Eaton Corporation plc (NYSE:ETN) Just Reported And Analysts Have Been Lifting Their Price Targets

Investors in Eaton Corporation plc (NYSE:ETN) had a good week, as its shares rose 8.6% to close at US$270 following the release of its annual results. Eaton reported US$23b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$8.02 beat expectations, being 2.7% higher than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Eaton

Taking into account the latest results, the consensus forecast from Eaton's 17 analysts is for revenues of US$25.0b in 2024. This reflects a satisfactory 7.6% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to step up 15% to US$9.26. Before this earnings report, the analysts had been forecasting revenues of US$24.7b and earnings per share (EPS) of US$8.87 in 2024. So the consensus seems to have become somewhat more optimistic on Eaton's earnings potential following these results.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 8.7% to US$268. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Eaton, with the most bullish analyst valuing it at US$310 and the most bearish at US$200 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Eaton's growth to accelerate, with the forecast 7.6% annualised growth to the end of 2024 ranking favourably alongside historical growth of 0.8% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 7.8% per year. Eaton is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Eaton following these results. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Eaton analysts - going out to 2026, and you can see them free on our platform here.

You can also view our analysis of Eaton's balance sheet, and whether we think Eaton is carrying too much debt, for free on our platform here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.