Eaton (NYSE:ETN) has been one of my favorite industrials for a while, and I can't say I regret those calls, as the shares have done quite well relative to other industrials (not to mention the S&P) over the last three months, 12 months, and three years. I've been particularly impressed by the company's execution on costs/efficiency; an effort that began a few years prior to COVID-19 but has continued to deliver better-than-expected results, even with the challenges of the pandemic and integrating a large deal.
Looking ahead, the valuation isn't the clear-cut bargain I wish it were, but the relative valuation is still fairly attractive. While I think it will take a few years for aerospace and oil/gas to fully recover, I don't see either market getting worse from here, and Eaton should also benefit from improvements in light vehicle and heavy vehicle production. Best of all is the leverage to electrical products, which gives Eaton exposure to a growing residential construction market, strong data center demand, healthy utility spending, and future investments in manufacturing and logistics automation, as well as green building retrofits.
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Eaton Still Standing Out On Execution And Strong Electrical Drivers
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