Sales and earnings increased for Eaton Corp. in the third quarter this year – up 7% to $3.3 billion and 4% to $248 million, respectively – compared to the same period in 2006, with its truck-related component business maintaining strong margins despite the falloff in truck sales.
“Sales growth of 7% in the quarter consisted of 1% from organic growth, 3% from acquisitions, and 3%t from exchange rates,” said Alexander Cutler, Eaton’s chairman & CEO. “Our improved geographic and business balance allowed us to post record earnings per share in the third quarter despite a 55% decline in the NAFTA heavy-duty truck market. We are particularly pleased with our strong margins … in [our] truck [division] at 17.6%.”
Despite those higher margins, Eaton’s operating profits at its truck division dropped 23% to $95 million on 16% lower sales of $541 million in the third quarter this year compared to the same period in 2006. NAFTA heavy-duty truck production dropped 55%, medium-duty truck production declined 38%, European truck production fell 4%, and Brazilian vehicle production increased 23%.
“Third quarter production of NAFTA heavy-duty trucks totaled 45,000 units, the same as in the second quarter,” said Cutler. “We expect that production in the fourth quarter will rise only modestly and that, as a result, full-year NAFTA heavy-duty truck production will be about 210,000 units.”
Cutler added that due to the economic uncertainties triggered by the late summer turmoil in global credit markets, Eaton’s overall markets in the fourth quarter would not improve as earlier anticipated.
“The NAFTA heavy-duty truck market is not rebounding as expected,” he said. “The greater weakness in U.S. housing starts is negatively impacting our residential electrical, hydraulics construction equipment, and NAFTA automotive businesses. In light of the conditions in our end markets, we anticipate that our sales in the fourth quarter will be about the same as in the third quarter.”