Eaton (ETN) 2 May 232023 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Eaton First Quarter 2023 Earnings Call. [Operator Instructions] And as a reminder, your conference is being recorded. I would now like to turn the conference over to your host, Yan Jin. Please go ahead.

Good morning. Thank you all for joining us for Eaton's First Quarter 2023 Earnings Call. Craig Vice Chairman Officer. President are Tom CEO; today Executive Okray, and me Arnold, and our and With Chief Financial

agenda to opening will the the fourth our today Craig, in Our he then company's remarks performance turn who Tom, by over quarter. will highlight it includes

be Craig's we closing As we'll done the at our on questions have commentary. end calls, past taking of the

this earnings today reconciled call related expected therefore This future to and measures. like release press and remind be is adjusted share, The presentation, you been website. of company on our forward-looking They results appendix. we'll that statements. cash of to through available the free the the today website webcast posted and have statements will for our go are non-GAAP including flow replay. in per include would adjusted on accessible I other A presentation and the commentary our will are

differ forecasted the presentation. that materially our and are release Our uncertainties actual earnings from described and to results projections a range risks our may in of wide due

With that, Craig. over it I will turn to

another off Okay. noting quarter on points lead We'll of that continue highlights the of basis Thanks, well X. And generated I'll post we've the XX start Yan. Page adjusted We strong quarter, for with range, some XX% record prior strong the we delivered XX.X%, EPS for quarter. record by $X.XX year. above up And to guidance from margins. our quarter year. and prior up of QX over

row of growth. up XX% organically, Our third sales in our billion, organic were a quarter XX% $X.X

was utility including strong strength center and in growth our in which up than more XX% institutional, particular very We data market. commercial, Electrical Americas have business,

Commercial had Aerospace also and eMobility in our businesses. growth We exceptional

the a Electrical XX% of to Aerospace for XX% and orders XX%, On Aerospace. also XX-month of backlogs, increased orders Electrical up up for orders record in led another quarter. rolling quarter and basis, were expectations for by came ahead Our which XX%

think spending note growth point, at well and of but reindustrialization, that company. prospects infrastructure with it's the along growth fundamentally transition our understood for trends I'd I changed have energy this secular digitalization once again electrification,

driven Lastly, quarter income free working net $XXX improved and million, cash in higher capital. was by nearly the flow

a So year to flow deliver on say good receivable start I'd keeps and guidance us balances. the free that higher to our revenue track despite cash

I'd say balance, on off good a year. very the So start to we're for

to what and stakeholders, ability spirit of Exchange. that adapt longevity ringing highlight to its and commitment of Moving society. is reached really a our March. I'd and to our our on has our our the on exchange Page of listing who again our X. our all over you anniversary say as a we customers, X innovation celebrated constant time this milestone. guides employees, all changing that saw, And by to world. remained But of of marking Stock function resiliency XX companies of XXXth like I'd that is is on in our have of once to many York Eaton early shareholders, New Eaton bell our communities is And the the the us

for convinced And growth we've stands lifetime, us. perhaps busy of significant this best our of most as ahead we'll that still forefront see trends Now that moment. are in the Eaton the days we're been at planning our

building electrical various electrical electrical end-to-end and services. across a products, solutions. full partner position power offering ability in expertise specific applications. consumed providing how spectrum. customers' as domain how the aftermarket supports good we customers a as power ourselves solutions business it's generation today, to value provides distribution, trusted Slide playing our beginning across And specify the our example we're applications Service, we power commissioning intelligent installation from chain Eaton providing As to at and deep software doing look of with solutions, that Data range management to providing a in of We're We're a with now X

has selling can their our role helping create changed components to serve proving that all solutions technology needs. We're energy also our fulfill owners leverage from Our that scale simply we markets. end and of changing

need breaker For and Breaktor. grow. New and electrification contactor, this technology the we the in sold and in those certainly successfully you saw Breaktor Electrical we who of are at our in is everything product Eaton's you as our example it our and meeting a and of new of call of will business technology solutions developed And with have March the eMobility us a for combination continues, York, businesses. an to a Aerospace a continue

source is mega this primary the that discussed. trends growth we've the coming And of from

know, the tracking unprecedented this of an by to In we're benefiting infrastructure infrastructure-related capital we're spending world. supported from transition digitalization large of projects. being and early, by U.S. the seeing addition you market, as number record is level the And governments electrification, while from a European energy capital and spending levels. we're around of reindustrialization And and

we're vehicles. Electrical growth For for of aerospace positioned of strong the trends growth rapid seeing business, $X at we've example, seen already projects over for and Collectively, cycle of the $XXX And have have future. electric beginning this of chart roughly these billion as and in Americas orders. also the foreseeable company million a adoption reflects, won our strong

year. the billions historical last XXXX, more are number how This planning which our run sustain Since electrical America for $XX of a record X years of in total projects reindustrialization electrical certainly that X% Keep as to wide $XXX incremental an to $XX historical you project creating almost growth phases projects at in we of as it nonresidential planning electrical billion, projects, this on certainly content of $XXX of of projects X% and and quarters, provide the These a specific is than billion into the value. we take of X on translating estimate range announced There's suggests the $XXX But Page $X means electrical you what billion billion mind, revenue. only. trends we And run in there's secular value various range We mega example is can $XXX is North the a or the mega various project projects. and Xx more billion from content the for these least the projects down. to industry. more a capital. presentation, of slowed planned, designed project assuming billion these But billion $X already more mega rate projects, in billion of And what's the mega that's X get built over have just to projects next for projects, announced define mega the billion Slide over of will are with to from on We naturally cumulative projects. announced tied they Next, come. nonresidential to X, small to a will a been and rate. projects is stages, haven't exposure these they building $X in announced come. On electrical some see, our closely certainly than large design, construction. of by years, infrastructure. expect a market expand more and and X

one decade good projects industry a we outlook growth are of for say think different and will trends a mega I'd very out playing the are run or how in electrical a for example these more. creating

proof helpful where on Another can our negotiation represented has point how pipeline X, Slide see you is grown.

