While it was lauded at the time, Eaton’s (ETN) 2012 purchase of Cooper Industries was even smarter than people realized. With the $12 billion buy, Eaton managed to nearly its doubled sales as well as transform its business mix so that revenues continue to come in no matter what stage in the business cycle we’re in. Additionally, the buy put ETN into the forefront of some pretty high-tech and high-growth markets such as energy efficiency, oil & gas and waste-water operations.
Those businesses complement its more traditional aviation, electrical grid and hydraulic offerings.
Eaton’s sales mix is now almost evenly split between U.S. and international operations, making ETN a great play on the overall strengthening economy. The firm has already seen boost confirming that fact. Overall orders across the bulk of its business lines during the third quarter ticked up. Analysts expect that trend to continue when the firm releases its fourth quarter numbers in early February.
Currently, ETN shares are trading a forward P/E of 15.75 and dividend yield of 2.2%. However, Eaton has managed to grow that dividend around 16% annually and is expected to grow profits around 18% in 2014. That makes its valuation quite nice for investors.