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Image source: The Motley Fool. Friday, July 31, 2026 at 11:00 a.m. ET Senior Vice President of Investor Relations - Yan Jin Chief Executive Officer - Paulo Ruiz Executive Vice President and Chief Financial Officer - David Foster Operator: Thank you for standing by, and welcome to Eaton's Second Quarter 2026 Earnings Results Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Yan Jin, Senior Vice President of Investor Relations. Please go ahead. Yan Jin: Good morning. Thank you all for joining us for Eaton's Second Quarter 2026 Earnings Call. With me today are Paulo Ruiz, Chief Executive Officer; and Dave Foster, Executive Vice President and Chief Financial Officer. Our agenda today includes operating remarks by Paulo. Then he will turn it over to Dave, who will highlight the company's performance in the second quarter. As we have done in our past calls, we'll be taking questions at the end of Paulo's closing commentary. The press release and the presentation we'll go through today, including reconciliations to non-GAAP measures, have been posted on our website. And a replay of this webcast will be accessible on our website after the call. Before we begin, I would like to remind our comments today will include forward-looking statements with respect to revenue, earnings and other matters. Our actual results may differ materially from our forecasted projections due to a wide range of risks and uncertainties that are described in our recent SEC filings. With that, I will turn it over to Paulo. Paulo Sternadt: Thanks, Yan, and thanks, everyone, for joining us. Starting on Page 3, I'm happy to share the strong second quarter results driven by improved execution. Adjusted EPS of $3.15 exceeded guidance by $0.10 at the midpoint, reflecting strong operating performance by our teams. We posted record revenue of $8.5 billion with 21% total revenue growth, 14% organic growth and 23.1% margins, all better than the high end of our guidance. Americas continues to execute well through its capacity ramp, delivering 18% organic growth and 190 basis points of margin expansion over prior quarter, all stronger than expected and very encouraging. We also continue to see unprecedented demand. Our total company book-to-bill remains strong at 1.2, with Americas book-to-bill expanding to 1.3 and Aerospace to 1.2. While demand is broad-based across end markets, you can see here, the data center orders and revenue remain robust. Overall, accelerating orders and growing backlogs are clear proof points that our customer-focused end-to-end solutions are winning in the market. This strong first half of the year give us confidence to raise our guidance again: organic growth by 200 basis points to a midpoint of 12% and our adjusted EPS midpoint by $0.22 to $13.50 for the year. Dave and I will dive further into Q2 and the 2026 outlook. But first, let's move to Slide 4. Okay. A year ago, we began our journey to show what a new focused Eaton could deliver through our bold strategy to lead, invest and execute for growth. The progress is real and is gathering pace, and I have strong confidence in where we are going. We are leading with a stronger team and a sharper enterprise mindset. We're investing with discipline in the portfolio and capabilities that will define our future. And we are executing for growth through operational discipline across every part of this company. Today, we will provide an update on our strong progress and share how our focus on culture is helping us grow faster, serve our customers better and win for investors for years to come. Moving to Slide 5. Enabling this unprecedented demand is our ability to execute, which rests on the work we are doing to evolve and strengthen our culture. Leading for growth through an evolved way of working is how we deliver results at scale. Together, the combination of our growth strategy, market dynamics and culture is how we will win. Thinking big, we are transforming a leadership position we have in gray space for data centers into an unparalleled portfolio from grid to chip and leading the conversion to direct current applications. Through thinking big, we've positioned Eaton's portfolio ahead of secular demand, focusing on serving high-margin and high-growth end markets. By acting boldly, we've prioritized what matters and led decisively, making the bold calls to acquire companies like Fibrebond, Resilient Power, Ultra PCS and Boyd that are delivering higher growth and accretive margins to their respective segments. And we made the necessary hard calls like separating our Mobility business to align our capital to the highest-return, highest-growth opportunities. We also continue to invest organically with conviction, making Eaton a stronger partner to our customers. We win together. As One Eaton, we are pushing decision-making and leadership closer to where the action is to the customer, the engineering and sales teams, the plants and service teams. And we are scaling our advantage by fostering a culture of humility, courage and learning, putting problems and opportunities on the table fast and solving for them as one unified team. This is not just about our executive leadership. It is about empowering 100,000 people to win together. We are transforming Eaton to win by being leaner, more agile, more customer-centric, more competitive and more innovative. We see this culture internally every day, and you see this culture reflected in our numbers. Moving to Slide 6. We are already seeing how this mindset and discipline translates into real results. We've said before that 2026 is Eaton's year of execution, and we are making solid progress in Electrical Americas. Scaling capacity to turn demand into revenue remains the clear priority in the business. As you know, we are investing more than $1 billion in capacity expansion and bringing online 2 dozen projects across Electrical Americas. As these facilities ramp, we see clear momentum in revenues per day. We are delivering roughly 25% growth in revenue per day since the start of 2025, up 16% in the year and another impressive 8% in Q2 over Q1. Q1 to Q2 represented the largest quarterly ramp in production output in our financial model, and we overdeliver on it. It is behind us. We remain laser-focused for the second half of the year. Demonstrating such strong execution milestone give us even more confidence as we step up in the second half. Importantly, we are realizing margin improvements from our execute for growth strategy in Americas. Margins improved 190 basis points quarter-over-quarter and will improve further in the second half of the year. Meanwhile, even after 18% organic growth, backlog continues to expand due to strong demand and winning projects at record pace. Altogether, higher shipments, improving margins and backlog driving extended visibility demonstrate our execute for growth strategy is working and give us confidence in the second half and beyond. I want to thank our Electrical Americas and all the supporting teams for the tremendous work they are doing. And now I'll hand over to Dave, who will cover our financials. David Foster: Thanks, Paulo. I'll start by providing a brief summary of our strong Q2 results on Page 7. Total revenue grew by 21% with a strong contribution of 7 points from acquisitions. Each acquisition is at or above our expectations for growth and margins. Organic growth for the quarter was 14%, driven by the strength in Electrical Americas and Electrical Global. Excluding Mobility, our organic growth would have been 16%. Adjusted EPS of $3.15 exceeded our original expectations and was a Q2 record. Adjusted EPS for the first half of $5.96 was also a first half record. We generated a strong $0.25 segment profit beat versus our guidance that was partially offset by $0.15 from a higher tax rate. We also posted Q2 record cash flow with operating cash flow up 23% over prior year. Now let's move to the segment details. On Slide 8, we highlight our Electrical Americas segment. Organic sales growth accelerated to 18%, driven primarily by strength in data centers, up about 65%, along with strong growth in machine OEM and commercial and institutional. We are pleased with our better-than-expected margins of 27.5%, 190 basis points higher than Q1, again, a reflection of our execute for growth strategy starting to work. From a year-over-year perspective, the majority of the margin decline was driven by temporary negative price/cost. With the pricing actions taken in Q2 and early Q3, we are confident this will return to a roughly neutral impact in the second half. Meanwhile, demand is accelerating. Our negotiations pipeline was up 60% year-to-date over prior year, translating to record orders up 41% on a rolling 12-month basis and a book-to-bill increasing to 1.3. This is solid progress and gives us even more confidence to execute on our commitments for 2026. Now I will summarize the strong results for our Electrical Global segment. Total growth of 44% included organic growth of 18% from strength in data center, utility and machine OEM, along with 25% attributed to the Boyd acquisition. We are very pleased with Boyd's performance and the strong growth ahead of us in the liquid cooling market. Operating margin of 19.8% was down 30 basis points over prior year, but about 1 point higher than we had expected for the quarter. We have also pulled in our planned general price increase from Q4 to Q3, which gives us even more confidence in our full year guidance. As you can see on the chart, demand in global increased, driven by our accelerating order growth, up 33% on a rolling 12-month basis with broad end market momentum and exceptional strength in data center demand. This reinforces a powerful growth trajectory ahead in this segment. Before moving to our industrial businesses, I'd like to briefly recap the combined Electrical segment's performance. For Q2, we posted organic growth of 18% and total growth of 27%, a great second quarter. Segment margins were 24.5%, 110 basis points higher than Q1. On a rolling 12-month basis, orders accelerated up 38%, and our book-to-bill ratio for our Electrical sector was 1.2. Our backlog for our total electrical business increased 43% over prior year. Page 10 highlights our Aerospace segment's performance for the quarter. Organic sales growth of 7% remained at a high level and resulted in record quarterly sales and Q2 record segment profit with particular strength in commercial OEM, along with strength in commercial aftermarket. The Ultra PCS acquisition is performing to our expectations. It added 6 points of growth and is accretive to Aerospace margins. Total Aerospace operating margin expanded by 60 basis points to 22.8%. Demand remains strong in Aerospace with robust orders driving backlog expansion and book-to-bill increasing to 1.2. While we make progress in our Electrical businesses, Aerospace continues to see strong