data billion mega projects As XXXX, strong and similar markets historically. as supports -- Americas seeing is negotiation seen we and you to step-up expectations broad forward. And one of noted Page for we on saw and proof utility supported nearly center, market. negotiation our pipeline In point we're faster in from projects, in has organic industrial expectations $X see, pipeline strength negotiation our go Electrical just And large This doubled is additional manufacturing further can further growth our XX. in in what we've our alone.

translating Here, examples these we are how specific few orders. a into show projects of

electrical we been orders our have years levels X at As record now. reported, for

into wins is projects our So what business. these translating mega for Electrical directly large how demonstrating we're are here

For of won management to new provide in EV for plants orders we've example, power North X $XXX million solutions America.

remote and power industrial Specifically, software. Brightlayer we're distribution providing equipment monitoring

$XXX a on Phase plant, even of which we're X this could working project, semiconductor new U.S. already for be is and order example Another a larger. million

has So that record overall, mind, the of in we're seeing front And record in keep set led project announcements, orders to record of a negotiations, is impact record mostly us. backlog. revenue

at also to trends Page the beginning in and Moving from and both cycle Aerospace market. We're commercial Vehicle. an in of growth We're XX. defense Aerospace benefiting mega

pre-pandemic to defense orders OEM passenger the in and as rates revenues to the And Specifically, to by significant also kilometers and over grow our mid-teens commercial expect in should a in digits aftermarket in next defense years. revenue grow also beyond. We've global lift the significant to see step-up build beginning continue expected recover double XXXX. Commercial several noted are levels

As orders our by years, auto EV point Vehicle, up XX% platforms. In from XX%. expect our XXXX continues of content accelerate, in than penetration run a doubled rates to and we reference, recent from and global we've Defense estimate more And both have prior now on electrification XXXX, levels. Commercial of sales defense increased exceed to global of

$XXX and few new as a eMobility eMobility, our forecast how million for win XX% digitalization, our to in benefit orders. providing updates beginning controllers key Page XX, cryogenic once segment. And and any growth our with continue And business. today, are again electrification While on businesses Mobility shortly, we're realize more eMobility are CityAirbus commercial in And win Tom revenue defense our for a seeing a and for example than Air wins. highlighted Urban good our Aerospace is program. we're to relooking Aerospace not we coolers will we report CityAirbus aftermarket the significant beginning of and The we software in wins

product The from eMobility of our most line coming are power within distribution significant our business. which

this business our to leverage breakthrough our recall is we're You'll and technology. able electrical unique broader where

a revenues. latest leading $XXX Our from million comes will year European mature of of generate year set automotive OEM a wins and

growth. like long-term the trends market businesses These confident rates. early their expected that support businesses, wins tied to historical outside significant as our our innings. growth trends we're years are you delivering are So than grow in combine the industrial Xx mega will at should that come. stated, to for Electrical, more we're faster to we've deliver When And

financial over to to it through Tom updated I'll With QX walk and turn us results that, guidance.

Craig. Thanks,

I'll a our On strong start QX providing by summary of results. Page XX,

adjusted organic organic percentage we third the and Operating the For profit, first record, to in, the EPS. growth unfavorable All us foreign XX% by growth quarter, Adjusted was record exchange. to a up quarter QX points XX%, also margins Revenue expanded a basis X record. of year generated over margins $X.XX. strong XX.X%, with EPS to enabled prior increased growth by of first reduced XX%. XX organic a report consecutive the quarter grew XX% and points

not growth higher trends, our mega levels Our of supply inventory challenged. of also by were only but the demonstrates when chains carrying importance the higher customers prioritizing

Lastly, our flow free was $XXX cash $XXX year million above and of prior exceeded our expectations. nearly million

relatively we be from recall expected will cash flat our You to year-over-year. flow free QX call,

the Moving next on to chart.

Our quarter. Electrical another had Americas strong business very

We X quarters consecutive quarters, for has XX%. margin. profit operating XX% Americas have growth organic least sales, QX generated including and sales back-to-back at was for Electrical set double-digit of growth. record Organic growth

and markets, On and is up in market. quarter, all center data broad-based In commercial growth end utility a especially X-year the growth robust with organic growth stack, there XX%. in was institutional,

in Specifically, in growth organic our revenues center we data posted QX. XX%

process year, and posted higher growth single-family in strong from XXX of strong over worth Institutional than very increased per in this It's versus So homes, our to volumes. market. Utility of important growth. X-year we residential strength margins Commercial single-family prior seeing in in points were growth and XX% stack start. Operating that in electrical home, margin XX.X%, are up weakness XX%. basis was were more XX% Incremental business. and completion multifamily also revenue new The strong which we at of homes XX%. more content is offsetting than more We're continue up benefiting noting very than see

