For many investors, the trajectory of a stock’s price is a crucial indicator of its potential. This movement not only affects investment portfolios but also serves as a benchmark for comparing returns across different sectors and industries. The allure of missing out, or FOMO, is especially potent in the investment world, particularly when it comes to tech giants and popular consumer-facing companies.
If you had invested in Eaton Corporation (ETN) ten years ago, would you be reaping the rewards today? Holding onto ETN for such a long period might not have been easy, but the potential gains are worth exploring. Let’s delve into Eaton’s core business operations and analyze its performance over the past decade.
Based in Dublin, Ireland, Eaton Corporation plc is a diversified power management company and a global technology leader in electrical components and systems. Its products are sold in over 175 countries, and it boasts a workforce of more than 85,000 employees. Founded in 1911, Eaton has a long history of innovation and growth.
Eaton’s current reportable segments are:
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Electrical Americas:
This segment comprises sales contracts primarily for electrical and industrial components, power distribution and assemblies, residential products, single and three-phase power quality, wiring devices, circuit protection, utility power distribution, power reliability equipment, and related services, mainly produced and sold in North and South America.*
Electrical Global:
Similar to Electrical Americas, this segment focuses on the same activities but operates outside of North and South America.*
Vehicle:
This segment is divided into Truck and Automotive subsegments. The Truck subsegment designs, manufactures, and markets powertrain systems and other components for commercial vehicles.*
Aerospace:
Eaton is a leading supplier of aerospace fuel, hydraulic, and pneumatic systems for both commercial and military applications.*
eMobility:
This segment focuses on two key technologies within electric vehicles: Power electronics & conversion and Power distribution & circuit protection.These segments contributed 44.8%, 25.4%, 15%, 12%, and 2.8%, respectively, to Eaton’s 2023 revenue.
The Power of Patience and Research
Building a successful investment portfolio requires a blend of research, patience, and calculated risk. If you had invested in Eaton a decade ago, your investment would likely be looking quite healthy today. Our calculations show that a $1,000 investment made in October 2014 would be worth $5,177.51 as of October 4, 2024, representing a gain of 417.75%. This return excludes dividends but incorporates price increases.
In comparison, the S&P 500 rose 189.65%, and the price of gold increased 114.20% over the same period. Eaton’s performance significantly outpaces these benchmarks.
Eaton’s Future Prospects
Analysts are optimistic about Eaton’s future prospects. The company benefits from its robust research and development efforts, which enable it to develop innovative new products. The rising demand for AI data centers and contributions from Eaton’s organic assets further bolster its growth potential. Eaton is actively expanding through acquisitions, and its strategy of manufacturing in the regions of its end markets has helped to reduce expenses.
Reindustrialization and megatrends are expected to create additional opportunities for Eaton. Eaton’s shares have outperformed the industry in the past year, and our model projects revenue growth in the 2024-2026 period.
Challenges on the Horizon
Despite its strong performance, Eaton faces potential challenges. Its global operations expose it to unpredictable currency translation, cybersecurity threats, changes in tax rates, and security breaches, which could impact its operations. Shortage of raw materials and supplier insolvencies could also disrupt production and operations.
Positive Signals
In the past four weeks, Eaton’s shares have gained 14.43%. There have been six higher earnings estimate revisions for fiscal 2024, compared to none lower. The consensus estimate has also moved upwards.
Eaton’s past performance and current growth trajectory suggest a promising future. Its commitment to innovation, strategic expansion, and adaptability positions it well to navigate the evolving business landscape. As with any investment, it’s important to conduct thorough research and consider both the potential upside and downside risks before making any decisions.
