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.