We're distributed strength. in up continued utility year to basis, also at build We manage and inflationary a XX%. which grew Backlog backlog. price data up and remains rolling a On with was and backlog pressures. Orders X% level to quarter-over-quarter than a IT, effectively versus XX-month market. continuing sequentially. offset industrial continue prior On sequential strength XX% orders XX%, were to particular center, basis, orders up show more high

market. partially very project from major than In orders up addition in QX in negotiations prior $X.X robust you'll XX% up distributed all-time our Overall, driven exchange the record growth year headwinds the of and the X%, Electrical segment, to center data a in billion. was transportation strong utility, versus growth year. On was and backlog, Page posted in Organic by start strength find had which Americas trends especially which nearly water, strong and sales and XX, Electrical was and quarter divestiture. center, a of XX% our Organic results growth foreign IT pipeline was market. Global wastewater from more sequentially data offset to by

pleased stake business accelerate Jiangsu Ryan China presence, the power in sequentially. I'm orders serving volume Global quarter, This is was Eaton's data price rolling X% center, XX%. distributed of market. Backlog us and China. commercial down will month, up last data center were growth, utility manufactures XX%. acquisition Electrical in Company. that inflationary last XX-month year-over-year growth high-growth we allowing market. up offset and Orders and highlight strength of a X subtransmission by grew up in XX% approximately utility This revenue and industrial $XXX on recovery. to and Our renewable in our X% sales with and was manufacturing also IT which center, Chinese-based a a revenues in closed increased and for the energy, Operating to utility institutional X% transformers JV markets expand primarily from Sequentially, higher is Electrical XX% and and basis fourth year, inefficiencies partially XX% of distribution million prior inside data and XX.X% market of with Eaton's to compared outside in years, the increased margin in investment

to Industrial businesses, the I'd segment. moving like briefly to combined recap Before our Electrical

and basis, prior roughly above to growth on the Orders X nearly Electrical a and operating was improvement. with in for the X.X also sequentially. On very for overall posted which of strong XX%, of X.X. flat confident in X% grew XX-month For growth of QX. with of sequential margin grew rolling order quarter sector our roughly electrical to points XX% rolling basis QX, Backlog a compared incremental compared years organic margins year-over-year business. pandemic. the we margin XX% XX-month growth our XX%, basis, XX% XXX margin XX% sequential -- in the was book-to-bill remains in growth above at our continued quarter in for strong our remain positioning We It of

XX primarily On and was half segment. headwind than -- We with page OEM QX a posted year, defense to half the aftermarket outgrowth for a exchange. continue all segment organically basis, than XX.X% XX%. and our was operating XX% very basis, growth acceleration in was X Commercial up with and QX. at profit. more over a than recovery. more volume aftermarket, rolling X.XX by trends more encouraging. Aerospace more remains book-to-bill points up Operating than for with QX. backlog commercial up foreign orders see including driven XX% price see across we On second OEM backlog was to recaps we XX% continue rolling growth next in second our defense Organic more Aerospace to continued than strong strong end record in orders point remain sales year, XX%. in up an the last from in last from for also by driven of Year-over-year which quarter growth up in a including The of our markets, XX%, in orders. Similar OEM up strength XX-month percentage growth X.X Order increased the QX, year, XX% margin growth XX-month Growth our basis strength inflationary XX% and were

to XX. X point segment percentage strong FX. cost. primarily particular with Operating unfavorable partially XX% saw revenue Moving organic came In XX.X%, up both on volume year, We EMEA and QX, price was at and to of higher growth unfavorability offset manufacturing inefficiencies, to and in Vehicle due growth Americas XX%, on the in Page our margins market. sales by prior with

towards recently progress technology multiple solution. for new programs We which securing continue wins, to e-Powertrain more make our sustainable includes most

up we XX% in versus manufacturing by including very results with electric was by higher the organic On Revenue basis growth prospects driven for remain of the down XX XX%, eMobility associated growth. new was prior We from eMobility business. segment. start-up show quarter. year, strong programs. encouraged Page points our XX, vehicle We costs growth generated Margin the

programs to platforms battery wins capabilities this leverage with these billion many of large We technology a additional momentum business revenues year includes industrial portfolio, across Breaktor, in recent European ramping our continue This our including entire up core strong OEM. businesses. Since have electrical and XXXX, mature including in XXXX in with with next-generation and XXXX. $X.X of we both won

we XX, sector We Electrical backlog the and important it's Aerospace Page on over backlog grown has time. Next, how for charts think illustrate historical show segments. to

up with year Our metrics record Xx to the roughly XXXX These backlog the forward. great level. going full billion outlook ending in and This is $XX end QX. was us the for nearly provide confidence

On the we guidance. growth and our fiscal next organic margin operating year show page,

growth We guidance raising our for XXXX. organic are

X% to from to points X% basis by XX% our XXX Aerospace X%. have we're points XXXX and organic backlog We We X% XXX increasing Electrical up midpoint We're basis In to our X% build growth Aerospace. XX%, points total, Global in now also from XX% to to raising continue to And negotiations an a XXX we're outlook to a basis basis particular to in Electrical strength X% Electrical XXX XX% XX% from Americas organic to robust increasing points guide. of XX%. Americas midpoint. prior and expect pipeline with from X% to XX%

strong forecast this tremendous outlook. with and backlog visibility market growth combined provides building Our XXXX in end confidence

have points strong our total reaffirming range reflects which range to we are XX Eaton this guidance business. Overall, the of we revised XX.X% in Electrical guidance momentum our to XX.X% raising basis Americas For margin XX.X%, a range of continued segment XX.X%. for we're to that margins, by

