Eaton Earnings Beat Estimates. Why the Stock Fell.

Coming into Tuesday trading, Eaton shares were up about 16% this year. (CHRIS DELMAS/AFP via Getty Images)

Key Points

• Eaton reported record adjusted quarterly earnings per share of $3.07 on sales of $7 billion, exceeding profit expectations but missing sales forecasts.
• The company’s stock fell 2.3% despite strong earnings, possibly due to a sales miss and fourth-quarter earnings guidance below analyst projections.
• Eaton’s Electrical Americas segment grew sales 15% year over year, while vehicle and e-mobility segments experienced accelerating declines.

Electrical equipment maker Eaton delivered better-than-expected third-quarter earnings that landed with a thud. The stock fell on Tuesday.

Shares traded as low as $352.10, but closed at $377.72, down 2.3%; the S&P 500 and Dow Jones Industrial Average fell1.2% and 0.5%, respectively.

The company announced record adjusted quarterly earnings per share of $3.07 from sales of $7 billion. Wall Street was looking for $3.05 and $7.1 billion.

A year ago, Eaton reported adjusted earnings of $2.84 from sales of $6.3 billion.

Third-quarter sales were a little below expectations, but profit margins made up the difference. Eaton’s segment operating profit margin was a record 25%.

Looking ahead, Eaton expects fourth-quarter earnings per share of $3.23 to $3.43. Wall Street is projecting $3.38 a share. The $3.33 midpoint is a nickel below that level. That could be one reason for the stock drop.

The sales miss didn’t help shares, either. Oxcap analyst Ben Uglow pointed out that organic growth of 7% year over year was a couple of percentage points below consensus expectations. He has an Underweight rating.

Along with earnings guidance, Eaton updated sales expectations. Management still expects 2025 sales growth of 8.5% to 9.5%, but declines in the company’s vehicle and e-mobility businesses are accelerating.

Those are the company’s two smallest segments, serving automotive and commercial vehicle markets. Its largest segment, Electrical Americas, grew sales 15% year over year and improved profit margins. Orders exceeded sales by about 10%.

Bernstein analyst Chad Dillard rates the stock Overweight. He was encouraged by solid order growth and management’s initial outlook for 2026. Market growth is expected to be 7%.

Overall, the report looks solid, with more growth tied to increasing U.S. demand for electricity. Investors, however, appear to have been looking for more than solid.

Write to Al Root at allen.root@dowjones.com