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Tuesday September 04, 2012
Eaton: Power up
by Jack Adamo, editor Insiders Plus  Eaton Corporation (ETN) is a diversified power management company. It is a global technology leader in electrical components and systems for regional and national power distribution grids. Warren Buffett is a long-time fan of the company, and it's easy to see why. It has a great long-term track record, a strong balance sheet, very clean accounting and is reasonably priced at 11-times trailing earnings. The company has approximately 73,000 employees in over 50 countries, and sells products to customers in more than 150 countries. It also makes hydraulics components, systems and services for industrial and military use, as well as truck and automotive drive-train and power-train systems. It is expected to grow EPS 11% between 2012 and 2013, which would give the stock a price/earnings-to-growth ratio of 1, which is a steal, especially for a company with such consistent growth. The shares have more than tripled in the last decade; dividend growth has been 12% per year, compounded, over the last five years, and its current yield is 3.3%. I'm not a fan of serial acquirers, but Eaton has a long history of successfully integrating smaller companies into its structure. The second quarter's earnings were three cents lower due to acquisition charges, but still came in at $1.12 -- 15.5% higher than last year's comparable quarter. In May, Eaton agreed to acquire Cooper Industries, a diversified global manufacturer of electrical components and tools with sales of $5.4 billion for 2011. At the close of the transaction, Eaton and Cooper will be incorporated in Ireland, giving it tax advantages it would not have in the U.S. In a rare show of approval for an acquirer, Wall Street actually bid up Eaton shares after the merger announcement. Due to my trepidation over the current state of the market, we will start with a small position. Buy Eaton Corporation up to $49. Reasons To Buy Eaton Corp:
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