increase reminder, all-time a margin. XX a basis our midpoint As this the is XXXX at point record from

adjusting wins. to are new have we large costs This and to to delayed balance continue growth our be OEM another year XXXX both the launch related Page and plans ranges. QX. program and financial organic the to XX, margin start-up eMobility, performance. On for strong positioned we For of guidance we summary, higher due In primarily of well is deliver

adjusted the $X.XX Following XX% range represents This in our EPS have the flow expectations $XXX for XXXX. million full million strong also year we $XXX growth our guidance for including $X.XX. $X.XX. utility guidance to performance At fund We're growth organic CapEx in improved to raising raised are to cash in raising of guidance growth unchanged. remains investments to experience our QX by increases. Free our strong approximately $X.XX, and additional from we business, continue year, EPS where we to midpoint

midpoint For increase XX%. versus to $X.XX of Segment prior basis and and at growth growth midpoint. QX, guiding representing XX% of are to margins between a we range year, $X.XX, the versus at EPS the year in the prior adjusted of organic XX XX.X% XX.X%, points XX%

Craig hand it up to wrap to presentation. back I'll Now the

Tom. Thanks,

XX. to turning Now Page

As base want we markets, a to built look recession our revised provide and and Once do for expect case again, expect end for XXXX, strong mild slightly a from the strong continue growth assumption and our into of with assumptions. end we the growth double-digit markets, almost solid track all to utility we growth. continue and that in growth to our market to demand we've raised year. assumptions growth trends, our we in But healthy we secular our

increased energy to And flat. market and from declining Here, we've residential continue to gain transition electrification momentum. our

combination and And resilient a QX. revision. strong housing momentum slowdown supports growth Electrical posted Residential Tom U.S. the recognize pricing upward we of now we noted, while as market, and single-family in renovation backlog XX% Americas So organic in the market, in an

backlog of want emphasize aligned data, I Data you extremely market, we are see of orders. to but despite the capital with once market market negotiation continued and our The most much that forecast I and commercial know that well. a institutions balance centers, growth remains about growing declining to to but And a to where again robust utility, that strong PMI concerns unchanged, have industrial, construction nonresidential spending strong reference momentum. we continue more point have perform drawn out revenue I'd pipeline, the

result, end expect decline are XXXX, a and levels to in not to growth. of our we expected markets healthy any do of see As most

close record. strong and comments. summary quarter with record and delivered me of have Page set few backlog. a on XX% QX a Let organic Once XX we a just handful We again, growth delivered

The our internal uncertainty secular decade While seeing are growth our These well, supply evidence accelerating. I our -- secular more Having beginning on grow now experiencing more strong QX our year. revenue and electric markets And tailwinds, uncertainties, macro the exceeded market chains strong and will guidance to forecast growth. up Xx year end our come. and continued raising mega think in growth trends improve. some growth normalization, our trends markets and rate. we're support we're performing that expected we're despite improving our macro are are will at orders historical another backlog continue strong execution. And in execution than of for for for the we as just to Despite show to position highlighted, the company markets are forces

for may I'll stop it you and here open questions any up have.

Craig. Thanks,

follow-up. cooperation. opportunity today, and to limit Q&A your just Thanks, a the one question for For everyone, please your

will give guys you turn I over operator that, it With to the the to instruction.

the question first Joe is Our of from Instructions] Ritchie Sachs. Goldman [Operator from line

Great start year. to the

of quarter. just the Americas' me on standout start Let Electrical this a kind margins. Clearly,

quarter I highest ever. quarter your first highest -- think

progress? the of about in strong kind as a think year? be to do be thinking reverse throughout items forward, about the expect you quarter. the Or that about margins going you As first rest incrementals the like incremental as the Are should it How of you you posted there like year? incremental any looks potentially XX% we

were a disruptions. of inefficiencies team last And number supply is the chain in job related appreciate outstanding operations we executing. just our as dealing doing our the manufacturing We Americas about talked in of And recognition, with an fairly we a sizable we as year, Joe. had

while into incrementals do those we And And that see XX%. go that and around supply expect first we as to the in we're company, continue better company Americas the chain. still in to quarter. would forward, we our business the improvements than got the as perform expect calling clearly for so better We

throw no in the question, there And specific on the items Americas were quarter top of is, unusual thing first driving that, only Yes. your I Joe, would margin. to the

year. Got reasons it. That's you of lot you about kind growth driving see going Jobs starting helpful. I'm super loosen excited the And year? dynamics from on outlined are Or curious, you look, the side? to particularly utilities a utilities the of be for took saw some Act, forward. your the on to Craig, the of I expectations money up grid for the companies expectation growth what's the for the increased

Yes. kinds Joe, had anticipated, to as have that market to by trends or mean needed of would make long going think frankly, economy. this whether we transition, economy about quite point the to all is is of been electrification be I these some that electrification investments something at the mega utility the us energy of the start of you to that support the it's of knew are

think, time are lead many As you pieces one the in of is could today the or cases, last a longest there order I times earnings mentioned, I of in equipment And industry transformer. XX beyond. electrical months that lead call, the on

energy this to the utilities the making And so see electrification we support transition their taking investments place, really that's the economy. to distribution of continue in infrastructure

come really growth to market a the investments. market strong yes, some so utility years they is deal think going as be we for with needed to And

we And since some orders through, as go growth, so on is, years now, the heard no and again question, significant that's coming once to growth to expectation from what quite orders conservative we the come. you the but think began of and little a in were year, Tom as are terms bit some for it's going of we

