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Eaton Corporation plc Yearly Results Just Came Out: Here's What Analysts Are Forecasting For Next Year

Investors in Eaton Corporation plc (NYSE:ETN) had a good week, as its shares rose 8.5% to close at US$102 following the release of its annual results. It looks like the results were a bit of a negative overall. While revenues of US$21b were in line with analyst predictions, statutory earnings were less than expected, missing estimates by 4.8% to hit US$5.25 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.

Check out our latest analysis for Eaton

NYSE:ETN Past and Future Earnings, February 7th 2020
NYSE:ETN Past and Future Earnings, February 7th 2020

Taking into account the latest results, the 22 analysts covering Eaton provided consensus estimates of US$20.4b revenue in 2020, which would reflect a discernible 4.7% decline on its sales over the past 12 months. Statutory earnings per share are expected to accumulate 8.4% to US$5.72. In the lead-up to this report, analysts had been modelling revenues of US$20.4b and earnings per share (EPS) of US$5.73 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

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Analysts reconfirmed their price target of US$106, showing that the business is executing well and in line with expectations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Eaton, with the most bullish analyst valuing it at US$120 and the most bearish at US$79.00 per share. 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.

Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 4.7% a significant reduction from annual growth of 0.008% over the last five years. Compare this with our data, which suggests that other companies in the same market are, in aggregate, expected to see their revenue grow 2.7% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - analysts also expect Eaton to grow slower than the wider market.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$106, with the latest estimates not enough to have an impact on analysts' estimated valuations.

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 2022, 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.