Should You Add Eaton Stock to Your Portfolio Before Q4 Earnings?

Eaton Corporation ETN is expected to report an improvement in its top and bottom lines when it reports fourth-quarter 2024 results on Jan. 31, before market open.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The Zacks Consensus Estimate for ETN’s fourth-quarter revenues is pegged at $6.35 billion, indicating a 6.4% increase from the year-ago reported figure.The consensus estimate for earnings is pegged at $2.81 per share. The Zacks Consensus Estimate for ETN’s fourth-quarter earnings indicates year-over-year growth of 10.2%.Image Source: Zacks Investment ResearchEaton’s Solid Earnings Surprise HistoryEaton’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.63%.Image Source: Zacks Investment ResearchWhat the Zacks Model UnveilsOur proven model does not conclusively predict an earnings beat for Eaton this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you can see below.You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Eaton Corporation, PLC Price and EPS Surprise Eaton Corporation, PLC price-eps-surprise | Eaton Corporation, PLC QuoteEarnings ESP: Eaton has an Earnings ESP of 0.00%. Zacks Rank: Eaton currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.Factors Likely to Have Shaped ETN’s Q4 EarningsElectrification, megatrends, energy transition and reindustrialization are driving growth across nearly 75% of ETN’s end markets. These are likely to have boosted fourth-quarter earnings. Courtesy of the mega projects, the backlog of the company has increased substantially.Eaton has been capitalizing on the global growth trends of electrification and digitalization. Its ability to provide urgent power management challenges results in organic growth in most of its segments, which is likely to have benefited earnings.The ongoing improvements in the artificial intelligence-driven data center space are likely to have driven Eaton’s earnings as huge power requirements from these centers continue to generate interest in efficient power solutions.Eaton consistently invests in research and development activities, which improve the quality of its existing products and create new products for its customers. The ongoing development allows ETN to get more orders and expand its market reach, which boosts its earnings. ETN expects its organic revenues to improve 6-7% in the fourth quarter.Eaton offers the broadest portfolio of efficient electric solutions for Commercial & Institutional buildings. This also consistently contributes to the earnings of the company. The ongoing buyback of shares will also have a positive impact on earnings.Eaton Stock Trading at a PremiumEaton’s stock is currently overvalued compared to its industry on a forward 12-month P/E multiple basis (P/E F12M), as shown in the chart below. ETN is currently trading at 25.67X compared with its industry average of 23.97X.Image Source: Zacks Investment ResearchSome of the other operators in the same space, like Illinois Tool Works ITW, and Parker-Hannifin PH, are trading cheaper compared with Eaton. The shares of ITW and PH are trading at forward 12-month P/E multiples of 24.22X and 23.61X, respectively.Investment ThesisEaton benefits from strong demand for the products supplied through its different segments. The company is upgrading the quality of its products through research and development work. Proper power management is essential for the successful performance of a project, and Eaton continues to provide the required solutions to its customers.Eaton operates in nearly 175 countries and has manufacturing facilities worldwide. This definitely enhances the revenue stream of the company but exposes it to unpredictable geo-political risks, which can result in the cancellation of orders and impact operations.Wrapping UpEaton’s rising earnings estimates and improving backlog, will continue to boost the performance of the company. Rising demand and increasing backlog signify a continuous flow of orders.Rising earnings estimates and strong contributions from organic assets make the stock attractive.However, it will be wise for the investors to remain invested in this Zacks Rank #3 stock, given its premium valuation and look for a better entry point latter.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Illinois Tool Works Inc. (ITW): Free Stock Analysis Report Parker-Hannifin Corporation (PH): Free Stock Analysis Report Eaton Corporation, PLC (ETN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks