A Member of Pat McKeough’s Inner Circle recently asked for his advice on Eaton Corp., a diversified industrial manufacturer and intelligent power management company that provides electrical, aerospace, hydraulic, and vehicle solutions to customers worldwide.
Pat likes the growth prospects spurred by the AI data centre infrastructure boom as well as company’s strategic positioning in the most promising electrification trends. However, he notes the stock trades at a high 29.9 times forward earnings.
EATON CORP. PLC (Symbol ETN on New York) is a power management company. Eaton serves many markets: datacentre, utility, industrial, commercial, machine building, residential, aerospace and mobility markets.
Founded in 1911, the company expanded worldwide and now has customers in more than 160 countries.
Eaton operates through five segments: Electrical Americas (47% of revenue), Electrical Global (25%), Aerospace (15%), Vehicle (10%), and eMobility (3%).
The Electrical Americas and Electrical Global segment includes electrical components, industrial components, and power distribution and assemblies. It provides these products wherever there is a demand for electrical power. Its main markets are industrial, institutional, government, utility, commercial, residential and information technology.
The Aerospace segment supplies aerospace fuel, hydraulics, and pneumatic systems for commercial and military use. Plus, it supplies filtration systems for industrial applications. Products here include pumps, motors, hydraulic power units, hoses and fittings, electro-hydraulic pumps, and valves.
The Vehicle segment makes drivetrains, powertrain systems and components that reduce emissions and improve fuel economy. Products include transmissions and transmission components, clutches, hybrid power systems and superchargers.
The eMobility segment makes products that improve the power management and performance of vehicles. These include high voltage inverters, converters, fuses, circuit protection units, and vehicle controls.
In April 2025, Eaton closed the acquisition of Fibrebond Corporation, a Louisiana-based manufacturer of pre-made modular power enclosures for datacentres and communications customers. With Fibrebond’s engineered-to-order power enclosures, equipment installation and testing procedures are performed off-site. That lets customers get up-and-running in less time and at a lower cost.
Eaton paid $1.4 billion for Fibrebond. That firm’s annual revenue is about $378 million.
Meanwhile, on June 16, 2025, Eaton announced the acquisition of Ultra PCS Limited, a U.K.-based manufacturer of electronic controls, sensing, stores ejection and other pneumatic systems, plus data processing solutions for its global aerospace customers.
Eaton is buying Ultra PCS from the Cobham Ultra Group, an affiliate of private equity firm Advent International. It’s paying $1.55 billion for Ultra PCS. That firm’s estimated 2025 sales are $240 million.
Future is positive with rising demand across many markets
In the three months ended March 31, 2025, Eaton’s revenue rose 7.4%, to $6.38 billion from $5.94 billion. The company’s three largest segments by revenue experienced growth in the first quarter.
Excluding one-time items, Eaton earned $1.07 billion, or $2.72 a share, in the latest quarter, up 10.8% from $966 million, or $2.40 a share. The increase was due to the higher sales and improved operating efficiencies.
The outlook for Eaton is positive. The company continues to see strong demand across its markets—with the most significant trend being Electrification. As automation is increasingly deployed in factories and as electric vehicles (EVs) gain share from internal combustion engines, demand for Eaton’s electrical switches and distribution products will continue to increase.
Energy transition is another key trend driver, as fossil-fuel-powered appliances and tools are replaced with electric products. At the same time, demand for electric infrastructure equipment from utilities is rising rapidly around the globe. Digitization is another major trend driving growth. Large datacentre projects are being constructed, partly driven by the expansion of artificial intelligence (AI).
Meanwhile, the stock trades at a high 29.9 times its 2025 forecast earnings of $12.02 a share. With the March 2025 payment, Eaton raised its quarterly dividend by 10.6% to $1.04 a share from $0.94. The annual rate of $4.16 yields 1.2%.
Recommendation in Pat’s Inner Circle: Eaton Corp. is okay to hold.