CLEVELAND -- Eaton Corp. today announced net income per share of $1.57 for the third quarter of 2010, an increase of 38 percent from net income per share of $1.14 in the third quarter of 2009.

Sales in the quarter were $3.6 billion, 18 percent above the same period in 2009. Net income was $268 million compared to $193 million in 2009, an increase of 39 percent.

Eaton Chairman and CEO Alexander Cutler said, “Our third quarter results significantly exceeded our guidance. The results reflect the outstanding achievements of our employees around the world, who have capitalized on the continued rebound in our end-markets while realizing the benefits of the substantial changes in our cost structure implemented over the past two years.

“Our 18 percent sales increase in the quarter was due entirely to an increase in core sales, with a 1 percent increase from acquisitions offset by a 1 percent decline from exchange rates. Our end-markets increased 14 percent in the quarter.

“Our segment operating margin in the third quarter was 13.4 percent, just slightly below our record quarterly margin of 13.5 percent posted in the fourth quarter of 2007. Our third quarter margins increased significantly from the second quarter in Electrical Americas, Electrical Rest of World, Aerospace and Truck,” said Cutler “Our strong margin performance is particularly notable given that our revenues are still 17 percent below where they were in our peak quarter in 2008. Our operating cash flow in the third quarter was $420 million and free cash flow was $314 million.

“As we look at our end-markets, we believe the growth patterns we have experienced so far this year will continue,” said Cutler. “For the full year, we now believe our end-markets will increase 10 percent, 2 points higher than our expectations at the end of the second quarter, driven by higher growth in non-U.S. markets.

“We anticipate fourth quarter net income per share will be between $1.50 and $1.60 and operating earnings per share, which excludes charges to integrate our recent acquisitions, will be between $1.55 and $1.65,” said Cutler. “Accordingly, for the full year, we are raising our earnings guidance by 10 percent. We now anticipate that net income per share will be between $5.30 and $5.40, and operating earnings per share will be between $5.45 and $5.55. This full year guidance includes the recognition of 14 cents per share of tax expense in the first quarter associated with Medicare Part D.”

The Automotive segment posted third quarter sales of $390 million, up 20 percent from the third quarter of 2009. Automotive unit production in the third quarter grew 14 percent, with U.S. auto production up 27 percent and production outside the U.S. up 8 percent compared to the third quarter of 2009.

Operating profits in the third quarter were $39 million, an increase of 70 percent compared to the third quarter of 2009.

“Global automotive production declined slightly from the second to the third quarter, principally due to lower production in Europe and Asia,” said Cutler. "We expect stronger growth in the fourth quarter. For all of 2010, we now estimate our markets to grow 24 percent versus our expectation at the end of the second quarter of 17 percent growth.”

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