demand now and into the foreseeable future, resulting in higher sales growth with attractive margins. Moving to our Mobility segment on Page 11. In the quarter, the business declined by 2% organically, which was fully offset by positive foreign exchange impact. Excluding the impact of the intentional exit of the low-margin business that I mentioned in our prior earnings call, organic growth would have been slightly positive. Meanwhile, margins increased 90 basis points year-over-year. Now I will turn it back to Paulo to discuss our updated guidance and close out the presentation. Paulo Sternadt: Thanks, Dave. Page 12 includes our end market growth assumptions. We've raised our expectation for the MOEM market to solid growth on the chart. I shared last quarter the demand in the data center and distributed IT market continues to grow even faster than we estimated in our initial guidance. And today, it's even stronger than we expected 3 months ago. Total U.S. data center backlog has grown to 307 gigawatts or 15 years of backlog at 2025 build rates, up from 12 years in our last update. Only roughly 20% of this backlog converts near term. The majority will translate to 2028 and beyond deliveries, a very nice tailwind for Eaton for years to come. We also continue to expect durable strength in many of the remaining electrical markets and in aerospace. All in, we estimate our total addressable market will grow about 10% this year. These many paths for sustainable growth give us confidence to deliver continued differentiated growth in 2026 and beyond. Now moving to Page 13, we summarize our updated 2026 organic growth and margin guidance. Following another strong quarter, we now expect total organic growth to be between 11% and 13%, up 200 basis points at the midpoint from the prior 9% to 11% range. This increase is driven by strength in Electrical Americas, up 200 basis points to a midpoint of 15% growth, and Electrical Global, up 450 basis points to a midpoint of 12% growth. Our margin progress is encouraging and provides the confidence to reaffirm our segment margin guidance ranges. On the next page, we have the balance of our guidance for 2026 and Q3. For 2026, we are raising our adjusted EPS guide. Now we expect full year EPS to be between $13.40 and $13.60, $13.50 at the midpoint. We are reaffirming our cash flow expectations for the year. We have also provided guidance for Q3 on this page. As a reminder, we also provide supplemental guidance, which includes raising Boyd's full year revenues to $1.8 billion of which $1.5 billion will be in Eaton's books for the year. Continued strength across end markets, combined with our record backlog, provides strong visibility into our outlook for the year. With the industry's best positioned portfolio, strong end market demand and significant secular tailwinds, we are confidently entering the back half of 2026 and very well positioned to extend our momentum into 2027. To wrap up on Page 15, these results reinforce what we've been saying for some time. First, our lead, invest and execute for growth strategy is working and is gathering pace. We are transforming our portfolio and evolving our culture. We are positioning the company to capture strong demand to accelerate growth and beat our own short- and long-term commitments so we can deliver meaningful value creation for our shareholders. Second, execution continues to be a difference maker. Our teams are doing a great job increasing capacity, serving customers and turning demand into shipments and earnings. We are making real progress, and there's still plenty of runway ahead of us, all while we continue to innovate, scale acquisitions and reshape the portfolio to achieve higher growth with higher margins for better earnings consistency. Third, we continue to see very strong customer demand. Orders, backlog and our project pipeline all give us confidence that the opportunities in front of us remain significant, and we are winning because customers value our technology, our solutions and our ability to deliver. And finally, when you put it all together, strong demand, improving execution, higher shipments and growing earnings, we feel confident in both the near-term outlook and the long-term commitments we've laid out. That's reflected in the guidance increase we are announcing today and our confidence in delivering on our 2026 and 2030 commitments. We are remaining focused, staying close to customers, innovating with speed, leading and investing in growth and executing with high discipline. I believe the best is still ahead of us. Now we will open the floor to your questions. Yan Jin: Thanks, Paulo. Moving to the Q&A. [Operator Instructions] With that, I will turn it over to the operator for instructions. Operator: [Operator Instructions] Our first question comes from the line of Deane Dray from RBC. Deane Dray: We're seeing continued strong growth in data center. I mean, really, that's what we were expecting. That's really good execution on the team. But I'd like to put the spotlight, if I could, on your other nondata center electrical businesses, the end markets there. Can you take us through the growth that you're seeing and what that means for the second half? Paulo Sternadt: Sure, Deane. I'll answer your question, but let me make a couple of comments first. Thanks for the question, by the way. But I want to make a comment on you for a moment to recognize your strong career. So after 30 years and plus in the industry, 12 years at RBC, you're stepping into a very well-deserved retirement. And we couldn't let this call pass without recognizing that. So our huge congrats from this team on behalf of the complete Eaton team, truly a remarkable career. And I hope you turn this next chapter into something fun with your family, well-deserved rest. And please note that we are very grateful for all the candor, your tough questions, your right questions over the years and also your support. So thank you very much. It was a pleasure working with you. You cannot see, but the team here is all nodding. So thank you, Deane, and congratulations once again. Now to your question, we expect a lot of questions on data center. So thanks for asking us a question which allow us to talk about the other parts of the portfolio. So I'm going to just make a comment on data centers because it's important. What we have ahead of us in terms of demand is still very incredible. It's an enormous growth opportunity. Just think about this 300 gigawatts of announcements versus the 50 gigawatts that was built over decades that's going to be online by the end of this year, 6x what this industry built ever is going to be built in the next years to come. So it's an incredible opportunity. I don't want this to go unnoticed. But the beauty of our strategy and, frankly, about our portfolio, is that we are anchored in deep secular trends that are even broader than data centers, right? So we have other meaningful growth opportunities beyond data centers. Your question was around Electrical. I'm going to answer around Electrical, but we also have a strong Aerospace business. As you look beyond data centers in Electrical, you'll see that we realized strong growth across most of Electrical end markets in the quarter, including double-digit organic revenue in commercial and institutional, which is still a very important market for us. Machine OEM recovering really strongly, also double digits, and also distributed IT recovering really nicely, also double digits. So that was revenues. In terms of orders, it's even more encouraging. Orders are accelerating broadly again, with growth in all of our end markets. I'm going to give you some highlights here. Our total Electrical orders increased mid- to high teens for commercial, institutional, utility, industrial and even residential, which is a market that is not as strong as you guys know. And the machine OEM market rebounded even faster with orders in the mid-30s. So very strong, all 12-trailing months conclusion. So I just want to say to this team and everyone and our investors that we are anchored on these secular trends beyond data center. We have many paths to growth, and we remain committed to data centers. So our end markets are really strong. Thanks, and congratulations again, Deane. And just a -- Deane, all the best to you, man. Before we go to the second question. Go ahead. Deane Dray: No, I'm going to keep to the one question, no follow-up. I just appreciate all the support you and your team have provided me, and I wish you all continued success. Paulo Sternadt: Same to you. Take care. All the best. Before we move to the second question, operator, I just want to recognize that our IR team received a number of inbound calls regarding the IEEPA refund. So in respect to all of you, in order to make this call a bit more fluid, I'd rather address that upfront and clear the air. So I want to say that our impact in Q2 from the IEEPA refunds is less than $3 million, so it's less than $0.01 of EPS, right? And so it's a clearly operational beat when Dave talked about $0.25 beat, it's truly operational. I just want to make that very clear. And then the impact of the tariffs for the second half is immaterial, the refunds, and is already embedded in the guidance. I just want to clear the air on that because I think we have multiple calls into Yan and his team. Operator: And our next question comes from the line of Andrew Obin from Bank of America. Andrew Obin: Yes. Thank you for the IEEPA data point. I will go to data centers. So lots of questions on Boyd. You raised your full year guidance for Boyd revenues. The business appears to perform well. Can you remind us how you look at Boyd's competitive advantages compared to competitors and maybe also talk about Boyd's cadence between 3Q and 4Q? Paulo Sternadt: Thank you. So thanks for the question. So I think it's important that I highlight we are very, very excited to have Boyd as part of our portfolio. We are really happy with the acquisition. They're performing really, really well. Why are we so happy? Not only I see this business as a winning business with this leadership position in cooling, but also as you're going to see in a minute through my comments, they're also a high performer financially. And the third thing that I love about this business is that it gives a lot of early strategic read into the chip development that will determine the future of the data center. So it's a very strong business, but also very strategic and performs well financially. So nothing not to like here. As I said last quarter, and I want to get back to it, many questions on cooling over time. I truly believe the investor community evolved in their thinking in the last months and most understand its growth potential and how strategic it is. So I don't want to spend much time there. Now looking at the cooling business we have today, we are glad to say, Boyd is part of us now. We