to be provided in February.
• Q: On Aerospace margins A: On track to 27% margins by 2030, driven by historical wins, volume ramping, and margin improvement levers.
• Q: On Boyd deal synergies A: Boyd's margin is 25%, synergies exist in revenue and cost, but deal is accretive without heavy synergy reliance.
• Q: On CapEx and channel inventories A: CapEx to be higher in 2026, channel inventories normalizing with resi bottoming and other markets (DIT, utilities) recovering.