The Josh Stanley. next is Pokrzywinski question from Morgan from

labor the be somewhere see take to back looks supply a kind might just today, demand of to So projects in chain, these at bad is with or plans supply pool guess, sorts that like there chain even -- in the limiting backlog, if Electrical. it's of all as side either some can though including those in a the the that Craig, contractor or sort maybe Is bigger still it's on good, maybe guess not a step I good of on unlock starting really installer else totality the your there about the the labor industry how sort fast level? I of things. you of grow notwithstanding cap current of thinking factor.

on the think We're improved. question, suppliers through time trying No, means. you not any spending has growth. woods now. and the the our from mean material we're Josh. by side that's of when semiconductor-related about our still electronic of Especially out to components, lot they things one are constraining constrained certainly I of appreciate the a that chain as right sort supply And mentioned, I clearly, I

point, a today. significant But to fairly is also labor your constraint

constraints and answer -- reasons of complicated seen I industry an revenue the very on the availability supply between of takes these one why question one I what's one and from don't gap this factor. because to so you've to market as is you have limiter extended And chains, terms your in supplier, know, labor only it player become in because, big in think perspective, once the again, chain direct the really been an our industry. the orders have constraining supply

commentary, of across in of a great that answer the but we today that our is spend these strength better that the tell seeing industry board. can opening our much that it's So outlook our deliver broad-based about just time a the of better through, where and thinking about and it's strong showing we very some clear the to these really revenue material to showing up one upper tied we're feeling ability And real trends. given terms to And for not that significant growth you today, we constraints. I and positives given to up talked what we're company question extended order the things have tons boundary growth in one just today for books. trying hope we're to labor, continue would our some are of industry's secular we supply backlog, and post it's on chains in getting and our

it's helpful. it. easy understand I That's not question Got an just yet. And to answer

lead supply Maybe in of shifting for book terms something which all then out between maybe any when And I pipeline the -- things like underlying mutually you over that? any enters churn and exclusive. are of how my the to would of with been that pipeline there that imagine projects, can and the Is some these into maybe in follow-up. there volatility Anything rate time you stimulus about should think financing, see the pipeline kind in share transmits backlog? chain, has we

I orders negotiations in No, appreciate I'd lot together of has we question of churn. than question. not the terms whether the whether everything it's our for activity doing I and we're a than lot put And certainly mean better that year. overall when specific a in seeing you economic historically -- revenue, anticipated plan or we or kind the is it asked Yes. or significantly very say there's of it's quite that better frankly, even,

more we to into continue with more orders So are anticipated, And -- we translating revenue. in more than general, things with negotiations, positive. obviously

of So I'd a specifically, in we that talked some stimulus little opening commentary. bit about that say the

We impact. are an have stimulus starting to see

We are in innings. the very early

ground we some obviously factors that, or has we Act. of about battery and talked and being billion factories EV $XXX projects, many Spending broken you that of mega are already XX% of about, started some semiconductors Infrastructure projects whether think early the think If it's by that that busters of

yet. seen the The Act. Semiconductor We're certainly any Reduction really that impact impact Act, Inflation not we have some seeing from from

mixed bag there, to of bit of visibility out impact most but in these front would us a say, times and I'd of on the So little a there be better say continues projects, yes, we lead I today. have today

As these period. bigger, them projects over to tend a run are multiyear they

delivered I'd about be so because multiple large And that we're But the into will projects very future of over these say... visibility great feeling our years.

XX%. part almost remarks, the Yes. speaker our up amplify year-over-year negotiation on is quarter-over-quarter going is up in to The would only almost back XX%, our that that U.S. pipeline I

up are growth. XX% segments big over the of well some And

very So pipeline we're here. seeing robust

from The next question is from Melius Scott Research. Davis

get you million about just size? be these and Tom. I since when people One stuff? covering want is competitive of out on couple different trusted orders this lot total Look, to to just when to change $XXX new, dynamic. at I've this the for is because really less bid talking just and kind this angles that up space. million to of here. a least there's a you're Maybe projects so Meaning customer can it the Does been at $XX-plus least fixate how go big Craig suppliers

theme sector we've of point I to -- mean, in I broader in certain sure, this bigger investing far essentially extent the all, this acknowledge between. customers you a companies able Europe, the just who said, a raised, the project, are to U.S. reindustrialization complex the what back But project, relatively really that had U.S. And mega of the will fewer big speaking, the think let's first but manufacturing Scott. of These that surge services also always the been manufacturing in it's provide to for few in and about talked you our really, the that -- Yes. go the need. you more we they've historically resulting we say, to projects, is if in around a the

in the electric more about because complex also general, capable Eaton of projects favors this environment And so they're our companies competitive like in we large frankly, you when more dynamic intensive. in certainly And quite think the organization. think general,

a the If strip building, typical the also factory, or underlying which intensity like or these center, greater office office electrical mall a than electrical of much plant intensity or typical the of about an the helps you data support applications growth is think companies industry typical EV semiconductor a versus Eaton. a building and

we faster to drive growth So certainly to it's also grow allow industry, at a it's our going an think important for the companies but trend should -- that's rate.