are very confident they're going to deliver on this raised forecast for the full year, $1.8 billion. It is certainly a huge jump from last year of $1.1 billion, but we believe this team can deliver, and I will be shocked if they cannot overdeliver on this number, to be honest. Now if you look at Q2, they delivered $432 million in revenue, which was 20% above their commitment and our Q2 guidance. So very, very strong performance. So in the short term, we know we are in a very good position. I guess your question, Andrew, was more how can we be sure they will continue to win? What is their competitive advantage? That's what I understood from your question at least. So if I'm to address that, I would start by saying that I believe they're going to continue to win because they are the partner, the design partner for broad-based chip providers. They are always in their road maps and gives them a first look and a first chance to bid, which I think is fascinating. If you look at their size and scale for liquid cooling, they are the market leaders for liquid cooling, if you think about the cold plates and the CDUs. And this team has proven over time, they can scale reliably and with high quality. So I think this is really important for most data center players. If you compare to other companies, they are rather small. So there are question marks of whether they can scale with the same quality and efficiency and some are actually showing some quality issues from the get-go. So I think they're going to win also on quality and the capacity to ramp. I must say, and you guys probably remember when we announced the deal, they cut their teeth. They developed their pedigree in aerospace. So it is very, very stringent conditions technically where failure is not an option. So they bring that DNA to the data center environment. So I think it's a winning formula. And I also believe they have a deep breadth of products and systems. It's a very well-balanced portfolio. And they have, as I said, multiple times, the deepest engineering team and experience. So whatever comes next, they're going to be able to lead the market. So that's what I think makes all the difference. Now I'll start talking about the way we are integrating them to the rest of the portfolio, which is also very important. They provide us grid-to-chip part that -- so we can say now we have the full portfolio from grid to chip. And a couple of words on integration because some of you might be interested in how the integration is going. I would say it's going really, really well. Our approach to it is that we are accelerating their development. At the same time, we are protecting, we are learning from it, and we are augmenting what made this company great, which is their superior engineering once again, their manufacturing quality at increased scale. So we are really taking good care of it. So I think it's a high-performance team that leads a high successful business, and we are just making them better as we continue to invest. So beyond cooling, the other thing that not many people realize, but it's really important the strategic importance to have the seat on the table with the chip manufacturers once again, will bring benefits to our power, but also our software business. So in summary, I think our customers validate our strategy. I am extremely happy to have Boyd in our portfolio, and we are all very confident they're going to deliver on the growth plan. Operator: And our next question comes from the line of Chris Snyder from Morgan Stanley. Christopher Snyder: I wanted to ask on Electrical Global organic growth, which was the biggest upside surprise in our model, at least. So you guys, I guess, high teens organic versus high singles expectations. So just kind of wondering what drove that level of upside and organic inflection? Is it the legacy business getting better? Like is data center coming to market? Are you starting to see maybe revenue synergies or tailwinds from the contribution of Boyd? So just what are you seeing there? And what gives you confidence in -- it seems like the guide is saying it's going to hold double digits into the back half. So just any color there would be great. Paulo Sternadt: Thanks, Chris. I'll give you 2 reads. I first talk about the individual businesses. Then I'm also going to give you a read into the end markets, so you have a complete view on how the segment is behaving and performing. So I would lead by saying that in Q2, and I'm very pleased to say that all businesses, our EMEA, our APAC and our GIS businesses all performed meaningfully ahead of organic growth expectations, all did really, really well. So if I go individually, revenues were up 20% in both EMEA and APAC, and they were up high teens in GIS. So you see the 18% combined segment organically. So very strong performance by all, and we are very pleased. If you cut this by end market, we are getting a lot of traction in data center. So organic revenues were up 65% and much, much faster than the underlying market that is growing at 23%. So definitely gaining momentum, gaining share. And if you look also the traditional markets we had for this segment like machine OEM are also up more than 20%. So it's a strong data center story, but not only a data center story. So OEMs were up 20%, utilities were up low teens and so was commercial institution also low teens. So the comment I want to make, and I hope you get this very clearly, growth was broad in terms of different geographies or different businesses. Every business did well, but it's also broad in terms of end markets. In the conclusion, this was a look-back view, of course. If you look towards the future, orders were up 33% on a 12-month basis. The total backlog, as you could see in the chart, is up 103%. There is a contribution of Boyd in that, of course. But even if you take the Boyd contribution out, the organic backlog is up 54%. So very, very strong performance by the team. So that's what gave us this confidence, Chris, to raise our guidance from 7.5% to 12%. We believe this team can deliver. And I think I'm also going to talk about execution for a moment here because this is an integral part of our strategy. We said in multiple events and calls that it's well known that the APAC team is a center of excellence for us in terms of operation, high-performance team competing in a very tough market. I think there's no surprise there. I would like to shed some light and recognize the EMEA team in this call because their turnaround in the last 18 months is really, really remarkable. So their organic growth of 20% and they keep expanding margins, gaining share and momentum, it's really a great performance. So here, you see our 3 pillars of our strategy implemented at speed and at scale as we move forward. And just connecting the dots here a little bit to the question before from Andrew Obin on Boyd. Let's not forget that Boyd joined that group now. So it's the new elite player who joined the Electrical Global segment. They keep winning. I talked about their performance. So I'm not going to repeat that. So just think about the moment where they start joining their organic growth rates. It's going to be a great moment for this business as well. So we'll continue to deliver good news, I guess, as EMEA, APAC and GIS keep delivering. And we are looking forward to Boyd to join the organic growth in 2027. It's going to be a good moment for us. Operator: And our next question comes from the line of Scott Davis from Melius Research. Scott Davis: Congrats on the improved quarter. Paulo, I think you just crossed a year as CEO. Any reflections? Any -- maybe you can talk through some of the ups and downs and how it makes you think about the business going forward? Paulo Sternadt: Thank you for the question. I appreciate the strategic angle to it. I really appreciate that. The team has accomplished a lot, Scott. So my answer is going to be a bit long because I need to pay justice to what the team has just did, okay? So I had the benefit to be announced months before I took over. So we could think about the strategy a little bit in advance and hit the day 1 really as one team moving forward, which was great. I give credit to Craig and the Board for allowing me to do so. So as you know, we developed this strategy having 3 pillars. And you should ask yourself, why did we include growth into each one of those pillars. We look back as a team, I would say this, even before I started as CEO a quarter before. And we looked at all the things we loved about the company, all the things we wanted to keep that made Eaton great. At the same time, we looked forward at the growth opportunity ahead of us, and we concluded that what brought us here would not necessarily be enough for us to double the size of the company moving forward. So for perspective, if you look at our history here, it took us 100-plus years, 112 years to hit $20 billion in top line when we acquired Cooper. Then the following decade, you guys know as well, we didn't grow much. We just grew $1 billion the top line. But what we did do as a team, we started reshaping the portfolio. We divested hydraulics, et cetera, and we definitely increased margins in that period. So we became this premium company with premium valuation, and we are proud of that. Now if you start looking at the last 3 years, including our guidance today, from '24 beyond is when the line actually bends for us, it's an inflection point in terms of growth. So if you look at the 3 years, beginning of '24 to end of '26, including our renewed guidance, we will add $10 billion to the top line. So in 3 years, we're going to do 10x what we did in the last decade, so the prior decade. So that's what we are getting the company prepared for. So I believe this is only the beginning, to be honest. The opportunity now we have as a company is actually to add much more to our top line and bottom line, not in 100 years, not in 10, but in the next 4 until 2030. So that's the spirit. I'm going to give you a bit of a hint on the performance of each one of the pillars. First of all, why lead for growth? What we are trying to achieve here? It's about culture. It's about strong values we want to keep. And it's also about improving speed and customer centricity. So over time, why this was required? Over time, we moved to more of a hybrid go-to-market model. In the past, we were just primarily a distribution model. Now we have strong distribution and strong direct accounts, and the team needed help in getting there. So we put actually a program together to provide coaching to our leaders, and we involved over 1,000 people in the organization. So 4 different levels of the organization are supported by this program. And we also recognize -- I did recognize it in my own team, my executive team, we needed to set the tone from the top and lead by example. So we looked and strengthened my executive team for faster results. So we