Eaton (ETN) 2 Nov 212021 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Eaton Third Quarter 2021 earnings call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host Senior Vice President of Investor Relations, Yan Jin. ahead. go Please

are I'm Chief Investor guys. for Eaton Vice Executive me Senior Third CEO, Chairman Good Tom Officer. and Thank Yan you of Okray, today With Call. Relations. XXXX President us Arnold, all President our Quarter and and morning, Vice Earning Jin, Craig Financial for Eaton's joining

highlighting in the performance agenda includes Our Company's today opening the remarks quarter. by Craig, third

Craig sales posted EV the to statements available 's be you to the our past calls, forward-looking be end are As earnings and of Company appendix. free accessible adjusted that at we This the and today the today website is per The call we go done have are - our therefore There and like adjusted eaton.com. cost including future cash this replay. presentation comments. taking our measures. we'll website related including release it statements. on An on price through comments remind the of I questions and the flow, expected would GAAP @www. recon non share, results presentation, and will of have our been for will in will other

from materially turn it in over a uncertainties that differ With will I our presentation. may that, projected of are earnings to results risks actual future due to described our range Our wide and release and Craig.

in margins focused we with posted what row, quarter, strong the quarter on in of It XXX revenue, -- of highlights incremental QX. It and the challenges controlling the but undertaken, Okay. On our segment still And and growing record by across the the we favorable supply despite on you portfolio results the we'd pleased was that X% an did points X as at businesses. as we're with for increase delivered chain is orders constraint adjusted programs. top inflationary posted environment, record actions And rein, we over restructuring savings the which had for an we mitigate quarter. year. EPS from delivered Overall also could we're in all-time quarter demand well-publicized record Thank the Electrical in impact of pleased our you. this did to were very record our margin our XX% And see strong. from that remains expected QX, very a were an XX.X% cost, we our segment, a all in that on will We And growth our as have page in basis an took prior while to margins, due we third bit start quarter. help in control. well changes have in can America have we revenues noting in than and backlog. to execution record team $X.XX. the all-time Supply for see, chain of of lighter in mix strength

another XX% than up our basis were rolling more electrical backlog orders the For XX-month was all-time overall, up XX%, businesses and record.

X, Page I'll here. on few a Next points summarize results note our QX just we and

operating growth, leverage reflects by increased which operating revenue our XX%, we portfolio X% our our First, benefits profits strong actions. and from

hydraulics. are the of were margins our revenues. the which that team businesses increased a earnings of higher our margin, collection did hydraulic have lower-than-expected range We're fully the our with XX and naturally last, consistency. was job executing, an offset And XX.X% of say above guidance Second, our have to higher XX.X well revenue by more by despite as outstanding replaced pleased X%, revenues of growth, acquisitions to I'd sale of

X%, to our and sales utilities. centers and including Electrical X, of data driven Moving have X% page in the Tripp strength offset large were Lite. residential from results of partially projects was sales up X% Organic by we n growth and organic Revenues markets, the to by America industrial acquisition in segment. weakness

mentioned impacted I chain earlier, by supply constraints. revenues As were

QX. is are highlight biggest and backlog in better organically general up XX-month at will basis segment And segments XX% were in basis, supply Our to to getting was and impacted feeling. to in expect Both margins and of the especially say the strong This our last XX.X%, points more than rolling and chain constraints orders up good suppliers that backlog. unique from be America a job in encouraging we're but expectations into On separate price supply up offset in is the expectations and continued acceleration inflation. doing our addressing up support and Electrical consistent segments in from that continued all do mis future I'd up residential a was and is these XX naturally this growth signs QX. be an markets. QX. from this with Operating were to who I'd business. XX% the this by strongest disproportionately and say pushed were XX% X% from we're utility a shipments The were simply QX. to to impactful orders from few actually year other We're challenges quarters.

were our growth all added really summarize currency segments which electrical markets end strong just with page strength board. XX% results, Turning was say in X%. I'd we and the X, across broad to Organic global

control, leverage, operating from again, by and strong margins strong organically up XX-month We was Orders institutional also the incremental at very commercial, in cost record markets. the a in all-time margins had actions. XX% our were rolling levels. backlog The particular very once quarter strength XX%. restructuring of basis, of industrial, savings, nearly driven posted performance record and segment, and on XX.X% more strong, and volume with XX% up America than Like is margin

organic built of a two our the points. businesses. growth you electrical by margins Before we summarize which the add strengthens performance solid businesses, X%, move basis backlog, future quarters for they here's to I'd the of delivered a sizable improved our XXX the outlook industrial When and way together,

balance, set on a electrical of say strong I'd results for businesses. very our quarterly So

This the for organic exceed been XX% markets. of last margin business. confidence gives the points partially points targets incremental set In offset which financial by mix also continue a Operating that were we have segment. X% were were as And Mission to quarter, result, primarily aftermarket the that Moving this up Revenues again, performance X, from had favorable margins where and And from we XXX the military once of in restructuring us Cobham from from and from commercial growth strong organic, were savings or And and full we'll the of higher XX% commercial basis was Systems, very have the the the financial currency. Organic is Mission pleased quarter Cobham taken. by of as we've XX%, X% QX strong basis to aerospace part our due results the of smoothly. acquisition was year, in the integration Company. the process by business performance sales first going way, that actions Systems, weakness we're up XX% very with driven XXX from sequentially. markets, aerospace page meet margins the to segment. markets growth primarily and recover,