on which the levels really which driven lens point, these is just big historically. which read PMIs, we've of projects all I And higher Craig's by reindustrialization, it don't think what this down. focused another slowing to so we gives CapEx, much these terms see And in not of

firm little just monitoring, say, less and Yes. of Is talk this the animal. bid, mean this? like out facilities a I'm back separate Helpful. a into a little products EPC when Is like a sales process I selling et traditional to but just it up let's bit is about same? a putting picturing a kind then you cetera. software/remote of bit, that different And

how the of really process sales So is product? unique changing with and evolve type this

think data the insights to of over years sale talking state that. to about Yes, we've of way spent software you about and with the some time we the

really equipment. it's the we think linked us, For do to

From part, the that These create insights, to digitally enabled. us, for data. so the of the that our algorithms They're and can that of to products, selling coming in ability monetize we're for data, native. we form either have from Service a are And stream software. products and all off or most products the digitally allow as either Data provide data that us we

do sale not to sale us, expertise together. these domain knowledge and for that company we bundle software have of every it's and the So same for this we the link services and the and places of in where we space, the data hardware, deep

for for go through decision every not way market, that's channel the the So together same go the the us same point. we through space. But company same in we to in the do

Deutsche The next question Bank. from from is Nicole DeBlase

Just XX% organic with bit for first outlook the the a starting in the of maybe quarter growth, embedding a deceleration from second quarter.

that a deceleration talk a from perspective? driving what's about you bit can little Just segment

balance look as is of I'd look you terms say land. volume you the you and year-over-year the things for that balance smaller the the of there's price a Nicole, you to clearly, obviously, if in move is But get, forward and a of price you I'd the as going relatively bit Yes. contributions where between get at of market significant can volume. you one always year, say increase, from from forward contribution imagine, pretty uncertainty, you when think that

that the quarter. of And and second year so -- that's inclusive business dynamic place the have the taken throughout in you clearly

mean, I QX. here. see. We're we'll to So at this a good point, we're into days start early off

possibilities have could able It if continue certainly, to convert for And have the issues resolved, so of and of quarter. the chain better. be range we we to some a supply we're

taking this in a on of out I'd view prudent we're the again, upon less supply I relative chain say we're once from And based a fact not price certainly at completely point, we QX. that a had the than standpoint. mentioned But woods year-over-year basis

That relative you're there inventory to Electrical? second quarter? any movement history Still respect And pretty past it. Got question, the channel in then makes just update to with seeing low or in on sense. what

important channel think think are relatively would spots some you We at channel most the today, good inventories to I probably message Yes. obviously, is and the orders. context size they of the actually in got the the when that can context with like look with inventory, in inventories the I more those shape, of group at that really where of think look leave in I the you backlog,

to If you're inventories. you're one to looking draw backwards, respect conclusion with going

of been ratios earnings in based that. to If and you're call, our inventory own company a They're that forward to they've looking the markets. inventory the our actually below a we things out historically express backlog, where laid of one QX for orders it's forward, Tom different you're upon our industry conclusion. some our to between of and draw going very And view tried and say where

I'd are, in in And speaking, just generally good shape. inventories today, so general say

We an the discussions Our fairly have a you distributors particular inventory. they're solve I need help today, XX% quarter. -- performed fourth Europe, don't as because But where since in quarter that enough Europe -- I'm having did shape. have good about a turned it's there time, destocking better inventories than And time, I has Europe see phone calls the in I of a customer even today distributors, shape. issue issue general, with of with I'd in fourth bit of in bit anticipated, good more. say me are That Can it's in on and a little where balance, so in was around. little we in the

the Jefferies. line question next the is Volkmann from And from Steve of

of backlog Craig, sort with sort these types backlog big going new of you and whatever we are just will saying. based levels you sort you backlog again? these were the on world down of operating think think the or back Or of normalizes forward? what that as question from a think chain come Do Eaton do numbers should picture about supply Eaton

about not do backlog ramps lead for same carry we'll these of It's taking clarified and that of thought we and serve. have are of could I backlogs. once out one, you think answer to We or as to place throughout with lot XXXX. think level XXXX, again, some get don't the well much question, but will we specifically. it's of times have actually through whether anticipate a in and that certainly, markets the great tell We not that I reducing of the obviously front can A industries we in that we

to that terms online historically lead our And to customers. get where capacity we of go back so can times been to perhaps can quick we lead we've times reduce in enough stated

today. in demand to think terms of level level, quickly be how strong, I but unfold can just of know be function growth. of And there think the And and so not capacity I in to level we're markets put is higher do we others because we this of will demand a a lot it support not how going

Steve, would I in chime where that, I it's on think connected.

I the remarks, include we on can and Eaton think Eaton Your we the And prepared doubling say that a in and that's question markets outgrowth have of over that. higher that put thing definitely our is think Craig we new big said where historically. top growth you doesn't they doubling when was but see been backlog, as a his

aero quarterly Global that Electrical up also to if look there's such up numbers. XX%. growth at we've over perspective, and back their growing got some the Electrical 'XX, just And XX% Americas of order of XX% terms first orders. quarter going you in over strong about

volume a the of that orders is higher the continued a the in new think of just So building and growth quarterly backlog, coming I much we're Eaton. Eaton seeing

to gears switching Aerospace. then And Great.

