Eaton Hitting Its Marks, But Still A Controversial Name

This fourth quarter earnings and guidance season has gone a little better than expected, with many companies having fine-tuned their guidance before the end of 2018 and defanging some of the potential disappointment here in January and February. Even so, there is still a lot of uncertainty regarding the health of the U.S. and global economies, with multiple multi-industrials (including Honeywell (HON), Illinois Tool Works (ITW), and 3M (MMM) ) establishing some rather low numbers for the low end of their 2019 growth outlooks.

I continue to like Eaton (ETN), even if more on a relative, “it’s not that bad” basis. I am definitely concerned about the risk of slowing demand in “general industrial”, trucks, off-road machinery, and non-residential construction, but management’s guidance for the year was fairly encouraging and markets like aerospace and data center are still looking healthy. With skepticism already seemingly built into the valuation, Eaton is a name that could surprise if 2019 proves to be better than expected for the U.S. and global economies.

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Eaton Hitting Its Marks, But Still A Controversial Name