XX-month and X%. the up with signs On both has the trending we're backlog a and seeing rolling primarily in segment orders business to X% strength we basis, positively. increased segment As look encouraging now of jet our recovery future, by were orders backlog in this with

America the class were truck Next, solid on generated aware vehicle page in weakness of X, strong And X XX% growth segment. impacted North that and in our constraints. we markets. of offset we very increased like business XX% incremental as has vehicle America in of America all margins margins you're severely vehicle than strength well with result been have production, South Organic Operating than North chain revenues supply more more by XX%. light it and

also favorable strong -- cars. as light some truck to business some sales prior our more up and our North ties aftermarket favorable mix and strong and small aftermarket, vehicle specifically XX% benefited SUVs of the with In customers, borrower programs from in content, mix at pickups addition full-size motor where America SUVs margins. quarter, more of were the fewer And America, had also vehicle we from benefited attractive North business execution,

restructuring mix, and growth from good volume to savings good contributed all very here. multiyear. program the So operating results quarterly strong

And will all the results semiconductor vehicle given segment, business, constraints as X, of see chain eMobility by sell revenues of increased will financial more here impacted significantly this we've you supply to where that Like well. page read in organically. nature the shortages about. that we the that our reduce levels by the segment, customer were they Turning our X% products production

to due associated programs. margins up is startup backlog our a once result, and significantly a IRD negative were with Operating again, X.X%, here. costs investments new As heavy

the QX million now with We XXXX. at X% in continue margins up to our long-term continuing pleased With we and XXXX. has to $XXX in to revenue one QX, expect year we update see XXXX, $X And operating supply by we of progress to mature expect organic $X of targets into which for in constraints billion an of XX, growth organic which in revenue. this positions programs ramp a to significant well revenues us achieve business, our worth be nearly page On growth revenue overall chain for provide year. XX% the

growth. X% we America expect Electrical For to X%

X%, guidance which we're the to You'll which margin I'd for margins organic flat are Despite outstanding segments a the guidance to for see markets reductions note had points, is roughly is And of be but is well, QX. revenue solid inflationary revenue X% military approximately strength in with current weakness the XX to performance lower operating to expected step just revenues offset strong given slightly incremental guard in this actually commercial XX% in being from that, environment. other we're some from X% XXXX, increasing generate our in on guidance minor basis by naturally track as Organic the And XX.X% by outlook, markets. implied in note growth XX%. aerospace up QX we with minor.

guidance year. items the have Moving to of page we for the XX, remaining our

year challenges. We $X.XX significant the At EPS between well. our And represents also from delivering as chain what the expect strong margin pleased last historic midpoint, XX% performance up I'm guidance. $XX.XX. supply call this XXXX. increased margin at to over are have We're full-year basis in XXX face growth the the midpoint of points doing operating improvement businesses adjusted we we of

million activities, $X.XX, more $XXX active M&A and lastly, we deliver to guidance includes now earnings and an and segment And again, repurchase with to a be orders revenue $X.X points margins. X% share growth, organic Next, once prior Overall, expect basis growth good between margins between and $XXX and X%, between execution, of million. given QX allowing increase at XXX us strong strong between year. XX.X%, revenue XX.X% record versus midpoint XXXX the solid and our

electrical page Next proud we But preliminary XXXX actions and on to want We lastly for and provide can our which our XX, our margin aerospace expecting from good business. and that year. commercial more and expect help in also I'd here in we And on benefits growth the next performance. see, elect we on XX, And guidance record share growth provide of of our and very provide some And assumptions industrial We'll here. page color to for quarter vehicle to certainly data-centers growth pricing of I'm want results, markets, we're facilities, did particularly thoughts see nearly our all our attractive as our some some would with preliminary growth markets. carryover did detailed just say, strong should when first in business, provide and we taken, year-over-year assumptions organic you also thinking -- XXXX. summary February. all in revenue end-market our in

chain and team better. and that, manage even secular And demonstrated pressures, maybe still EPS. out and just of or energy electrification, as improve transition, we supply growth Our through can margins expected, digitalization operating has are challenging trends a the inflationary long-term environment, we constraint, playing

momentum today. higher-margin, track and XX% We with EPS adjusted a year. transformative growth. great to also QX of on Management. XXXX cyclical into deliver have terms Company We're Portfolio And we're growth, very our double-digit Eaton performance, less well organic as the And and with higher-growth, for strong strong year-to-date I'd see into year in XXXX revenue also and we going add, next

improvement XX% you'll year, to have a the order and markets beginning growth of we recovery. We we have medium-term many X revenue And poised annually, EPS. growth, full to at points end said annual adjusted strong XX the and X% our to are basis that in margins, organic backlog, growth XXX targets for recall XXX of of in

over with evaluating to ahead of and I'd session turn Q&A. And progress that up that open I'm And in, running Yan the we're it expectations. our back so about summary, X-year for pleased say to to

great. Craig. Okay, Thanks,

to the operator the please Q&A instructions. one your everyone the today, and corporation. section will turn For for Thanks I limit over to that, follow-up. With one your to question give you it question

[Operator Instructions].

