Eaton Poised For New Highs
Every now and then a company adapts to the environment and is able to see the road ahead. Eaton (ETN, $93.27, up $4.02) has done just that and now it is rewarding its shareholders. The company has slowly switched its focus from auto engines to “developing “green” engines for mass transit. Eaton is supplying the hybrid power system for the 500 hybrid electric vehicles that United Parcel Service (UPS,$70.54, up $2.14) recently ordered.
Eaton’s has grown internationally through acquisitions (11 in 2007) that is helping fuel its growth. In April, the company reported earnings of $247 million, or $1.64/ share. If you exclude charges, they actually hit the high end of their guidance of $1.70. Eaton also raised estimates for 2008 by a nickel to $7.80 to $8.30 a share.
The stock took a big hit from late December when it was at $100 to its $78 bottom in late February. Since then, Eaton has slowly proved to Wall Street that the synergies from these acquisitions are starting to pay off and investors are rewarding the stock. Want even more proof? Eaton’s CEO said he expects top line growth of 25% and nearly 20% of that will come from these acquisitions.
Was yesterday’s big move the one that kick-starts Eaton’s run towards a new 52-week high of $104? As much hype as this stock is getting you would think its Big Brown going for the Triple Crown (that would be June 7 my friends). And since I just mentioned June, I might as well tell you about the June 95 calls (ETNFS, $1.80, up $1.22) for Eaton. They were up 210% yesterday. They are still out-of-the-money but that will change if Eaton starts to race towards $100. Place your bets!
Rick Rouse
Rick@OptionsMentoring.com
Tags: Eaton, Eaton blog