are building a more focused and integrated team with high collaboration, not only internally, but also with our customers. Under invest, another 1 minute on invest. Here, the idea is to focus on the structure transformation of our portfolio. I still believe that story is now fully appreciated by the market. But every quarter, we're going to be working to prove that we are transforming the company here. So within the first year, we deployed capital to acquire businesses, and the idea was to accelerate both growth and margins. Just a reminder, we acquired Fibrebond on the models for data centers; Resilient Power, which is the medium-voltage solid-state transformers for 800-volt DC. We also acquired Boyd. So now we can actually say we have the complete portfolio going from the utility all the way down to the chip. So that happened really fast, and I'm proud of the team. Let's not forget, we also acquired Ultra PCS, which is a great leader in technology in defense systems. So we're also proud of it. So we continue to refine our portfolio including the tough call once again on the Reverse Morris Trust to move away from the automotive sector. All those are required measures. And let's not forget that part of invest for growth is also on organic investments. We are ramping several facilities, as you guys know. And most of the pain now is behind us, happened in Q4 and Q1. So we start to see the plants delivering better volume, better output. Going forward, what to expect here is more productivity out of the plants and the learning curve is getting every time easier as we move forward. So top line should grow faster with less bottlenecks. And just to conclude on execution, we know we have pockets of excellence in the company. I talked about APAC being a center of excellence before. We still have room to improve in operations in all high-margin businesses, Electrical Americas, Europe and aerospace. And that gives us hope. We are focusing on that, and that can bring us a lot of self-help for the future. So all in all, having this new leadership team and portfolio in hand, I want to say we are now fully focused on executing for growth. And I want to say that give us this full confidence for the year, but also '27 and our 2030 commitment. So I want to stop here. I know it was long, but the team has done a lot. I'm thankful and I'm proud of this team for what we achieved together in the first year. And I would say I'm very, very confident in that the best years for Eaton is still ahead of us. Thanks for allowing me to talk about it. Operator: And our next question comes from the line of Nigel Coe from Wolfe Research. Nigel Coe: Great. I think this is going to be a short answer. Before I ask my question, can I just clarify -- I know you don't want to talk about tariffs, Paulo, but I heard $30 million. The transcript's got $30 million. I think you meant to say $3 million. Is that correct? Paulo Sternadt: $3 million. Less than $3 million. $2.8 million, if you want to be precise. Nigel Coe: Okay. $2.8 million, that's perfect. Okay. Okay. I just wanted to double-click on the Electrical Americas margin ramp in the back half of the year. And you talked about better price. So I just want to really understand how much is coming from kind of better price versus cost? And then what benefit are you seeing from factory productivity, lead times, et cetera? Paulo Sternadt: Thanks for the question. I will kick it off to give the big picture, and then I will not steal Dave's thunder. He's ready to go on the bridge. So I'm not going to steal his thunder. I just want to remind everyone that something that is really important. First of all, we know this is top of mind. Rest assured, we spend a lot of time on this as a team. We're really focused. We know what we need to do. So I will start with that. And the demand, once again, is fantastic. We cannot talk about margin progress without understanding how much capacity we are adding and how we are growing this business. I would say this, I don't need to go back to every detail, but you see the orders keep growing our backlog, only in the Electrical Americas, we had $5 billion since beginning of last year and only sequentially is another $700 million. So although the organic growth accelerates to 18%. We keep growing backlog. So that needs to be taken into consideration as we look for the second half and the future of that business. The other thing I want to say, if you pull all these elements together, the acquisitions we made, how we are reshaping our execution model, our leadership model, I truly believe we are in the precipice of what I call a new growth cycle for the whole company and especially here for Electrical Americas, and we're getting ready for it. I think what was really important for us was to realize that the bulk of the disruption we expected to happen, and we told you so happened in Q4 and Q1, Q4 last year and Q1 this year for the ramp. I would say by now, and I want this before Dave goes through the ramp, the expansions are going well and progressing better than planned now in Q2. We start to get speed on this. And I want to say once again, we cleared the biggest hurdle we had in terms of sequential order -- revenue per day growth, which was the sequential Q1 to Q2. So that was the strongest hurdle we had to clear, and we did that successfully. So I want to say no one is taking a victory lap here. The whole team stays absolutely laser-focused to meet the commitments. We meet as a team every week. And my executive team is working to support the Electrical Americas group to achieve that. So Dave is going to give you the sequential walk, I don't want to steal your thunder, Dave. David Foster: All right. So we'll start out with the first quarter to second quarter sequential. So we're up almost 190 basis points. About 100 points of that was price/cost and the other 90 points was pure output as we got to scale that Paulo just talked about. If we talk -- look at H1 versus H2, some of you like to look at it that way. We'll be up 450 to 500 basis points. 300 basis points will come from price/cost relationship. All of our pricing actions have either been implemented in Q2 or early August. And then we'll get about 150 to 200 basis points from output and productivity. So then if you look at Q2 to Q3, which is a 250 basis point improvement, 150 basis points is price/cost and 100 basis points is output and productivity. Again, the difference maybe from Q1 to Q2 compared to Q2 to Q3 is not only do we get to scale, but to Paulo's point earlier, we're starting to see productivity in those factories as our workers get more experience. And then if you look at the sequential from Q3 to Q4, again, it's a 200 to 250 basis point improvement, 150 basis points is price/cost and 50 to 100 is output and productivity. So we're on the right trajectory. We finished Q2 really strong. We -- I have early reads on July as of this morning. Again, it's an improvement from what we saw in second quarter. So I'm feeling very confident about our exit rate for 2026, and we're still committed to our 32% margin by 2030. Operator: And our next question comes from the line of Jeffrey Sprague from Vertical Research Partners. Jeffrey Sprague: I was going to ask about 800 volt. But given that answer -- I was going to ask about 800 volt, but I think I want to come back to the ramp. I appreciate all that color. It looks like your guide, right, for Electrical Americas actually assumes relatively flat sequential revenues, right, Q2 to Q3 to Q4. So that lift in margins tied to price/cost and output, right, sounds like that requires higher revenue, right? You're going to have more revenue coming through on price and you're going to have more factory output supporting the margin improvement. So is there any kind of mutual exclusivity between revenue and margin here as we think about that bridge? Perhaps you're still just being a little bit cautious on the ramp in terms of what you gave us here today. David Foster: Some of it, to be quite honest, is when you look at the difference between Q2 and Q3, we're going to be doing it on regular time versus overtime as an example. We're going to have less premium costs involved because we're already ramped. The biggest ramp was from Q1 to Q2. And again, I talked about it, we have more experienced operators, the manufacturing engineers are making cost out improvements. And then if you look from Q3 to Q4, our -- we have productivity investments we've made as well in our capital spending that will drive cost out as we move forward. So it's your normal improvements as you go through and get more comfortable with the product you're making at these plants, and we're seeing it in our numbers already in July. Paulo Sternadt: And also, price is going to -- price/cost is going to normalize. Jeffrey Sprague: Yes, more with price coming up than costs going down, I guess, right? I mean, you're taking cost actions, but you're going to have more actual price going through the system in the back half? David Foster: Absolutely. Paulo Sternadt: Yes. David Foster: And it's more than just general price increases. We're also doing discrete price increases as we need to. We kind of commented on that in the prior earnings call. Operator: And our next question comes from the line of Nicole DeBlase from Deutsche Bank. Nicole DeBlase: I wanted to ask about Electrical Global. Organic growth there was much stronger, I think, than you guys had expected. Curious what really drove the upside? And then thinking about how you're framing the rest of the year, you've got the full year up 11% to 13%. I know that's up from prior, but it does embed a pretty kind of a material decel in the back half. Was there any sort of pull forward of demand? Or could that maybe be a bit of conservatism? Paulo Sternadt: Can you repeat the last part of your commentary? It was a bit faded for me. Nicole DeBlase: Sure. Yes. So just the implied second half within EG organic comes down a little bit relative to 2Q. Just curious if that could be some conservatism or if there is any sort of pull forward of demand? Paulo Sternadt: Yes. We are very prudent here, but we just raised 450 basis points. So we are still prudent in our guidance, but it's still a large, large upside, not only for Electrical Global, Nicole, but if you look at our trajectory, start with the big picture for the company. We started the year saying we'll grow 8%. In the last earnings call, we said we'd grow 10%. Now we said 12%. And then the same is true for Americas, right? We started -- I think it was 10% and then 13% and now it's 15%. So we want to continue that trajectory, keep improving and keep proving that we can do more. There is no downside here. We keep pushing as hard as we can. Operator: And our next question comes from the line of Andy Kaplowitz from Citi. Andrew Kaplowitz: Paulo, now that Boyd has been part of the portfolio and you've had several quarters