Our Please of first the with line question from Ritchie, Sachs. Joe comes ahead. go Goldman

morning, Thank everyone. you. Good

Joe. morning, Good

you better range us XXXX to of of X% I slightly X and next organic should fair across backlog or our up give Electrical a given the be business know Electrical your I you Craig, very this mean, business? to seeing or commentary assume guess, it business I with way year, want XX%,. some the the give at in minimum, is just on maybe X in commentary us growth being are to exact framework the at context to expectations February. -- what just for the long-term to X% that, in

things higher all back for you to the that certainly, there's case as mean, hedge great growth recognizing world business Company, look for the those targets I of a by you order example we we're the recall don't in QX out the numbers. laid backlog take than And And happen you'll out. running that numbers that a Joe. in and the businesses a And for we make corporate that numbers uncertainties also level, intake, better way some a XX% can building at are supply of up X% there. appreciate if often expect. is the towards and certainly these that with the performance that at year those constraints I number the you performing the always laid we anticipate of chain X% this question, growth business and of the that

of plans think, supply that make. today's the better And we given could we that. in those be chain especially suggest we're are that. But yes, certainly that performance planning in electrical have a that there's so assumptions And reasonable uncertainties still with, for to segments could possibility think internal I But than upright. better environment, number the perform again, once purposes, you dealing still would

this conversation And And your talking prices just this fair. how own for topic you following up plays we conference the in XXXX, That's pricing, a to about the there come and you mechanisms Thank system. guess just as key across I talk in the you. about can maybe about call out little maybe Obviously, far. bit expect think through much pricing how

will talked Pricing offset price. be And as as we our our we businesses bit about the continues well. Laguna to Conferences at a fully with that expectation inflation little

so dealing supply my say to thinking I'd really in changed probably given all pricing. living and with get and hasn't it's certainly it's where we're in environment probably respect to of our career are We an but say price, today never it's easier easy I'd today professional with the constraints some evident, that chain that

mechanisms We place. have in good

pattern by typically the continues inflation a by upon And we had inflation go additional we large, serving. the But which that. market others, we would through of depending market as came have like result, to or experienced and pricing for Our X naturally originally a price. quarter we this than We as QX lags expect more we're anticipated. to have segment and

a expectation offset year. to By we're would to again, of a what on fully little large, tracking it. our more is XXXX, we tailwind going year. And to we the inflationary next to As maybe pressure inflation year. that's we it's offset and look long-term versus than fully price And bit this forward for experienced to once this that expect add

Thank, you.

question next Bank from comes Please with Andrew Our Obin America. ahead. of go

Good morning.

Good morning.

revenue on How care you quantify much particularly to I build your think chain Joe's you it. in to to question. the but quarter, North could supply Just impact challenge alluded America? it, third in if

versus Americas if balance in Certainly Joe. question, some quarter. business electrical grew take at combined the but the had that commentary, of look We Electrical in below t; business, performance appreciate in very biggest is a which Global a we I I'd the have Yeah. unique what we in our X% constraints. where that our different really we you in resulted anticipated. number supply And mentioned opening business being revenues my chain clearly suppliers our on

And so as try we to impact think quarter. about the and in it you quantify the

Our backlog grew by the quarter in million. $XXX

-- back the look magnitude, you simply north in say the we of could If in shippable you order look log piece revenue, its that shippable of at piece $XXX that quarter call $XXX of million, at something if the the it let's million itself. quarter,

have very growth Electrical X% for a number in business in So could chain I supply the constraints. we but say, would America quarter posted, easily the the

backlog in a Wow, XX%, number thank normal should XX%, normally then actually a you. because up talked our backlog had is focus of how know we that short-cycle about just XX%. just we think And companies more about for versus of coverage

does guys it our it Thank about to more of or mean, yours much terms As the you uncertainty? you about Because world, more backlog. so visibility you. in of think think care unusual for internally? like How business guys do so actually

that see more clearly We has it visibility.

And typical a XX% to in for the the about of with our today end year, in at think of the that. say, year you high orders into, we're would year upcoming XX% very certainly let's the we backlog. running go If

so and in we're can a imagine these a in and And is customers line. so and you and get field little getting, the or second extremely channel that we're a We solid. by And backlog certain of of see the probably backlog of backlog the But the as bit XXX% is partners quality orders. never and position play it large, order whether not place our there indication solid the better terms that's testing visibility. we clearly you test that, is your although

much, Craig. Thanks so

Thank you.

you. Thank

Jeff Our go Vertical ahead. comes next Sprague Please of Research. line question from with the

morning, you. everyone. Good Thank

morning. Good

Morning.

Just you back everyone could just your elaborate they're resolved. supply does and growth really quarter, jump And out, Hobo if then the a the wonder I level really issues else. in more on chain, confidence relative right the the and little what were Craig, Schneider to X% bit on just that

anybody the Just it as you in be U.S., didn't happen market get leader think would stuff, to quarter. if the the and that the seem could in

in we has And leader Jeff. question, probably of North North in And our the electrical years appreciate posted XX a really gain. as know, are America business a share market I you role America.

