ETN – Market expectations are for Uniform ROA to expand to new peaks, but management may have concerns about growth, supply chain, and restructuring

January 7, 2022

  • Eaton Corporation plc (ETN) currently trades above corporate and historical averages relative to Uniform earnings, with a 27.9x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to expand to new peaks of 27%, accompanied by 3% Uniform asset growth.
  • Meanwhile, analysts expect Uniform ROA to improve to 22% in 2022, accompanied by 1% Uniform asset growth.
  • If sustained going forward, these levels would imply a stock price closer to $128, representing approximately 25% equity downside for the firm.
  • Moreover, the firm’s most recent earnings call suggests management may have concerns about growth, supply chain constraints, and restructuring.

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