Eaton Corp. said its sales in the third quarter ended Sept. 30 were a record $3.3 billion, up 7 percent above the same period in 2006. Net income rose 4 percent to $258 million.
“Eaton’s diversification strategy is working,” said Eaton Chairman and Chief Executive Officer Alexander Cutler. “Our improved geographic and business balance allowed us to post record earnings per share in the third quarter despite a 55 percent decline in the NAFTA heavy-duty truck market.”
The brightest spots were the electrical and fluid power businesses, which represented almost 70 percent of segment operating profits for the second quarter in a row, Cutler said.
For the fourth quarter, Eaton sees a holding pattern. “Due to the economic uncertainties triggered by the late summer turmoil in global credit markets, we believe that our overall markets in the fourth quarter will not improve as we had earlier anticipated,” Cutler said.
Non-residential electrical, power quality, aerospace, and Brazilian vehicle and agricultural equipment markets remain strong, but “the NAFTA heavy-duty truck market is not rebounding as we had expected,” Cutler said. Also, the greater weakness in U.S. housing starts is hurting Eaton’s residential electrical, hydraulics construction equipment and NAFTA automotive businesses. “In light of the conditions in our end markets, we anticipate that our sales in the fourth quarter will be about the same as in the third quarter.”
Eaton’s Truck segment posted sales of $541 million in the third quarter, down 16 percent compared to 2006. Operating profits were $95 million, down 23 percent from results in 2006. In the third quarter, NAFTA heavy-duty truck production was down 55 percent compared to 2006, while NAFTA medium-duty truck production was down 38 percent, Eaton said.
European truck production also was down, but Brazil was a huge plus: Brazilian vehicle production was up 23 percent, and Brazilian agricultural equipment production was up 65 percent.
“Third quarter production of NAFTA heavy-duty trucks totaled 45,000 units, the same as in the second quarter,” Cutler said. “We expect that production in the fourth quarter will rise only modestly and that, as a result, full-year NAFTA heavy-duty truck production will be about 210,000 units. The lower volumes in the NAFTA heavy-duty truck market are being offset somewhat by strong conditions in the Brazilian vehicle and agricultural equipment markets.
“We are very pleased with the 17.6 percent operating margin posted by our truck business in the quarter,” Cutler said. “The margin reflects the diversity of our products and operating geographies, as well as the success of our reconfigured manufacturing footprint.”