And that do have so our we support in to strong relationships little we business. in a they industry are very bit have suppliers suppliers in a were market. that that great that perhaps the few And not some America Who I'd working we case, a together. we're Electrical our we what supplier have that position through others say have that that surprised that the unique is general. was were in had challenges

so the see for what what number X% number, with of easily seen as in you'd line talked X I from which sales that the in some And industry. a the But chain much about, been. others the becomes agree is backlog, in growth think the I challenges, it you supply if in more I think you've

need These some that suppliers just being worked our very that that, it's and have and tied unique speaking that own in through like that to clearly we're under-allocated. operations we're And of focused are competitors It it's kind through. on issues strong that is over-allocated very not and working supplier are issues relationships their they and be supportive confident We us specific to being are -- generally working. supplier our particular of so absolutely It's timing. business, about one

quarter. large, Electrical And so we're about through business, you numbers we're our so they We'll up by talking of or could setting timing. in And X% XXXX. this around get it's see and in QX, for XX% grew I'd yes, growth and in say and the well it global

issues been growth to look you and think others America. in when with we that the is And for better. But much chain supply line global North industry, our very don't I we're having that, so would've aggregate Electrical want business, at in I the in our

the So it We good franchise worry just as nothing to in see shape, about. timing. is really

the you've Great. Thanks little type you don't just And on wrap Mid, directionally the zip I to a be assume increases. in on reluctant I same could but a impact price in out just price, that what be even XXXX? for then bit share that maybe code price, of price would is think there. high know we're kind caller. little thought that more I single-digit Is you're been And just what seeing specific correct? might around -- on

are the we it. on and And Okay. price and It different inflation the so, positive there next be markets our than so a overall, by a provided to maybe it you other not that on we're lots to supply next We we'd that factors that, not year. rather widely neutral provide different will we're question beyond and for offset different I positive business, doing But asked of to in customers transparency markets, different net have to appreciate year. this price you as why on will varies year. We'll obviously of different this we're more affecting getting more parts than going inflation. customers about offset price be say we're chain transparency year, well, have think neutral -- and comment you price teams net be it getting end have slightly in

given wrap execution as will the just pricing you clearly in of timing impact a We the mentioned, Jeff, XXXX. of have the

you. there. I'll leave Thanks. Thank it

Thank you.

of Our with go Deutsche next line Deblase question comes Nicole from ahead. Bank. Please the

morning, Yeah. Thanks. Good guys.

Nicole. morning, Good

I you snap take Jeff's America you in guess, embedding question. on like in back to guys are back Electrical a XQ. Just

fourth the seen back achievability the go getting just XX% supply-chain of to give those issues have away of of some some about us beginning organic? the through quarter, progressed you as like So to you confidence

with our number us our externally, been obviously Nicole, improvements. of we forecasts made Appreciate who suppliers to conversations from providing part of internal the direct We're and guidance question, operations. and a a looking were commitments in have our very as obviously at

grounded what terms we're so, our that from can much is forecast from what our assured suppliers expectations. specifically rest you And their hearing very we're getting of and that in businesses in

so, we're that in based We're suppliers. our not confident upon And we're hearing -- what forecast from

Got it. Thanks.

again, completely of we're we QX, resolved We're some some woods, the slight not that are challenges. QX. certainly say still if the QX completely in be Let's resolved the from could out much have than better but not change. were of all we of problems in Once better assuming

Okay, that how the I got a the then follow step-down record that up just quarter, guys is about just these margins coming that fourth away the on you perspective, to levels to more third maybe for thinking Are that it. of Q-on-Q. in puts the seasonal assuming And because and you just a this you dynamics you would some flattish be of took takes for bit that positioned understand goes margins have like in XQ. think favorable from do experienced trying mix quarter, normally

the QX have in backlog components little we in the built grow lot of big slightly are in a unfavorable the favorable the commentary, sure. as I mix and these my in lower than A of a expected projects for of some of mix margins projects shipped had QX year, in to lot backlog business. essentially carry is we that we We And QX. bit been the be did mentioned as during these when big have course in

about quarter. to a in nothing function worry of really So just really, once it's it's again, mix I'd the say

pass it Thanks, on. I'll Craig.

you. Thank

Thank you.

Josh from Pokrzywinski, with Morgan of Stanley. question the ahead. comes line Please next Our go

Hi. Good morning, guys.

Josh. morning, Good

I is on -- guess else's just morning. this for shoulders I standing Could everyone everyone questions

like what Joe end cyclical price And the versus on market mean, to does to year, even pattern you consumption, kind In demand of chain So kind level, up, in environments, something corporate the by year year, any kind sort backlog. view color Ritchie billion anything I it's one. $X guess, think maybe the on first for $X on bandwidth follow backlog that natural, maybe Thanks. convert if other question, is the gated I'm of I to that's this or that, able Q XXXX commentary, last But preliminary and of I stage be because of kind throughput going on then look following would the of of guys I'm then kind supply billion you're at you on we without that to and constraints. that's given incremental? backlog backlog

tell will outlook question. economic as forecasts the I will you appreciate that generally your think our of we include in forecast. market economic about I The markets price.

