Saturday, August 1, 2015

Seeking Alpha: Eaton Seeing The Headwinds Blowing Harder

This hasn't been a quarter of good news for the industrial sector, and Eaton (NYSE:ETN) is no exception in that regard. In addition to a worsening short-cycle industrial environment and worries about the health of capital investment in China and auto/truck assembly in the Western hemisphere, there are real challenges in hydraulics and reason for concern in the company's Electrical Products margin structure.

The other thing that worries me about Eaton today is the announcement of another restructuring program that seems (to me, at least) to hint that this is not a lull in the company's end-markets, but potentially a longer downturn. Eaton does look undervalued today, but I have some concerns as to whether the company can meet my FCF margin improvement targets. General Electric (NYSE:GE) and Honeywell (NYSE:HON) seem like safer picks relatively speaking, but Eaton does still hold some appeal.

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Eaton Seeing The Headwinds Blowing Harder

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