CLEVELAND — Diversified industrial manufacturer Eaton Corp. posted an overall net income per share of $1.30 for the third quarter of 2005, an increase of 19 percent over net income per share of $1.09 in the third quarter of 2004.
The company’s truck segment posted sales of $601 million in the third quarter, up 24 percent compared to 2004, and recorded operating profits of $119 million. Operating profits before restructuring charges were $120 million, up 29 percent from results in 2004. NAFTA heavy-duty production was up 14 percent compared to 2004, NAFTA medium-duty production was down 11 percent, European truck production was up 4 percent and Brazilian vehicle production was up 6 percent.
“Third quarter production of NAFTA heavy-duty trucks totaled 86,000 units, about the same as in the second quarter,” said Alexander Cutler, Eaton chairman and CEO. “We expect that for the full-year NAFTA heavy-duty production is likely to be about 325,000 units.
“We were notified during the quarter that Eaton has been selected by the National Highway Transportation Safety Administration to be part of a group of companies to evaluate crash-avoidance technologies for both cars and commercial vehicles. The government has budgeted $31 million for this four-year study.”
Eaton’s Automotive segment posted third quarter sales of $436 million, 1 percent above the comparable quarter of 2004. Automotive production in NAFTA was up by 3 percent while European production was down 3 percent over the third quarter of 2004. Operating profits were $50 million. Operating profits before restructuring charges were $51 million, up 2 percent.
“Our Automotive business recorded solid margins despite sluggish automotive markets,” said Cutler. “We are expecting that the markets in NAFTA and Europe will be down slightly over the balance of the year.
“We announced during the quarter we had started production on a new combination supercharger and turbocharger system for Volkswagen,” said Cutler. “The combination allows an automaker the option to provide a smaller displacement gasoline engine in place of a turbo diesel while improving performance, and reducing fuel consumption and emissions.
Cutler mentioned that during the quarter, Eaton closed on the acquisition of specialty differential manufacturer Tractech Holdings and the filtration business of Hayward Industries, as well as two new acquisitions in its aerospace business. The annualized sales of all acquisitions closed and announced so far during 2005 total approximately $580 million.
“(The Tractech Holdings) acquisition allows Eaton to expand our traction modifier business to off-highway vehicles, a diversification beyond our traditional light truck market,” said Cutler.
Overall, Cutler said the company enjoyed a strong third quarter with sales growth of 10 percent in the quarter, consisting of 7 percent from organic growth, 1 percent from acquisitions and 2 percent from exchange rates. The organic growth was comprised of 4 percent in our end markets and 3 percent from outgrowing Eaton’s end markets.
“We expect our end markets to grow about 4 percent in the fourth quarter,” said Cutler. “The electrical markets are improving and the truck markets remain very strong, while some segments of the mobile hydraulics and automotive markets are weakening. We are pleased with our third quarter segment operating margin, which increased about 1 percentage point over the margin in the third quarter of 2004.
“We anticipate that net income per share for 2005 will be between $5.10 and $5.20, and accordingly we anticipate that net income per share for the fourth quarter of 2005 will be between $1.25 and $1.35. Operating earnings per share, which exclude restructuring charges to integrate our recent acquisitions, are anticipated for 2005 to be between $5.25 and $5.35, with operating earnings per share for the fourth quarter of between $1.30 and $1.40.”
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