the become probably dependent we that, part of we year. be upon next and general, it's of chain maybe develop So that more price next supply level. baked around, in, it's -- the QX we're and give chain guidance too or and be should A course challenges or we be some clearly it's baked more unfolds environment will think a of be first and with supply the chain during issues dealing XXXX, how about And fully supply a -- half lot assumptions debate think more you we those we'll about make year say the our of we're in plan think I next call if electronic highly historical generally would than challenges year. for semiconductors in. specific of first are can what of to down should it will be as an our to what right you before early it's around whether as burning backlog resolved. think components something it through trying than, like that think reduction getting Backlog you and that but the assuming, less to through into now the we

our But plan not price. down we would And in include but necessarily out when in burned does you it so assume backlog, we'll market lay at outlooks, give -- the we're those it this in more February guidance not juncture, year. for

Helpful, appreciate guys. it. Good luck,

Yes, you. thank

Thank you.

line the Davis of from go ahead. Scott comes question Melius please next Research, Our

everybody. morning, Good

Morning.

out Is you're they don't that perhaps that and that or there about right ordering the taking -- are need other customer segments there now just that in general? concerned given folks you're product selling into double shortages

that appreciate well natural levels time Scott about I are spent because concern. lot pushing backlog Davis dealing a a one question, of that's as it's on, when thinking that these you No. that we with

take As to earlier, a they and we mentioned as inventory would actually if today their in more than say it find and they they'd distributors, that distribution levels number in to in them And want this are reasonably inventory; ship would I'd be, of would lower you inventory typically the more our like good largely we tested commentary certainly is my channel. in could I markets. customers it specifically and with where shape end them

can't completely certain and so But of to assume is tell ordering find it can would customers, to And that we going double to be tough on. reasonable our it. there little talk bit as you a we it's be I

That's tax yet whatever on helpful. about of for new Eaton fine impacts in it, this treaty how know tax been how rate? or the sense is that press. compromise on Tom, overall I And details the there then / aren't enforce any there minimum Okay. that's probably talked but to

peers code you devil the headlines in on. would be. closely, more strong position for will detail Legislation the with you No, we're questions, to terms sure. to it on connected advantage etc. look relative maintain what well come to Scott. is caution is I What The But we're appreciate to and our very of tax. get on the and passed, to Obviously, going you it with tax I I the as confident very is the really in is, it we leave relates very our relative can that at that's following going what's What going

pass guys. Thank it I'll Good. on. you. Good luck, Okay.

Thank you.

Thank you.

Please Duignan go question with ahead. Ann line Our of the JPMorgan. from comes next

Yeah. but it I by you. at all can and color, markets. of XXXX no end funny any we to Hi. your see appreciate Thank turn your Perhaps the outlook red is to across sectors. arrows

and you If residential, the market as risks called potentially might you could that think would Craig, I talk you I think orders a then be it maybe residential align just And have out about aerospace. down. very were military strong. flat could in yet for a where

would talking about North you. were page just those if maybe Global helpful. America. assumptions some that, So could end you you of But if that market reflects could reconcile you talk be just Thank through this and

Thanks year you're expecting opening and commentary, so some have you markets orders year it see good your if all -- strong. Ann. the we're your of you are a to Appreciate feeling its your to an growth unusual very end specifically is about I'd I to result markets, that. where next as question that -- residential about whether And and in say that think of

are some That indicators at time. stats index that look an of would that period or the naturally growth some you should housing, double-digit around you housing whether posting indicators can't it's the markets macro there for If of slowdown. these indefinite these suggest numbers affordability of macro keep huge

-- would growth that really And also the the in looking consistent order say in I'd it's we're macro that with residential.. at continues with the in which so more back that in the quite is residential back-order the XXXX. have that the all log we're at back-order seeing is today, us growth flatish strong not strong be consistent in growth indicators to and suggesting market all Not

of and see extraordinarily for backup. it reason no outlook in will in strong, And in that so that have to plays what's there's how down. data out. But any market continue for And some that And to general, year. I'd the that's centers certainly that suggest would would reflected data we'll kind the centers say point at way slow be

data the And comfortable with around so, forecasts we're center the world.

of increasing and store events to hardening the consume, will to poised continue markets investments and that As continue Weather-related utility seeing grid as -- around in utility as people they Utility world. well we're in and events process, growth, that hardening drive weather are markets think invest all to these data. we for markets. continue amounts

certainly If all about and we deal world, with you on think there automation be the today today, appetite equipment. industrial an going around in as factories we believe the labor to investing these what's going and shortages markets in is increased for

think vehicles of we the broader we bit that going should worry another year the We as these go still a transition trends that about vehicle we again talk what positive bills in little terms a we uncertain. will energy bills spending investments thinking worried and I and What chain a of our will infrastructure ultimately to whether to of in once we -- are with positive electric our next aerospace commercial be demand in end little vehicle around cover infrastructure I of supply that charging and been back. are support get electric the bit give we infrastructure indicators that's wrong? many these Military this markets, grow to into most year experienced an unknown the unmet. or you markets having pointing and in to all terms number constraint We in you're can that this happening that large, of will support be out, produced about so big not continue and think of could world and that's about sold what's all we end our that so by the And But are challenges markets. about certainly to say, that bit come thinking worried baked about? the market, respect position mean, and period of Goldilocks come Washington. they've about of think that these net future. that's well Global was these around a market just