like a you be We feels It that kind about haven't like may it. this real But from business. Aerospace I've talked talk too of that step the on reading stair call just for one heard 'XX commentary and your guys about much. others

ramps revenue and than mentioned, I'm a thinking in we you think should up. the have that of margin just military a of you increase of case? curious might business be year-to-year if be there's I 'XX kind Craig, bunch bigger of in that kind that normally sort

not to early Both to Airbus it's of do certainly do to in for for think commercial the side, have line We increases certainly in Boeing industry -- and We'll us continues for improving. thesis have that guidance on is an terms the that [indiscernible] off ramp. But but numbers opportunity mark. be believe obviously rates is out later the put in XXXX. I putting year. your I out that already

continue some getting are I to grow passenger planes. up, on levels. Revenue back miles XXXX to XX%, and kilometers Consumers still I in not think, think, QX,

long passenger So just way aftermarket revenue to miles, know, drives which, there's to a on as back for XXXX go the you get to us.

be then delivered most And orders of this growth in them to will begin on military huge the into side, that XXXX. year

going is favorable be. good the how to business now, you certainly Aerospace indication our for be in we'll setup and right an the think we think position quite of give I So in year to later a certainly it's

question Coe from Wolfe. from And the Nigel is next

in major perspective want we markets back get going from to seeing that that XX.X% this to -- on a mega some we're margin gets of quickly, the get Maybe But and in what better year? you before do come I to projects. just margins, these into went global through to Global, investments. peel back the what full just

say to I'd manufacturing but single fairly as is, volumes, gets getting margins year. we to in had Yes, about last the biggest talked the is, last an business thing we significant to inefficiencies incremental, that higher year, the one say delivering better you're and obviously the you're I'd get higher big one,

logistics that standing and had fact of -- a inefficiencies so costs of profitability of well. record despite we around in and people Given the up for chain time the and didn't of challenges, had as factories record that show waiting we components in lots year supply a expedited lots year freight we on XXXX,

the put had elimination going months or get better over of inefficiencies it to it's really many manufacturing on is so. that's that XX it And to experienced better, XX so thing last to if and we've one I getting the of these

way, mega roughly a are Volumes said that back general haven't. going positive and in on the sense, horse to then a projects, the awarded those the dead sense. at of of what been very at billion You have on risk majority Okay. the more $XXX this bid of percentage beating makes And point?

your just Your that America And So is your how what's then looks. the about that wondering win win North in U.S., does rate? X%, how bogey? compared share market rate to

Yes.

said, projects. underlying share on ground And I all these the As I are these and broken as are under them we said company is market said, announced these XX% above underlying overall. on say the construction. for win mega at or rate much And projects, that mega of our actually I'd essentially projects are pretty

very been success we've with our So rate. pleased

more complex talked the would the the project, selected. likelihood we we be project, about bigger the higher that the As earlier, the

on in so keep and mind, say, the products underlying rate years. to And projects will next, delivered win be -- these over X let's these the X

a tail they them. fairly so And have got -- long it's on

But these projects. win underlying the So upon is big movements rate the to profitability in good, also I the necessarily near wouldn't expect term based and underlying see is good.

win The we share above for that rate. materially only thing quarter, I would the our amplify were given actually

in So doing yes, the we're deal. well terms of closing

from question Julian The next is Barclays. from Mitchell

a sort equipment tailwinds revenue multi-industry as QX of electrical of QX. lot a in well price around have very ones broader and be would cost disproportionate very question first my very, price substantive just Maybe manufacturers had margin to in tailwind and

sort you over of normalization months? on do the the of see wondered tailwinds points, X of XX next those So pace I how those X just

-- commodity ago, about a say quarter. I It's us a say down actually where XX% from the look if certainly we a for our fourth versus a major the are price steel. cases, up I'd cost, many fourth commodity is costs business, in at costs, are was were steel, from year but for it's ago, in it commodity were Yes. that where I'd where look up XX% actually versus Julian, they example, Take quarter. while actually down own they mean, in at year versus

So have mixed bag there. a you

labor on in the inflation more also can imagine, as labor today. then you side, business seeing And the we're

the we earnings price so relationship the and would our embedded I elimination others. piece that is our versus normal of incrementals drive the and maybe more it in own and around is it inefficiencies forward cost. growth as our And mostly, are than and in look as ultimately the margins price company, volume lot to volume that's But this growth not that is of significant it's in guidance the for business the going a between as say is in in at

the company. said, of from strategic subtractive either a business, don't the we the underlying way we that's standpoint, or think margin from the manage rates we is As additive price and

too What Julian, because We we see of I don't from our ourselves feedback add, price our just losing got getting effectively. cost not either. would Yes. we're sales much is We're we've organization price. business that think managing

quick That's first and those follow-up. helpful. Global And and at just mentioned apparent Vehicle. inefficiencies quarter Craig, the margins then now, Electrical I just you most are in those my think

we year, As the of expand those kind should year-on-year. go to we through margins start see

of happen more the second Is for segments? as does when it kind when expand in the as and wondered quarter the Just the it's Vehicle? soon or that is margins EG second half X

specifically expect our mean, in in in inefficiencies, challenges had those better. X businesses are Julian, quarter. progress, quarters doubt, a sequentially where the places subsequent see get to some would we without expect each we then to of would each see We I the and

quarter sure. too because seeing the year the muted the in through the but was much P&L the not margins last we're somewhat what get of from sheet. For and coming And rolled off balance into accounting, to first it

forward. be should tailwind going it a So

is from question Snyder Chris from next The UBS.

you a you are rate view? historical growth not the comment? kind Xx market few XXXX this And XXXX, times the coming growth Craig, levels. of that, Xx a just do market from you the the pushing Xx uplift long-term growth what mentioned can through market above means secular that Or drivers quantify is that Is here? believe with for

is It Yes. There's long-term question. no view. the

and cooking cars talking we're the think in needs stimulus all basically about, of that supporting the moved about investment the all equipment to U.S. move whether market trends offshore energy that an appliances dollars transition, the in factories, to connectivity, you the to economy, whether data it's reinvest go example about think or the in reindustrialization, your it's secular had renewables, of manufacturing that and you that the into growth most the digital electrification are As and as or that.

