Yahoo Finance Earnings Update: Here's Why Analysts Just Lifted Their Eaton Corporation plc (NYSE:ETN) Price Target To US$268
It's been a good week for Eaton Corporation plc (NYSE:ETN) shareholders, because the company has just released its latest yearly results, and the shares gained 8.6% to US$270. The result was positive overall - although revenues of US$23b were in line with what the analysts predicted, Eaton surprised by delivering a statutory profit of US$8.02 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
View our latest analysis for Eaton
Following the latest results, Eaton's 17 analysts are now forecasting revenues of US$25.0b in 2024. This would be a reasonable 7.6% improvement in revenue compared to the last 12 months. Per-share earnings are expected to expand 15% to US$9.26. In the lead-up to this report, the analysts had been modelling revenues of US$24.7b and earnings per share (EPS) of US$8.87 in 2024. So the consensus seems to have become somewhat more optimistic on Eaton's earnings potential following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 8.7% to US$268. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Eaton at US$310 per share, while the most bearish prices it at US$200. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Eaton's rate of growth is expected to accelerate meaningfully, with the forecast 7.6% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 0.8% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.8% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Eaton is expected to grow at about the same rate as the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Eaton's earnings potential next year. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Eaton. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Eaton analysts - going out to 2026, and you can see them free on our platform here.
It might also be worth considering whether Eaton's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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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.