very we ourselves And the that's really how feel looking optimistic. talk and position, macro outlook. our so medium-term a maybe can certainly and scenario the Company's 'XX, by less about but large, we into just at not But good indicators

supply Craig, the because Is the right sorted and that get strongly. about clarity issue next comes to just you. internally anticipated, than supply if I sorted, follow-up that, something But automotive we continue chain labor production additionally, if that's mean, longer semiconductor it chain Thank you freight there. we back and leave risk outlook, and there this and out any for a that's that at problem, and you're really as do that haven't for the revenues of we Thank Is suddenly there chips haven't out. all and you rest. just any the year's Particularly, the available. the risk issues to are exacerbate worry about I'll there sorted plenty we you talk all?

spending it bottleneck of absolutely challenges raw bottlenecks. amount supply about imagine, all what a it's labor unforeseen of we whack-a-mole of we're been that the -- chain resolve tomorrow, exactly been -- but supply that only an No, today, extraordinary talking you to Not time have -- issue the right can whether up, or relates terms there a as whether have because bit to Okay. now chain when it in bottlenecks popped -- of you little and has potential this bottleneck becomes materials we're availability. is number playing today the relates

As our you've fill the in to read newspaper, all as challenge operations. in open all production we jobs about

think out I there. And so that is risk

I but in don't there, think I think think will out risk the is be XXXX? than I it so. worse

I XXXX. debate rate year think is XXXX much industry constraints. supply based will be better? to these better of You than at chain the a could resolve upon which the How able some

Thank you [Indiscernible]

you. Thank

Baird, ahead. comes go Our question with from please next the of Mig Dobre line

good and morning. you Thank

Morning.

this basis on top-line. little when a a to the back more obviously you just various you maybe I'm raised your half margin cost outlook. cut year perspective for the of points XXX in looking from that had your But adjust on structure you items

need you of. takes wondering this, there helped margin what of are that if I'm obviously here puts terms performance very good and other to mentioned [indiscernible] in quarter. the So you in for we third be aware allowed

in other that a things one materials I'd of would inefficiencies say labor that in always of with that good out that We're outside good think factory, chain it's that there's to so that and factories, goods The I just mix as our not execution. our we're the front. we business call mix the been billing control make any costs lot try was I'd a other in out, balance than with money of I fully we've we we're expedite also, of say around. laid so and bads, a probably the But I got productive, guy had these business kind we've and dealing other, staffed, running dealing keep mentioned, was some extraordinary as did the constraints challenges and normally on mostly we as there's the lot a of we on obviously I'd given fully have supply and of know, the that that spending our say to positive. and

to that a the chain, revenue despite we're control, you that performance at know, called to earnings we do and as anticipated Our our things point the to supply supply we issue we the have maximize on we relatively due it that can chain work teams, went early, that challenges. our teams our and things can going to deliver

than We're schedule seeing execution, I originally anticipated in we're we've some so was quite and other seeing that And place really better programs. think with benefits just good restructuring. of associated the our frankly benefits, the running ahead we restructuring of

we originally that on that by benefits anticipated. spending it's more million and about than we $XX see the deliver taken the million up queue restructuring filed You'll going we've $XX in

the can't ability. And that we we we so then the our managing best and -- control that the teams can't we laser can't controlling things -- to are really executing, our things on don't good, focused of

for strong very in year a it's So will really say and the just quarter good I'd be the execution it year.

like compensation see. terms of [Indiscernible] I nothing some expense items is in or of component other variable But your structure variable,

it's a sure. mean, Certainly, year. going be to very good I

the good comp originally spend. So is we what planned for, higher plan is than Whatever which thing.

plan comp offset And the well. no, So as lower. not that we higher is haven't

were? you some third, XXXX? supplier you. that this of qualifying hole making catching new Then that's Or just to of out quarter in in in bad it supply Okay. supply I'm given doing fourth are my the of are to adjustments the chain, relative looking less your and Thank things follow-up, as terms transpired way your getting all proactively dig terms in you your chain, how up clarify suppliers, to the things

may shops our different or working it's some constraints, whether had our to to many of labor in of better. I constraints all materials, actually to we've the it's to make in some some have cases own in sending And And really suppliers, change it cases, supplier’s that the we operation lines. qualify on working of getting -- had their where with people are say some we're our supplier We're We're where hard in also we've the sales above. ability materials. have that,

-- So of within that's things chain a that control it's pulling improve we're to whole working every host lever the situation. and our supply on really really we're

not it's of multitude a world the being thing, around that the teams outlook. whole undertaken So our really improve are one by to different initiatives

