Diversified industrial manufacturer Eaton Corporation (NYSE: ETN) posted some great numbers for 2Q 2008. Investors responded by pushing the stock down 8% as a result. Go figure. With the exception of its automotive segment, which saw a modest 2% decline in sales, all other divisions posted double digit sales increases with demand remaining strong going forward. 2Q sales increased 32%, net income increased 35%, while net income on a per share basis increased 24% The company posted these results despite the fact that oil prices increased 40% during the quarter.

The FAA recently awarded a $40 million contract for power quality equipment. The company's Hydraulic Launch Assist technology performed very well in tests on trash trucks. It reduced fuel costs by 25% and significantly reduced brake service costs. With diesel prices showing no signs of decline, demand for this technology will be very strong when it becomes commercially available in late 2008. CEO Alexander Cutter forecasts FY sales growth to be 3% in the U.S. and 5% internationally. FY operating EPS are forecast to grow 12-16%, resulting in EPS of $7.70-$8.00. At this rate of return, the stock is currently bargain-priced around $73.00

Eaton Corporation (NYSE: ETN) manufactures electrical systems and components for fluid power systems for industrial, automotive and aerospace industries. While the stock market continues to gyrate, Eaton continues to post solid results quarter after quarter. 4Q2007 results proved no exception. Across the board, numbers are up. Net income increased 6% to $256 million, sales grew by 10% due to both acquisitions and organic growth. Operating earnings increased 7% to $269 million. The story is the same for FY 2007 results.

The bulk of Eaton's growth and profits for 2007 came from outside the U.S., which remains a weak market, particularly in the NAFTA truck segment, which declined 14%. To offset this decline, European medium-duty truck production increased 12% and Brazilian agricultural equipment, still a small market, increased 63%. Electrical and fluid power segments each posted sales increases of 17%. Operating profits in these segments increased by 17% and 37% respectively. Aerospace segment grew by 6%.

Eaton CEO Alexander Cutler forecasts overall revenue growth at 25% for 2008, due both to organic growth as well as continued acquisitions. Operating earnings per share for 2008 are forecast at $7.75-$8.25. With the stock price right around $80 per share, coupled with an annual dividend of $0.50 per share, conservative investors may wish to take a look at Eaton as a safe place to park money.

Since August 2005, diversified industrial manufacturer Eaton Corporation (NYSE: ETN) has been rated a buy. This is not likely to change any time soon, as Eaton just posted record sales and net income for 3Q 2007. Sales were up 7% to $3.3 billion. One percent of that was from organic growth, 3% came from acquisitions and 3% from currency exchanges. Net income for the quarter was up 4% to $258 million, and net income per share was up 6% to $1.71 per share. Eaton managed to post these positive figures despite absorbing costs related to recent acquisitions, a 16% decline in its NAFTA heavy-duty truck production unit, continuing low demand for US residential construction, and a global credit crunch.

Eaton is still a buy. The company has settled its tax problems with the IRS in its own favor. Defense aerospace spending continues to increase at a measured rate, while commercial aerospace production remains strong. The downturn in NAFTA heavy-duty trucks has not come as a surprise and is partially offset by continued whopping increases in vehicle and farm equipment production in Brazil. The company sold off its car mirror control business for over $100 million.

Eaton CEO Alexander Cutler is in the enviable position of having to lower FY guidance slightly, while still beating guidance forecast issued at the beginning of the year. Now, 4Q net income per share is forecast in the $1.60-$1.70 range, and FY 2007 net income in the $6.50-$6.60 per share range, still $0.40 above expectations at the beginning of the year.

Diversified industrial manufacturer Eaton Corporation (NYSE: ETN) recently announced increases to both 2Q and FY 2007 guidance based on increases in sales growth. But these sales numbers bear investigating. According to 2Q 2007 earnings, sales increased 4% to $3.25 billion. But 3% of that growth was due to acquisitions, 2% was due to favorable exchange rates, and organic growth accounted for NEGATIVE 1%. Likewise, the EPS numbers bear scrutiny. 2Q EPS was $1.64, well ahead of the forecast $1.35-$1.45, but $0.17 of that differential was due to a tax adjustment, not to increased profitability. Nonetheless, Eaton has raised FY guidance by $0.30 to reflect FY EPS in the $6.75-$6.95 range.

Eaton CEO Alexander Cutler credits Eaton's diversification strategy and implementation of a program entitled Excel 07 for the company's positive performance. Upon closer investigation, these two programs resulted in an operating margin of 12.9%, exactly the same operating margin the company posted in 2Q 2006 without the benefit of these two initiatives. Some sectors of the company are posting good numbers. The electrical power sector posted a sales increase of 11%, and this was before the introduction of Eaton's hybrid truck power system went into production. Eaton electrical power quality deals primarily with non-residential customers, so it remains unaffected by the ongoing carnage in the US residential housing market. The fluid power sector, primarily hydraulics, is poised to post great numbers. Eaton just won two large military helicopter contracts totaling more than $220 million. The aerospace industry, both in the US and Europe, remains a lucrative customers for Eaton.

Eaton's stock has taken several hits recently, closing on 16 August at $85.12, down $2.63. Much of this loss can be traced back to negative publicity about continuing declines in Eaton's heavy-duty truck sector due to implementation of NAFTA regulations. But Eaton knew about these regulations well ahead of time and has been making strategic acquisitions in its other sectors to offset anticipated losses in the truck sector.

Industrial manufacturer Eaton Corporation (NYSE: ETN) posted good 1Q results. Sales for the quarter were up 5% to $3.2 billion, net income was a 1Q record $234 million, operating earnings increased 16% to $243 million, and net income per share rose 15% to $1.56. The numbers would have been even higher but for $0.06 per share acquisition and integration charges. Despite earnings decline in some business units, 1Q 2007 marks the 20th consecutive quarter in which Eaton has posted overall EPS growth in excess of 10%. CEO Alexander Cutler stated that Eaton Corporation is growing by increasing sales and by acquisition. This is a company that is worth a look.

Sales in the electrical unit were up 12% to $1.1 billion. Profits were up 16% to $122 million. Most of this increase was driven by increased sales in the commercial electrical market even as numbers in the residential electrical products declined. Eaton took a $2 million charge against earnings during the quarter to complete the acquisition of Aphel Technologies, a power distribution equipment manufacturer.

Growth in the aerospace sector was responsible for a 7% increase in Fluid Power sales, to $1 billion. European automotive hydraulics increased 2% while global hydraulics sales increased 7%. Profits in this business unit were up 20% to $128 million, minus $11 million in acquisition charges. Eaton forecasts this business unit to grow steadily in the U.S. market throughout the remainder of 2007, particularly with the acquisition of Argo-Tech, an aerospace fuel system company.

The automotive segment posted a sales increase of 2%, mainly due to growth in the European market, against an 8% decline in automotive production in North America. The implementation of cost control measures last year paid off this year with a 19% increase in operating profits to $63 million.

The only drag on earnings came in the truck segment with production and profits declines across the board. 92,000 truck units were manufactured in 1Q 2006 compared to 75,000 in 1Q 2007, and the numbers will fall even lower to 45,000 truck units in 2Q 2007. Operating profits fell 9% to $107 million as a result of cutbacks in production.

Despite problems in the truck segment, Eaton management has raised guidance for both 2Q and FY 2007. 2Q net income per share is forecast at $1.35-$1.45 and FY net income per share at $6.20-$6.40. These numbers are better than average earnings on a stock that closed at $92.97, up $.48 on 29 May 2007.