Operating Cash Flow in the Fourth Quarter a Record $944 Million; Full Year 2014 Operating Cash Flow Excluding Legal Settlements a Record $2.53 Billion
2015 Operating Earnings Per Share Expected To Be Between $4.75 and $5.05 Inclusive of $0.20 Negative Impact From Foreign Exchange
Power management company Eaton Corporation plc (NYSE:ETN) today announced operating earnings per share for the fourth quarter of $1.27, which exclude charges of $0.04 per share to integrate recent acquisitions, an increase of 18 percent over the fourth quarter of 2013. Sales in the quarter were $5.6 billion, up 1 percent over the same period in 2013. Operating earnings for the fourth quarter of 2014, which exclude charges of $32 million to integrate recent acquisitions, were $602 million compared to $516 million in the fourth quarter of 2013.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, “We had a strong quarter, posting attractive organic growth, record fourth quarter segment margins of 15.9 percent, and operating earnings per share above the high end of our guidance range. Organic sales growth was 5 percent, the strongest quarter since the fourth quarter of 2011. Partially offsetting the strong organic growth was 3 percent from negative foreign exchange and 1 percent from the divestitures of two aerospace businesses during 2014.
“We generated record operating cash flow of $944 million in the fourth quarter,” said Cutler. “For the full year, we generated operating cash flow, excluding the legal settlements concluded in the middle of the year, of $2.53 billion, an all-time record. We repurchased $326 million of shares in the fourth quarter, bringing our full year share repurchases to $650 million or about 2 percent of our shares outstanding at the start of 2014.”
For the full year 2014, sales were a record $22.6 billion, 2 percent higher than in 2013. Excluding charges to integrate recent acquisitions, the legal settlements and the divestiture gain, operating earnings totaled a record $2.2 billion, up 13 percent over 2013. Operating earnings per share for 2014, excluding the same items, were a record $4.67, up 13 percent over 2013.
“Our full year 2014 sales increase of 2 percent reflects organic growth of 4 percent, partially offset by 1 percent from negative foreign exchange and 1 percent from the divestitures,” said Cutler. “During 2014, our markets grew more slowly than we had expected. Despite that, operating earnings per share grew 13 percent, reflecting strong performance by our businesses as well as success in achieving the integration savings targeted from the Cooper acquisition.
“Our board of directors will address the first quarter dividend at its meeting later this month,” said Cutler.
“In 2015, we anticipate our organic revenues will grow between 3 and 4 percent,” said Cutler. “In light of the dramatic shifts in exchange rates during the second half of 2014 and carrying into 2015, we expect the impact of negative foreign exchange to be approximately 4 percent.
“In spite of the negative impact of foreign exchange and a higher anticipated tax rate, we expect that 2015 operating earnings per share will set another record,” said Cutler. “For the first quarter, operating earnings per share, which exclude an estimated $15 million of charges to integrate our recent acquisitions, are expected to be between $0.95 and $1.05 per share. For the full year 2015, we estimate that operating earnings per share, which exclude an estimated $45 million of charges to integrate our recent acquisitions, will be between $4.75 and $5.05 per share. Excluding the sizeable impact from expected negative foreign exchange during 2015, our operating earnings per share would be about $0.20 higher.”
Business Segment Results
Fourth quarter sales for the Electrical Products segment were $1.82 billion, up 2 percent over the fourth quarter of 2013. Organic sales grew 5 percent, partially offset by 3 percent negative foreign exchange. Operating profits in the fourth quarter were $304 million. Excluding acquisition integration charges of $17 million during the quarter, operating profits totaled $321 million, up 8 percent over the fourth quarter of 2013.
“Our bookings in the Electrical Products segment increased 4 percent over the fourth quarter a year ago,” said Cutler. “We saw particular strength in the Americas.”
Fourth quarter sales for the Electrical Systems and Services segment were $1.65 billion, a slight increase over the fourth quarter of 2013. Organic sales grew 3 percent, almost completely offset by negative foreign exchange. Operating profits were $242 million. Excluding acquisition integration charges of $8 million during the quarter, operating profits totaled $250 million, up 8 percent over the fourth quarter of 2013.
“Our bookings in the Electrical Systems and Services segment were flat with the fourth quarter of 2013,” said Cutler.
Hydraulics segment fourth quarter sales were $673 million, down 6 percent from the fourth quarter of 2013. Organic sales declined 2 percent and negative foreign exchange was 4 percent. Operating profits in the fourth quarter were $81 million. Excluding acquisition integration charges of $1 million in the fourth quarter of 2014, operating profits were $82 million, down 11 percent from the fourth quarter of 2013.
“The hydraulics market was impacted during the quarter by declines in global agricultural equipment production, as well as by continued weakness in Chinese construction equipment,” said Cutler. “Our bookings in the fourth quarter declined 3 percent compared to last year.”
The Aerospace segment posted fourth quarter sales of $456 million, an increase of 2 percent over the fourth quarter of 2013. Organic growth was 9 percent, partially offset by 6 percent from the two businesses divested in 2014 and 1 percent from negative foreign exchange. Operating profits in the fourth quarter were $70 million, up 19 percent over the fourth quarter of 2013.
“Aerospace bookings in the fourth quarter increased 6 percent over the fourth quarter of 2013,” said Cutler. “We were pleased with the strength in aftermarket bookings.”
The Vehicle segment posted sales of $965 million in the fourth quarter, up 4 percent over the fourth quarter of 2013. Organic growth was 8 percent, partially offset by a 4 percent negative from foreign exchange. Operating profits were $163 million, up 28 percent over the fourth quarter of 2013.
Eaton is a power management company with 2014 sales of $22.6 billion. Eaton provides energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton has approximately 102,000 employees and sells products to customers in more than 175 countries.