Thanks. it. Got

you. Thank

question line from comes Please Our Julian next Barclays. Mitchell of ahead. the go with

the such maybe in question or guide, appetites, first Is so coming the has took of morning, buoyant which understand lot that M&A maybe just the because a just been environment, more a sale Good it's you'd a seeing help heightened it Q&A. you changing XX M&A Intrigued buyback on maybe yet what's portfolio, think expected, Hi. X down market addressed for I because you're there. us to assets than don't

months suppose ago. tells for I also, And reasonable. M&A that look think it valuations us you

to M&A, volume is the your to expect should up pick getting on it more or coming So returns next if year? intrigued to then appealing. maybe you're has on changed hurdles what us perhaps help divestment assets we again also understand, makes also divestment's it anything side, is the just do And market of so

for Lite. acquisitions to just buybacks. certainly back put very which Tripp always draw we Thanks, the opposed the would What capital with related big We're and as about I I proved your to dollars the of carbon we've much on beginning well lookout into read of our acquisitions these more not to have that good done acquisitions, the million. be, of as quality strategic them the buybacks is that therefore, we've done a level took Julian. too year to attention It's as year-to-date. and $XXX X

as has said terms and relates head shrink I anything the tail. to of many in allocation, grow divestitures, times, into on the the read it it changes. And as Craig to always wouldn't we're capital strategy So lookout

performing, pruning part a report to it's specific but and to our of the business, it's look at whether always here. So on not upside, nothing it going we're adding

a anticipated. in of we've In business more of most and we think Company. the JVs so what are deals acquired said, deals all year say in we've than M&A I'd it's transformational China and in Europe, I one market, we in we as headline thing have the from number agree Lite. obviously would Tom this only to that the been Cobham very I have electrical of Tripp that green with And year There other active during business, active a a big add I the course completely the well. But the motion we been of this market. portfolio signed done history our where year transformation, the the of

to focused And be on so continue we opportunities.

last What in I are today the commit than in we'll disappointed. cases We promises have certainly we would are couple seeing fact many years. a remain still in better of stretched. we'll deal Valuations -- that and flow to we'll you

back we business. today and multiples in we're You've and kind focusing focusing be segment, given highly assets, in -- grow that acquisitions that our between business, eMobility leaning dollars buying we're those electrical flow on seen our value towards the aerospace of we shares, the and of M&A the of in and better focused lose of acquisition are and acquiring we're our continue our focusing assets to a for way, type our But in those seeing strategic, obviously, won't paying creating portfolio. deal spending we'll trade-off to the kind

Year-to-date, metrics? Maybe the this next of Realize be thoughts flows mid-teens. here? the to the does between questions some we cash XXXX, wage a cash that there's -- when forth. free around a are any been the context should initial look free at flow up, just year. maybe and and driving from than more That's flow. revenue closer it on XXX%, we adjusted lead EPS maybe conversions cash So have time on, in reassuring. Thank you. there then your free CapEx is cash to on And down of X Any outlook expect year a on one so XX% EBITDA -- the lot

Wait.

approximately a quarter, cash it's was Julian, flow of cash as -- was think to free note our important the flow in conversion I percentage XX.X%. our net that XXX% free sales and

trajectory. XX%, was think I outlook, that midterm Our we're on so

going And growth would we first business. As it always at to CapEx, want relates capital our next our invest year flow and have the allocation and as or that higher to to cash to certainly we're in free our XXX% going conversion. in priority it to forward, be relates

So looking those be for opportunities. we'd

Thank Great. you.

Thank you.

with of Our next question comes Research. go from Please Nigel the line ahead. Wolfe Coe

morning. Good Thank.

Good morning, Nigel?

back America. to to wanted just Electrical want go morning. -- just I Good hi. back I to

We from comp You a prior did benefits the inventory. have saw year with tough 'XX. in XQ some

comments wasn't channel chain. crack any just on So guessing, inventories the then where And one I'm them? trending you at more are helpful. now supply right I'm when curious, it

behind in You nappies? supply I just think, these do supply I some have and Puerto Republic. am down complex that Rico change a Dominican pretty factor of wondering if was a chain

Okay.

On what missed supplier, What -- way don't really missed where in third-party I I question, the not know, we I was in statement we're with. four the of part at walls latter related do is that was first Dominican the all. was that Nigel. the dealing have the part -- number a to And of around part question I the outside our in of and facilities Puerto mean, our pricing question, this challenges first of the It Republic Rico, the and was your of centered. your largely a no the issues it? first were

inventory restock in some are Yes, year. comping benefits just prior you -- the

income guessing, what wasn't the this inventories in [indiscernible] within quarter. you're curious, helpful, just it So seeing channels but I'm

them a and partners the market done balance as and inventories are that disappointing our ship constraints. probably cases, where challenges, to care them given as say in many own like talked chain we I'd to today opening to the of due inability they supply in be, And bit you certainly supply demand or line and they below, distributors our some to to distributor channel the we with chain today, commentary, than would talk we've checks in these where with unfortunately of like we're the little be. some more Yeah, in to either tell they

are say be. many well in this cases I'd a And control to and in below total merger they at where inventories so need by juncture,

with a I that's follow-on pension what expected. then out. quick And Yes,

You got a this obligations We've being of see $X.X billion seen trends macro discount pension rates positive. benefits year. up rising nice some from

based Just funding funding best for X on curious, or levels. the years the the X on view pension current next

Yeah.

you is of next as almost come the year, contributions out it. Our depend rates know at to to on end the the pension don't specifically it's going returns additional anticipate plays the fully making in We February. we more pension, when obviously, talk on any in discount the funded. the And and that How year. to

Tom. Thanks Okay.

