“Factoring in the earlier than expected closing of the Tripp Lite acquisition and our strong first quarter performance, we now expect 2021 adjusted earnings per share to be between $5.90 and $6.30, up 24 percent at the midpoint over 2020,” said Arnold. “We anticipate adjusted earnings per share for the second quarter of 2021 to be between $1.45 and $1.55.”
The Hydraulics sale to Danfoss is expected to close in the second quarter and the acquisition of Cobham Mission Systems remains on track to close the beginning of the fourth quarter of 2021.
News Segment Results
Operating cash flow in the first quarter of 2021 was $260 million. Excluding $200 million of contributions to Eaton’s U.S. qualified pension plan, adjusted operating cash flow was $460 million and adjusted free cash flow was $341 million, representing a 62 percent increase over the first quarter of 2020.
First quarter segment margins were 17.7 percent, up 190 basis points over the first quarter of 2020, above the high end of our guidance range, and a first quarter record. This was the result of strong execution and ongoing improvements in the company’s cost structure from the multi-year restructuring program announced in the second quarter of 2020.
During the quarter, the company closed the acquisitions of Tripp Lite and Green Motion, and the acquisition of a 50 percent stake in HuanYu High Tech, adding new products and growth opportunities for the Electrical segments.
Craig Arnold, Eaton chairman and chief executive officer, said, “Our first quarter was stronger than expected, with organic sales well above the high end of our guidance range, segment margin at record levels, and strong cash flow. We are pleased with how rapidly our businesses are recovering towards pre-pandemic levels.”
The twelve-month rolling average of orders in the first quarter was down 5 percent, driven by declines in oil and gas markets partially offset by strength in data center, residential and utility markets. During the first quarter, the business experienced strong order growth of 7 percent over the first quarter of 2020. The March backlog grew 17 percent over March 2020.
Hydraulics segment sales were $561 million, up 11 percent over the first quarter of 2020, driven by a 9 percent increase in organic sales and positive currency translation of 2 percent. Operating profits were $84 million, up 53 percent over the first quarter of 2020. Operating margins were 15.0 percent, up 420 basis points over the first quarter of 2020.
Sales for the Electrical Global segment were $1.3 billion, up 10 percent over the first quarter of 2020. Organic sales were up 5 percent and positive currency translation added 5 percent. Operating profits were $213 million, up 28 percent over the first quarter of 2020. Operating margins were 17.0 percent, up 250 basis points over the first quarter of 2020.
The twelve-month rolling average of orders in the first quarter was up 1 percent, with particular strength in data center and residential markets. Orders increased 11 percent over the first quarter of 2020. Backlog at the end of March remained strong, up 23 percent over March 2020.
Sales for the Electrical Americas segment were $1.6 billion, down 9 percent from the first quarter of 2020, driven by a 14 percent reduction from the divestiture of the Lighting business. Organic sales were up 2 percent, the acquisitions of Power Distribution, Inc. and Tripp Lite added 2 percent, and positive currency translation added 1 percent. Operating profits were $332 million, up 8 percent from the first quarter of 2020. Operating margins were 20.5 percent, up 330 basis points over the first quarter of 2020.
The News Highlights
- Eaton reports solid results in the first quarter of 2021 and increases the outlook for 2021
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