of very high data center orders, maybe you can update us on what you're thinking for content per megawatt in data centers. Is $3.4 million the right number to think about now? And you gave us last quarter your view on Eaton's positioning for 800 VDC as your confidence has been improving that when the dust settles on that transition that you feel good about Eaton's ultimate content at least in that $3.4 million range? Paulo Sternadt: Thanks. So I would answer your question directly. The $3.4 million is the right number to think about it. So for your modeling, it is the right one. You asked about the 800-volt trajectory. Let me make a couple of comments. I think there is a lot as we travel, we talk to investors and analysts around this. Last quarter, I talked about why this matters to data center operators. I just want to remind everyone what our customers want to do ultimately is to improve tokens per megawatt, so improve the efficiency of the data centers. And this transition to 800-volt DC helps quite a big deal. 5% is huge for a gigawatt site. So there's a huge impact. In my opinion, I hear a number of different opinions in the market. I believe this is going to happen and customers are going to get what they want, right? We -- when there's so much money involved, this is going to happen. So at the core of your question was the dollars per megawatt. And you talked about this transition. Everyone thinks about the solid-state transformer, medium voltage solid-state transformer is a very important element of that transition, and we are clearly ahead in terms of technology after the acquisition of Resilient Power last year, and we are speeding up their development. So we know we are ahead. That's the feedback we get from hyperscalers and multi-tenants and also chip manufacturers. But there are more elements to this transition. So it's broader, and we are working every element of this transition. So the first thing I want to say, of course, the medium voltage solid-state transformer is a key element of it. But you also need to have in order to be a great player in this new world, you need to have core DC breaker technology. You need to know how to break that circuit, right? Otherwise, you're not a reliable partner to the data center operators. So you need to have the transformers, you need to have breaker technology. The third building block for me is around power electronics and power quality. So think about UPS capabilities that we also are a leader in the marketplace. And the fourth big element of this transition, in my opinion, is cooling. You need to have cooling because it becomes even more important. Here I'm talking about both cold plates and CDUs. So in order to win in this new era, in my opinion, you need to have those 4 technical blocks very strongly, be a leader and be able to supply that to your customers. And even when you get all of them, you still need to clear another hurdle, which is to have the service available. So having a strong service network that can show up in a site in an hour, not in days is also required. So it's not for everyone. It is not for every company. And again, it's my personal opinion and my team coincides in this opinion here is that if you're -- a company will be missing one or many blocks of these 4, they will have a really hard time convincing their competitors to sell to them so they can package the solution. So that's why I want you to understand, yes, there is dollars per megawatt, but being able to offer the complete spectrum here will be also a differentiated performance KPI for the future. Operator: And our next question comes from the line of Chad Dillard from Bernstein. Charles Albert Dillard: I was hoping you could spend some time on prefab and modularization. Could you talk through what share of your RFPs are for prefab and modular? And then how does that change your competitive positioning? And then third, what does it mean for the adoption of this approach as we think towards 800-volt architecture? Paulo Sternadt: Great. Great question. So there is a clear trend. If you think about one of the bottlenecks in the industry, which is to have availability of electricians, plumbers, et cetera, there is scarcity of people to work on a stick build. So there is a push towards more modular solutions. This is exactly why we last year decided to make the acquisition of Fibrebond. We saw them as a strong market leader in building those models. And they're packaging things we know pretty well, which is our equipment, our UPSs, our switchgear, et cetera. So there is a very good connection there. I just talked -- I love -- actually, you asked this question after we talked about the 800-volt conversion. When you simplify the architecture, you even increase the opportunities of using modular solutions here. I just want to highlight a couple of things because I got many questions recently about this and complexity, et cetera. It is a different skill set than working in a manufacturing site. So that needs to be dealt by professional people, professional engineers, professional project managers. That's exactly why we acquired the competence of Fibrebond, and we are scaling them up. They are very strong already in gray space, as you guys know. And as we migrate into the white space with the 800-volt DC, we can also tap on their capability and also cut other partnerships to win in that space. So we're going to do this. We're going to do this responsibly. We're going to do this effectively, and we're going to do what our customers want of us basically. Operator: And our next question comes from the line of Jeff Hammond from KeyBanc. Jeffrey Hammond: Thanks for the color on the bridge. That was very helpful. I just ask, as you kind of expand your capacity comes online, you get more productive. I'm just wondering what you're seeing on lead times for some of your longer lead time items. And then as you get more productive and your lead times are maybe better in line relative to your competitors. What's your line of sight where you start to get more of your fair share as these lead times get better and these plants come on? Paulo Sternadt: Yes. Very great question. So lead time is important to our customers, especially in a fast-moving market like this. We are working on that. We constantly work on that. If you see our growth, especially in data centers where lead times are even more important, we grew 65%, and I asked the team to look back, and I think we completed in total 8 consecutive quarters of growth beyond 35% in data centers, which is fascinating. And just as a reminder to all of you, when we shared the 2030 commitments for growth, we only baked 17% of the data center growth in our model. So we are clearly ahead of that moving towards 2030. So my point, I'm going to get back to your lead time question in a second. We cannot be winning at that pace with that progress if we're not competitive. So I want to lead with that first. Having said this, we believe we can and should improve. And we know the product lines where our lead times are extended. We are ramping capacity, not only in the factories, but we're ramping engineering support, and we're going to knock them down time by time and time again. Okay. Just thanks, everyone. It was a very intense and productive call. I just want to conclude with my closing remarks. First of all, once again, Deane, congrats man, well-deserved retirement. Many thanks to all of you for interest in Eaton for all your analysis and your questions. I want to say once again, thanks to the Eaton team. I know I've been hard -- fair but hard with all of you, you guys are responding exceptionally well. I'm pleased with the progress, knowing that we are committed to continue to improve. So this is really important. So I would say our strategy is working. I hope you can appreciate that. It's gathering pace. Our markets are strong and durable. We accelerate organic growth, keep moving our backlogs up. And we're going to benefit from the strength of this market for years to come, right, if you think about all the announced projects. We also took the decisive portfolio moves to structurally transform the company. And I believe -- I truly believe that new Eaton is taking shape as we speak towards higher growth and higher margins. We have this unique grid-to-chip capabilities. So all in all, a much stronger team and a stronger portfolio. And execution continues to improve, especially with the Electrical Americas improvements. We're going to keep moving margins up as we progress. And consequently, I would just remind you that we could print a very strong operational beat in Q2, which gave us confidence to raise our guidance once again for the year. So thanks for your interest. Great afternoon to all. Thank you. David Foster: Thanks, guys. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. Before you buy stock in Eaton Plc, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Eaton Plc wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,405!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,344,091!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 7, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Eaton Plc. The Motley Fool has a disclosure policy. Eaton (ETN) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance in Q2 was driven by strong operational execution and favorable market dynamics, resulting in a 270-basis-point margin expansion year-over-year. The company achieved $19 million in cost savings during the quarter, maintaining the trajectory to reach a $325 million program target while addressing stranded costs from the Off-Highway divestiture. Management is leveraging the Dana 2030 framework to drive growth in high-margin segments, specifically targeting $40 million in new sales from national retail aftermarket chains. The Applied Technologies pillar is gaining significant traction in the defense sector, with volume increases in the ISV program and rapid prototyping for major OEM projects. The Eaton Mobility transaction is framed as a deepening of Dana's core powertrain capabilities, rather than a reversal of previous simplification efforts, by adding complementary engine and transmission technologies. Strategic rationale for the Eaton combination centers on creating a scaled global aftermarket leader, with pro forma aftermarket sales expected to reach approximately 16% of total revenue. Full-year sales guidance was raised to $7.75 billion, primarily reflecting stronger-than-anticipated demand in the commercial vehicle market and continued backlog conversion. Management expects to achieve at least $250 million in run-rate cost synergies within 24 months of the Eaton closing, with $75 million realized in the first year. The Eaton Mobility separation will be structured as a split-off, which management believes will support a more orderly distribution of shares to long-term investors. Capital allocation plans include repurchasing an additional $200 million in shares through the end of 2026, with a goal to complete $2 billion in total buybacks by 2029. The 2030 revenue target has been upwardly revised to a range of $14 billion to $15 billion following the integration of Eaton Mobility assets. Adjusted EPS guidance was revised lower due to higher depreciation from accelerated asset in-service timing and lower equity earnings from joint ventures in China. A one-time $20 million U.S. union contract signing bonus is expected to impact third-quarter results, though ongoing wage increases were already factored into long-term plans. Net interest expense is projected to improve by approximately $80 million year-over-year following debt reduction actions taken after the Off-Highway sale. Management identified approximately $40 million in stranded costs following the Off-Highway divestiture that they are actively working to eliminate through efficiency initiatives. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management is exploring ways to restart buybacks during the 24-month post-closing period despite complex tax code considerations. If a buyback agreement cannot be reached, Dana remains unrestricted in its ability to raise dividends or pay special dividends to return cash to shareholders. The EPS cut was driven by higher depreciation, increased interest from refinancing, and a significant decline in expected equity earnings from China JVs. Jurisdictional tax mix also presented a headwind, though it was a smaller factor than the equity earnings decline. Management noted that the anticipated Class 8 prebuy is being pushed out as regulation changes are not imminent, with a significant volume uptick now expected in 2028. Current Class 8 volume for the year is projected at approximately 275,000 units, partially offset by softness in medium-duty and bus production.

VRT and ALAB both beat earnings riding Amazon and Microsoft's $100B quarterly AI capex, yet Astera dropped 12% post-earnings while Vertiv surged 25%. Vertiv suits stability-focused investors with a six-quarter beat streak and tripled free cash flow, while Astera at a 249 P/E rewards patient buyers waiting for a pullback. Don't wait: the analyst who called NVIDIA in 2010 just revealed his top 10 AI stocks. See the full list FREE now. Vertiv (NYSE:VRT) and Astera Labs (NASDAQ:ALAB) both reported into the same tailwind: Amazon and Microsoft pouring roughly $100B to $105B combined per quarter into AI capex. Vertiv sells the racks their power and cooling depend on. Astera sells the connectivity silicon stitching GPUs together. Both beat. Only one saw its stock drop the next day. Vertiv posted Q2 revenue of $3.27B, up 24.1% YoY, with Americas sales jumping 29.2% and adjusted operating margin expanding 410 basis points to 22.6%. Free cash flow more than tripled to $925.3M. CEO Giordano Albertazzi credited "the compounding effect of years of deliberate investment in technology, capacity, and customer partnerships" as hyperscaler deployments grow more infrastructure intensive. Astera came in hotter but smaller. Revenue hit $392.4M, up 104.5% YoY, with non-GAAP EPS of $0.80 beating by 15.61%. The Aries retimer hit a record, and CEO Jitendra Mohan said the Scorpio fabric switch will become the largest product family in Q3, one quarter ahead of plan. Q3 guidance was the shock: revenue of $540M to $560M, a huge sequential leap. Don't wait: the analyst who called NVIDIA in 2010 just revealed his top 10 AI stocks. See the full list FREE now. The strategies diverge sharply. Vertiv is the physical bet, capturing an estimated $1.2B to $1.5B per quarter of hyperscaler spend, and raised full-year guidance to $13.80B to $14.20B in net sales with 30% to 32% organic growth. EMEA is the soft spot, with organic sales down 2.4%. Insiders across the C-suite acquired shares on June 25, 2026, though those look compensation-linked. Astera is the silicon bet, capturing perhaps $220M to $280M per quarter, tiny in absolute terms but growing far faster. Its risk profile matches: concentrated customers, no long-term commitments, and a fully-priced valuation. News flow confirms the connectivity layer is where money is moving. Vertiv rallied 24.61% in the week after earnings. Astera fell 11.96% the day after its beat, a classic "priced in" response. Watch whether Scorpio crosses Aries in Q3 revenue, and whether Vertiv's Americas margin holds while EMEA stabilizes. Tariffs and supply timing are the swing factors. If I had to pick one, I would lean Vertiv. Cash generation is real, guidance keeps rising, and the six-quarter beat streak tells me management is not stretching. Astera fits a different investor: someone comfortable owning a 9-for-9 beat hypergrowth name with a P/E near 249 and accepting volatile reactions. Astera's setup rewards patience for a wider pullback, while Vertiv's Q3 warrants a close watch on the stock, where organic growth guidance sits at 34% to 36%. Don't wait: the analyst who called NVIDIA in 2010 just revealed his top 10 AI stocks. See the full list FREE now. Contact [email protected] for any questions or corrections.

Eaton Corporation plc recently reported its second-quarter 2026 results, with sales rising to US$8,531 million while net income eased to US$821 million, and issued third-quarter net income guidance of US$2.77–US$2.87 per diluted share alongside full-year guidance of US$10.36–US$10.56. The combination of higher revenue but lower earnings, reaffirmed full-year guidance, and ongoing portfolio reshaping around electrification and data centers gives investors fresh insight into how Eaton is balancing growth investments with current profitability. We’ll now examine how Eaton’s higher sales but softer earnings, together with its reaffirmed 2026 guidance, influence the existing investment narrative. The future of work is here. Discover the 36 top robotics and automation stocks leading the charge in AI-driven automation and industrial transformation. To own Eaton today, you generally need to believe in its shift toward electrification and data center power, while accepting near term pressure on profitability from heavy investment and portfolio changes. The latest quarter, with higher sales but lower net income and trimmed full year EPS guidance, reinforces that tension. For now, the news mainly highlights short term margin risk and execution around growth projects rather than changing the core electrification and data center catalyst. The most relevant recent announcement is Eaton’s plan to separate its Mobility segment through a Reverse Morris Trust, expected to close in early 2027. Against the backdrop of higher Q2 sales but softer earnings, this move matters because it could simplify Eaton around its electrical and aerospace franchises, where data center and grid to chip solutions are key near term growth drivers, while also reducing exposure to weaker traditional vehicle markets that have been a drag on results. Yet against this growth story, investors should be aware of how dependent Eaton has become on large AI driven data center projects and what happens if those projects... Read the full narrative on Eaton (it's free!) Eaton's narrative projects $41.8 billion revenue and $6.9 billion earnings by 2029. This requires 11.7% yearly revenue growth and an earnings increase of about $3.1 billion from $3.8 billion today. Uncover how Eaton's forecasts yield a $464.59 fair value, a 4% upside to its current price. The lowest estimating analysts sound far more cautious than consensus, even before this earnings miss, assuming revenue reaches about US$37.0 billion and earnings US$6.8 billion by 2029, which could look ambitious if data center demand or capacity expansion, like the Mobility separation, does not play out as expected. Explore 7 other fair value estimates on Eaton - why the stock might be worth as much as 19% more than the current price! Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts. A great starting point for your Eaton research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision. Our free Eaton research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Eaton's overall financial health at a glance. Don't miss your shot at the next 10-bagger. Our latest stock picks just dropped: Uncover the next big thing with 19 elite penny stocks that balance risk and reward. We've uncovered the 8 dividend fortresses yielding 5%+ that don't just survive market storms, but thrive in them. Capitalize on the AI infrastructure supercycle with our selection of the 56 best 'picks and shovels' of the AI gold rush converting record-breaking demand into massive cash flow. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include ETN. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Eaton Corporation ETN posted solid second-quarter 2026 results, with both the top and bottom lines improving year over year as well as beating the Zacks Consensus Estimate. The quarter benefited from double-digit organic growth in both electrical businesses and strong acquisition contributions. This diversified power management company and a global technology leader in electrical components and systems is gaining from rising electrification and data center demand. Shares of ETN have gained 15.6% since it posted earnings on July 31, outperforming the industry’s 11.2% growth. Shares of industrial tech stocks like Emerson Electric Co. EMR and Powell Industries POWL have gained 9.3% and lost 0.5%, respectively, in the same time frame. Image Source: Zacks Investment Research Adjusted earnings of $3.15 per share were up 6.8% year over year and beat the Zacks Consensus Estimate of $3.08 by 2.3%. Revenues of $8.53 billion increased 21.4% and surpassed the consensus mark of $8.01 billion by 6.57%.Sales growth included a 14% increase in organic revenues and a 7% contribution from acquisitions. Management said data centers remained a major growth engine, while demand was also robust across other served markets.Electrical-sector backlog rose 43% year over year, while Aerospace backlog advanced 28%, underscoring sustained demand across key end markets. Margin was 23.1%, 10 basis points above the high end of management's guidance but 80 basis points below the prior-year quarter. Acquisition-related effects and higher amortization weighed on reported profitability.Operating cash flow was $1.13 billion, up 23% year over year. After $253 million of capital expenditures, free cash flow totaled $874 million, an increase of 22%.As of June 30, 2026, cash was $483 million compared with $622 million at year-end 2025. Long-term debt was $18.51 billion, up from $8.76 billion, reflecting the funding impact of recent acquisitions. For 2026, Eaton now expects organic growth of 11-13% (up from prior range of 9-11%), segment margin of 24.1-24.5% and adjusted earnings of $13.40-$13.60 per share (up from prior range of $13.05-$13.50). The midpoint of the earnings range implies 12% growth from 2025. For the third