Thank you.

the of from David line Evercore. ahead. Our next Please go question with comes Raso

what you. and in about in your trying from And businesses. margins, incremental When at Electrical, a you what year sense look those XX, these mix, get of to to to is just assumptions, When that how for you the question also at neutral, you end course the about know next negative, is cost, structurally. get My market look some backlog you margins think else. Thank and positive that Slide sense. just know price trying what's are relates backlog everything the a you how incremental in businesses of just

There's about, in is terms year. the delivering We're there business. is from some this of We're that appreciate the going incremental I our to lot nothing going great really getting business delivering backlog of obviously that bit of as want articulate say to about been we you Company the kind think the XXXX, XX% restructuring. that the changes question we is drive and the work into that done incremental. than a better specifically I'd performance think in in past a inside any benefits earlier of

the purposes, store a benefits think from But made We incremental about I way some Company. is incremental the for XX% think really and electrical portfolio that are I this year. entire for getting the really for the the we think moves right planning business to

of missed up hearing resi, year, year And It on heard also versus in [indiscernible] you much low to any next not demand aggregate. least I'm seems might you with way this little non the are hearing products, end like X% it, maybe increases at I'm XX% last price, the catch-up. appears month, first resi this as are the I Siemens, even by a of they at - be destruction you, as almost just quarter high-single XX%. the all pricing But for pricing? but double-digit playing they curious,

destruction and of is remained pricing demand No, to an said we're pass-through any environment extraordinary point marketplace the strong. I period incremental where when mean, seamlessly typically as really but dealing at all. to be pricing not the margins where around seems I really And hearing cost clearly time been it's you as increases get. going that this we're you what have environment to your into don't in hyperinflationary big you we're with have market, big demand

of margins Your normal a margin of on there margins little on has cost the the so not been bit increase, recovering as year this and result and increase. commodity the pressure commodity and full on a

something -- that's that held back margins And bit. is certainly hold so a

seeing Remember, those labor and also logistics likely sticky. obviously, it's just are seeing increasing, commodities We're increases we're not increases.

to well, as XX% Somewhat into incremental planning going a you purposes. XXXX gets back which for

like all. nice. doesn't destruction is Which least any demand seem find It don't at we at just

is from even even of It now, pretty be sticky. the it or in costs back as are little a off a half surcharge, much, should the year. this is year-over-year So even not up incremental should more mean, year price, I this bit. hopefully, hold so. Help so if down not the come

Yes. exactly I it you mean, [Indiscernible] articulated. through we're the way plays hoping

Alright, Appreciate thanks lot. a it.

you. Thank

question Suisse, our please will from Walsh the go last John ahead. you. Thank of And line with come Credit

morning, me. fitting Thanks Good for everyone.

morning. Good

one and all Electrical we of chain than order into I and that, sale year. distributors can a would with going through to our XX%. feel -- was this truly through where our order book and be and John, in to more is hold our or once you've none Americas. just XXX%, a them I typically things faster dedicated relationship, essentially we are a and supply and confirm of goes some inability it is think the this that that There's next these and the in and obviously, of and large, by margin, never By a your distributors low Eaton I and the that, confident But stuff America want distribution? question want backlog clarification to that X backlog that lost large Yes, lost, right? are the quarter this essentially who run always result the deferred to who deliver. to the again, committed you sales that Maybe on take from as just sales Once ship of going the voltage, say in up perhaps to Especially, the have have growth we we're through growth business are very again, business. we fact is

today miss And a the future deliveries. simply become shipment loss

the kind And what the so delta. think we is for case that's of of vast the majority

in growth we've in quarter. that say experienced the Let's

Great.

Just wanted understood to I make correctly. it sure

Keep in mind are also, these projects. typically

one where simply you particular once this that a your difficult buyer, supplier. of or to has other specified It's supplier much So business supplier, goes changed been another specify very to switchgear. a and for in project into projects for Electrical project out a particular just be on the

I'd So confident. say we feel yeah, fairly that,

just then data a maybe center, around specifically, little maybe industrial get you're And can what industrial, commercial, seeing of in on color Great. China we more those verticals?

you anticipated think own more tell headlines than year in anyone will the let's reading In same on residential on say pressures, I had very different segment, China. market, that bit had today. strong of slowed that going XX% with you to all see terribly with economy a China Asia we're I tell segment than segment certainly whereas an quarter. that the has an a would you team the respect that, part numbers growth. of global this just outstanding quarter certainly weren't and business the in business in an that our They electrical we until what's special our can that China post I our are

today a historically. I some starting seeing to these we're in we see we lot more opportunities of ventures real the we're And than place. put benefits joint that have think of

Asia-Pacific doing it's data well. center region, the Our China, in business in

the what quite well obviously anyone, but in we've as And business watching and and today business, headlines both as Asia of seen is China reading well. revenue so them our in we're orders doing out our

Thank color. you. the Appreciate Great.

you. Thank

thanks, guys. Hey, Okay.

the and end have We participation of the to reached call appreciate and do we questions. everybody's

and and Craig follow-up address always, As available Thank questions. to your I you a be again, great have day. will

and ladies for conference you, Service. Thank gentlemen. participation Conferencing for for That conclude our your does and today. AT&T We thank you using

may You now disconnect.