Bernstein: Eaton’s global electrical business leads in the third quarter; preliminary 2027 outlook points to growth of about 11%

Third-quarter results beat expectations: what stood out?

Eaton reported third-quarter revenue of $8.95 billion, 5% above market consensus, with organic growth of 19%; adjusted earnings per share were $3.68, 4% above consensus.
The global electrical business stood out: revenue of $2.73 billion and segment profit of $576 million exceeded market expectations by 13% and 18%, respectively; organic growth was 27%, and the margin was 21.1%, about 0.9 percentage points above expectations.
Boyd achieved triple-digit year-on-year growth in both revenue and orders in the third quarter, and its backlog tripled, making it a standout source of growth in the global electrical business.

Data center orders in the electrical business more than doubled year on year on a rolling 12-month basis, while third-quarter data center revenue rose about 65% year on year; both orders and revenue indicate expanding demand.
Organic orders in the Americas electrical business grew 39% on a rolling 12-month basis, with a book-to-bill ratio of 1.3 times; backlog was $16 billion, up 33% year on year. Organic orders in the global electrical business grew 51% on a rolling 12-month basis, and backlog rose 121% year on year.
The Americas electrical business’s third-quarter margin was 29.8%, up 2.3 percentage points sequentially but still about 0.25 percentage points below market expectations; strong demand has yet to bring the metric above expectations.

The company raised its 2026 adjusted earnings per share guidance to $13.70–$13.80, with the midpoint 1.5% above market consensus; full-year organic growth guidance was raised by 2 percentage points to 14%, but remains 0.4 percentage points below consensus.
Full-year organic growth guidance for the Americas and global electrical businesses was raised by 4 percentage points each to 19% and 16%, respectively, about 2.4 and 2.8 percentage points above market expectations. Full-year segment margin guidance remained at 24.3%, while the midpoints of operating cash flow and free cash flow guidance also remained at $5.2 billion and $4.1 billion, respectively.
Fourth-quarter adjusted earnings per share guidance is $4.05–$4.15, with the midpoint in line with market expectations; organic growth guidance of 14% is 1.13 percentage points above consensus, but segment margin guidance of 25.6% is about 0.4 percentage points lower.

Management’s preliminary assumptions for end markets in 2027 point to growth of about 11%, above the roughly 10% in 2026. Supporting factors include Boyd’s growth being included in organic growth from March and the expected separation of the Mobility business in the first four months of 2027; end markets such as commercial and institutional buildings, industrial facilities and commercial vehicles are expected to improve year on year.
Bernstein rates Eaton Outperform with a $534 price target. The firm calculates the target by discounting a valuation of 28 times its 2030 earnings per share forecast, equivalent to about 33 times its 2027 earnings per share forecast; disruptions to data center construction and lower-than-expected growth in electricity demand or utility capital spending are among its principal downside risks.