quarter, management projects organic growth of 13.5-15.5%, segment margin of 24.6-25% and adjusted earnings of $3.46-$3.56 per share. The outlook reflects expectations for continued demand momentum and stronger profitability. Eaton is well positioned to capitalize on long-term growth trends, including grid modernization, data center expansion, industrial automation, the global energy transition and the aerospace market recovery. Its growing backlog highlights strong customer demand and the company’s ability to provide reliable, mission-critical power management solutions.Innovation and sustainability remain central to Eaton’s strategy. The company plans to invest approximately $3 billion in research and development over the next decade to create advanced, sustainable technologies, strengthen its product portfolio and address evolving customer needs.Strategic acquisitions are also supporting growth by expanding Eaton’s presence in attractive, high-margin markets. Acquisitions such as Fibrebond, Resilient Power, Ultra PCS and Boyd are contributing stronger growth and accretive margins to their respective segments.The rapid development of AI-powered data centers represents a particularly significant opportunity because these facilities require greater power capacity and improved energy efficiency. Eaton continues to strengthen its position across the electrical power value chain while benefiting from robust demand in data centers, utilities, commercial aerospace and defense. Its diversified exposure across industrial, utility, commercial, residential and aerospace markets also reduces reliance on any single industry.Eaton remains focused on portfolio optimization, productivity improvements and disciplined execution to enhance operational efficiency and expand margins. The planned separation of its Mobility business will enable the company to direct capital toward higher-growth, higher-return opportunities. Meanwhile, Eaton is investing more than $1 billion in capacity expansion and launching roughly two dozen projects across Electrical Americas, supporting stronger daily revenue momentum as the new facilities ramp up. The Zacks Consensus Estimate for 2026 and 2027 revenues indicates a 16.8% and 10.6% year-over-year increase, respectively. The same for 2026 and 2027 earnings implies a 11.3% and a 17.7% year-over-year increase, respectively.  The expected long-term earnings growth rate is pegged at 11.7%. The Zacks Consensus Estimate for ETN’s 2026 and 2027 earnings per share has moved 0.6% and 0.4% north, respectively, in the last seven days. Image Source: Zacks Investment Research The Zacks Consensus Estimate for Emerson’s 2026 and 2027 earnings per share has witnessed no movement in the last seven days. The same holds true for Powell. Eaton’s shares are trading at a premium compared with its industry. The company’s forward 12-month price-to-earnings of 30.26X is lower than its industry’s 35.28X but higher than the median of 23.86X over the last five years. Image Source: Zacks Investment Research Eaton shares are more expensive than Emerson Electric but cheaper than Powell. Eaton continues to deliver solid performance across its core businesses, supported by strong demand from expanding data center infrastructure. Continued research and development investments are fostering innovation, enhancing its product portfolio and addressing changing customer requirements. Strategic acquisitions are further strengthening Eaton’s technological capabilities and presence in high-growth markets. Favorable earnings estimate revisions, healthy investment returns and a growing backlog support its long-term prospects. However, the stock’s premium valuation may limit near-term upside. Therefore, a wait-and-see approach appears appropriate for this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 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 Eaton Corporation, PLC (ETN) : Free Stock Analysis Report Emerson Electric Co. (EMR) : Free Stock Analysis Report Powell Industries, Inc. (POWL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Eaton Corporation plc ETN used its second-quarter 2026 earnings call to stress that execution, rather than demand, remains the key variable for near-term performance. Management pointed to improving Electrical Americas output, broad order strength and expanding data-center activity as the basis for a higher full-year outlook. Adjusted EPS of $3.15 exceeded the Zacks Consensus Estimate of $3.08 by 2.30%. Revenues of $8.53 billion topped the $8.00 billion estimate by 6.60%. Eaton Corporation, PLC price-consensus-eps-surprise-chart | Eaton Corporation, PLC Quote CEO Paulo Sternadt raised Eaton’s 2026 organic growth outlook to 11% to 13%, increasing the midpoint by 200 basis points from the prior range. Sternadt also lifted adjusted earnings guidance to $13.40 to $13.60 per share, with the midpoint rising 22 cents to $13.50. For the third quarter, management expects adjusted earnings of $3.46 to $3.56, organic growth of 13.5% to 15.5% and segment margins of 24.6% to 25.0%. Sternadt said Eaton is investing more than $1 billion across roughly two dozen Electrical Americas capacity projects. Revenue per workday has increased about 25% since the start of 2025. The business delivered 18% organic growth in the quarter, while its operating margin rose 190 basis points sequentially to 27.5%. CFO David Foster said the first-to-second-quarter margin improvement reflected about 100 basis points from price-cost and 90 basis points from higher output and scale. An RBC Capital Markets analyst asked whether strength extended beyond data centers. Sternadt said commercial and institutional, machine OEM and distributed IT revenues each grew at double-digit rates. He added that rolling 12-month electrical orders increased in the mid-to-high teens across commercial and institutional, utility, industrial and residential markets. Machine OEM orders rose in the mid-30% range. Data-center demand remained the largest standout. Electrical-sector data-center orders increased about 85% year over year, while revenues advanced about 65%. A Bank of America analyst pressed management on Boyd’s competitive position. Sternadt said the liquid-cooling business generated $432 million of second-quarter revenues, 20% above its commitment. Management raised Boyd’s full-year revenue forecast to $1.8 billion, with about $1.5 billion expected to be recorded by Eaton during 2026. Sternadt emphasized Boyd’s relationships with chip providers, scale in cold plates and coolant distribution units, and engineering depth. He also described the acquisition as central to Eaton’s grid-to-chip portfolio. A Wolfe Research analyst asked for more detail on the Electrical Americas margin ramp. Foster projected a 450-to-500-basis-point improvement from the first half to the second half. He attributed about 300 basis points to price-cost and 150 to 200 basis points to output and productivity. Pricing actions were implemented during the second quarter and early August. Foster said lower overtime, more experienced operators and productivity investments should support additional gains. Management expects price-cost to return to roughly neutral in the second half. A Citigroup analyst asked about data-center content and the transition to 800-volt direct current. Sternadt reaffirmed Eaton’s content estimate of $3.4 million per megawatt. He said the architecture requires capabilities in solid-state transformers, DC breakers, power electronics, power quality and liquid cooling, supported by a responsive service network. A Bernstein analyst also asked about modular construction. Sternadt said labor constraints are increasing demand for prefabricated solutions, reinforcing the strategic rationale for the Fibrebond acquisition. Sternadt’s closing message remained focused on Eaton’s lead, invest and execute strategy. He framed stronger capacity conversion, portfolio reshaping and acquisition integration as the company’s central priorities. Management expressed confidence in the second half and its 2030 commitments, while stressing that the capacity ramp and productivity work remain active execution tasks rather than completed milestones. ETN currently carries a Zacks Rank #2 (Buy), indicating a favorable near-term earnings-estimate revision profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Its Momentum and Growth Scores of C, however, are neutral rather than top-tier signals. The Value Score of F and VGM Score of D weaken the overall style profile because the Zacks methodology favors A or B Style Scores alongside top ranks. The Zacks Rank can change as analysts revise estimates following the reported results. 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 Eaton Corporation, PLC (ETN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Eaton (ETN) came out with quarterly earnings of $3.15 per share, beating the Zacks Consensus Estimate of $3.08 per share. This compares to earnings of $2.95 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +2.27%. A quarter ago, it was expected that this power management company would post earnings of $2.74 per share when it actually produced earnings of $2.81, delivering a surprise of +2.55%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Eaton, which belongs to the Zacks Manufacturing - Electronics industry, posted revenues of $8.53 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 6.57%. This compares to year-ago revenues of $7.03 billion. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Eaton shares have added about 21.5% since the beginning of the year versus the S&P 500's gain of 8.7%. While Eaton has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Eaton was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $3.52 on $8.22 billion in revenues for the coming quarter and $13.35 on $31.82 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Manufacturing - Electronics is currently in the top 33% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Emerson Electric (EMR), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 4. This maker of process controls systems, valves and analytical instruments is expected to post quarterly earnings of $1.68 per share in its upcoming report, which represents a year-over-year change of +10.5%. The consensus EPS estimate for the quarter has been revised 0.1% lower over the last 30 days to the current level. Emerson Electric's revenues are expected to be $4.79 billion, up 5.3% from the year-ago quarter. 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 Eaton Corporation, PLC (ETN) : Free Stock Analysis Report Emerson Electric Co. (EMR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Adjusted EPS: $3.15, exceeding guidance by $0.10 at the midpoint; Q2 record. Revenue: Record $8.5 billion, with 21% total revenue growth and 14% organic growth. Segment Margins: 23.1%, better than the high end of guidance. Operating Cash Flow: Q2 record, up 23% over prior year. Electrical Americas Organic Sales Growth: 18%, driven by data centers up about 65%. Electrical Americas Margins: 27.5%, 190 basis points higher than Q1. Electrical Global Total Growth: 44%, including 18% organic growth and 25% from the Boyd acquisition. Electrical Global Operating Margin: 19.8%, down 30 basis points year-over-year but about a point higher than expected. Aerospace Organic Sales Growth: 7%, with record quarterly sales and Q2 record segment profit. Aerospace Operating Margin: Expanded by 60 basis points to 22.8%. Mobility Organic Growth: Declined 2%, fully offset by positive foreign exchange impact. Book-to-Bill: Total company at 1.2, Americas at 1.3, and Aerospace at 1.2. 2026 Adjusted EPS Guidance: Raised to between $13.40 and $13.60, with a midpoint of $13.50. 2026 Organic Growth Guidance: Raised to between 11% and 13%, up 200 basis points at the midpoint. Warning! GuruFocus has detected 6 Warning Signs with OCFC. Is ETN fairly valued? Test your thesis with our free DCF calculator. Release Date: July 31, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record Q2 revenue of $8.5 billion with 21% total growth and 14% organic growth, exceeding guidance. Adjusted EPS of $3.15 beat guidance by $0.10, with strong operational performance and record cash flow. Electrical Americas delivered 18% organic growth and 190 bps margin expansion quarter-over-quarter, with book-to-bill at 1.3. Data center demand remains robust, with US backlog growing to 307 gigawatts (15 years of backlog) and Boyd acquisition performing above expectations. Raised full-year 2026 guidance: organic growth midpoint up 200 bps to 12% and adjusted EPS midpoint up $0.22 to $13.50. Electrical Americas margins declined year-over-year due to temporary negative price-cost, though expected to normalize in H2. Mobility segment organic sales declined 2% in Q2, impacted by intentional exit of low-margin business. Higher tax rate partially offset segment profit beat, reducing EPS by $0.15. Electrical Global organic growth is expected to decelerate in H2, implying potential conservatism or demand pull-forward. Capacity ramp challenges persist, with lead times still extended in some product lines, though improving. Q: Can you take us through the growth you're seeing in your non-data center electrical businesses and what that means for the second half? A: Paulo Ruiz (CEO) highlighted that while data center demand remains enormous, the company's portfolio is anchored in broader secular trends. Beyond data centers, Eaton realized strong double-digit organic revenue growth in commercial and institutional, machine OEM, and distributed IT markets. Orders are accelerating broadly, with total electrical orders increasing mid-to-high teens for commercial, institutional, utility, industrial, and residential markets, while machine OEM orders rebounded with mid-30s growth. This demonstrates multiple paths to growth beyond data centers. Q: Can you remind us how you look at Boyd's competitive advantages compared to competitors, and maybe also talk about Boyd's cadence between 3Q and 4Q? A: Paulo Ruiz (CEO) stated that Boyd is performing exceptionally well, delivering $432 million in Q2 revenue, 20% above commitments. The company raised Boyd's full-year revenue forecast to $1.8 billion, up from $1.1 billion last year. Boyd's competitive advantages include being the design partner for broad-based chip providers with first look at roadmaps, market leadership in liquid cooling (cold plates and CDUs), proven ability to scale reliably with high quality, and a pedigree developed in aerospace where failure is not an option. The integration is going well, with Eaton accelerating Boyd's development while protecting what made the company great. Q: What drove the level of upside and organic inflection in Electrical Global, and what gives you confidence that double-digit growth will hold into the back half? A: Paulo Ruiz (CEO) explained that all businesses within Electrical Global (EMEA, APAC, and guides) performed meaningfully ahead of organic growth expectations. Revenues were up 20% in both EMEA and APAC, and high teens in guides. Data center organic revenues were up 65%, much faster than the underlying market growing at 23%. Machine OEM was up over 20%, utilities up low teens, and commercial institutional also up low teens. Orders were up 33% on a 12-month basis, with total backlog up 103% (54% organic excluding Boyd). This broad-based strength gave confidence to raise guidance from 7.5% to 12% organic growth. Q: Any reflections as you cross a year as CEO, and how does it make you think about the business going forward? A: Paulo Ruiz (CEO) reflected on the company's transformation, noting it took 112 years to hit $20 billion in revenue, but the company will add $10 billion to the topline in just three years (2024-2026). He highlighted the "Lead, Invest, and Execute for Growth" strategy, including culture transformation with over 1,000 people involved in leadership coaching, strategic acquisitions (Fibrebond, Resilient Power, Boyd, Ultra PCS), the separation of the mobility business, and organic capacity investments. He emphasized that the bulk of disruption from facility ramps is behind them, and the company is now fully focused on execution with confidence in 2026, 2027, and 2030 commitments. Q: Can you provide more detail on the Electrical Americas margin ramp in the back half, specifically how much is coming from price versus cost and factory productivity? A: David Foster (CFO) provided a detailed sequential walk: Q1 to Q2 margins improved 190 basis points, with about 100 points from price cost and 90 points from output scale. H1 to H2 margins will improve 450-500 basis points, with 300 basis points from price-cost relationship (pricing actions implemented in Q2 or early August) and 150-200 basis points from output and productivity. Q2 to Q3 improvement of 250 basis points includes 150 from price cost and 100 from output/productivity, as workers gain experience. Q3 to Q4 improvement of 200-250 basis points includes 150 from price cost and 50-100 from output/productivity. Early July reads show continued improvement. Q: The guide for Electrical Americas assumes relatively flat sequential revenues Q2 to Q4. Does the margin lift from price cost and output require higher revenue, and is there any mutual exclusivity between revenue and margin? A: David Foster (CFO) clarified that the margin improvement comes from operating on regular time versus overtime, less premium costs since the biggest ramp (Q1 to Q2) is behind them, more experienced operators, manufacturing engineers making cost-out improvements, and productivity investments from capital spending. Paulo Ruiz (CEO) added that price cost will normalize, with more price going through the system in the back half through both general and discrete price increases. Q: What's your thinking on content per megawatt in data centers, and has your confidence improved on Eaton's positioning for 800 VDC transition? A: Paulo Ruiz (CEO) confirmed that $3.4 million per megawatt remains the right number for modeling. Regarding the 800-volt DC transition, he emphasized that customers want to improve tokens per megawatt, and the transition to 800-volt DC improves efficiency by 5%, which is huge for gigawatt sites. Eaton is clearly ahead in medium voltage solid-state transformer technology after the Resilient Power acquisition. To win in this new era, companies need four technical blocks: solid-state transformers, DC breaker technology, power electronics/power quality (UPS capabilities), and cooling. Additionally, having a strong service network that can respond within an hour is critical. Companies missing any of these blocks will struggle to compete. Q: Could you talk through what share of RFPs are for prefab and modular, how that changes competitive positioning, and what it means for 800-volt architecture adoption? A: Paulo Ruiz (CEO) noted a clear trend toward modular solutions due to scarcity of skilled labor for stick builds. This drove the Fibrebond acquisition, which is a strong market leader in building modules that package Eaton's equipment (UPS, switchgear). The 800-volt conversion simplifies architecture and increases opportunities for modular solutions. Fibrebond is already strong in gray space, and as the industry migrates to white space with 800-volt DC, Eaton can tap into their capability and partnerships. The company will execute this responsibly and effectively based on customer demands. Q: As capacity comes online and you get more productive, what are you seeing on lead times for longer lead time items, and when do you start getting more of your fair share? A: Paulo Ruiz (CEO) stated that lead times are important for customers, especially in For the complete transcript of the earnings call, please refer to the full earnings call transcript.

For the quarter ended June 2026, Eaton (ETN) reported revenue of $8.53 billion, up 21.4% over the same period last year. EPS came in at $3.15, compared to $2.95 in the year-ago quarter. The reported revenue represents a surprise of +6.57% over the Zacks Consensus Estimate of $8 billion. With the consensus EPS estimate being $3.08, the EPS surprise was +2.27%. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next move, some key metrics always offer a more accurate picture of a company's financial health. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Eaton performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Net sales- Mobility: $841 million versus $857.29 million estimated by three analysts on average. Net Sales- Electrical Global: $2.52 billion versus $2.11 billion estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +43.6% change. Net Sales- Electrical Americas: $3.95 billion versus $3.79 billion estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +17.9% change. Net Sales- Aerospace: $1.22 billion versus the three-analyst average estimate of $1.21 billion. The reported number represents a year-over-year change of +13.2%. Segment operating profit (loss)- Aerospace: $278 million compared to the $267.63 million average estimate based on three analysts. Segment operating profit (loss)- Mobility: $109 million versus $116.25 million estimated by three analysts on average. Segment operating profit (loss)- Electrical Global: $499 million versus the three-analyst average estimate of $405.69 million. Segment operating profit (loss)- Electrical Americas: $1.09 billion versus $1.03 billion estimated by three analysts on average. View all Key Company Metrics for Eaton here>>> Shares of Eaton have returned -2.9% over the past month versus the Zacks S&P 500 composite's -0.5% change. The stock currently has a Zacks Rank #2 (Buy), indicating that it could outperform the broader market in the near term. 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 Eaton Corporation, PLC (ETN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research