grow that our this view at think So clearly the is markets would growth least at we -- long-term rates. not least our Xx but Xx, Xx historical

the in those rates And so we mid-single-digit the markets range. think for growth are

I want -- appreciate to relative of my broader projects been that. on the a And or administration focus investment. if government where the and on mega just just infrastructure higher the projects domestic domestic these to margins and take U.S. material mega share maybe this follow-up even protect have drive then providing just There's content I incentives. Eaton a manufacturer allow for on Does projects prior a it U.S. cycles? company margins or support could is benefit the or higher to to as

U.S. shares we they U.S. compete we global they market I Yes. you Most most tend the have companies tend the just be much to would higher. the that around of where in what direct fact that higher much What is localized electrical of we is the tell do. get have shares to benefit world, market with also our But the fairly that

we'll in get as projects market. U.S. the this reindustrialization takes place manufacturing unfair so of And an share and

is Evercore question from Raso from next The ISI. David

exiting So growth the rate 'XX.

laying of about growth. the year you're XX% framework saying then for quarter, Is out quarter it's the for your Just the and is to assume of sales you're second organic how first half the it X%. back right XX%

So just the general X% decent a in of third growth that how the is framework rate kind 'XX exiting X% let's the fourth. in framework? X% Is and that call we're it of

and the at rate asking that guidance, of going for chain, had the understand need missed what's end of Yes. magnitude, is where based to if for say the happens -- don't we sit be of work growth guidance year, I the year next that But you -- with think and really but our And order today, supply get to we unfolds. the given we to how a what question, be your if X% point a an assumptions through that number, the like. starting make upon lot bad gist be of a looking It bad point. XXXX to there's exit starting what the I'd a to assumption this pick rate for that looks year, in be numbers I would not would I what wouldn't point you're you're front implied

certain of that are keep next really our in are talked inflect mind, But year, as we think markets very one. going we to about, there Aerospace positively is

And put a to so days, an it but you anchor down wouldn't early place point, as had a if today to bad be starting start.

would year, through I'm baked to how into Yes. negativity already viewed trying probably Vehicle just you be the think to part particularly much end have positively. the truck

Aerospace guess Vehicle, is within down the fourth quarter. of have XXX% truck the I size do we So trucks. by

problem. if just in I'm 'XX, significantly? to get no So If trying a even is up big level... But Aero down trucks

baked North is and to into our Class year, -- get assumptions. think time have X will fourth of the do we We the by that truck be this America negative, quarter we

next Berenberg. Phil question is from The Buller from

nicely some Vehicle A from room lot group remarks. or I aligned this here organic question guess very for would out? tail tail that guess, else don't grow you anything, some asking I potentially the trucks head But you'd But with now inorganic the on in for Obviously, sense investment? if portfolio. touched quite to And or mega come there's framed trends. be you that watch, segment efficiencies. I'm of on you and from point? I the of there's the the Craig these incremental deprioritizing this relation in this, shrink I get your there's self-help call or in I'm fix analogy, or something terms there, what, that always the at a of if things to and prepared get here relation has which to wondering much has along a and the and

No, the Yes. acknowledgment. I'd appreciate say that I

we with mean, looking of lot We business in clearly, a whether portfolio the I portfolio. have secular understanding the think every through now. participate to to we going Directors, fairly we at X well, the years and year, time with like to certainly done it moment off. And in to go comprehensive it our that's every today, process from a we're Board in like position done portfolio tailwinds, the and point really paying we where are your never at be work this as of we're to

in And so very as that of we is portfolio. look well green a inside the company process at our

every And businesses, to so evaluate evaluate we will to only continue Vehicle that. everything. going portfolio, not continue do but to of the piece We'll we're the

where around we real to all the world world. think we provider like Vehicle we element of benefit today synergistic space Today, to do as this the new the We're by what and launch specifically real automotive Mobility OEMs continues eMobility whole are. We getting across today the by as a Aerospace, segment a across there's -- electrify. we of legacy being

Every stay work it's deliver it the is into to that that just right earn to going And everything, the We to portfolio. every today, the team. works. business company, not part the so future. got say part to the can't we always to one And that to a message Vehicle of of has

Yes. example our if [indiscernible] fixing Global, back be had Craig example in a Electrical tail. actually to it's results organization we're It nonstrategic would constantly A challenging tangible that. for you the of great divestiture, the in is line, how quarter. of we prepared is the by that and impacted go the the fee a remarks which

That's I one great. may. quick just follow-up, if And very

of in particularly investors. a obviously, some be good defense European hurdle, outlook, there's bit terms a it's of a investors of terms a lot but the growth for the so where to is defense In exposure spot of business,

how you're wondering here defense priority from about going M&A low a whether I'm thinking forward? and not a that's high you for So or or

defense. need say strategically, security to part be And Aerospace, way the sure. we you're be the in you're going is out. business Yes, to I'd an It's Aerospace for of in important about in national you either or think if

say that -- concerns. we And ESG-related that X% understand we're the our But number close understand of many really that that good threshold. have to a Today, this It's business we for overall. company. strategic X% for the investors for us, defense there's I'd maybe So is to make X% businesses sense Eaton. focusing on

that grow. platform It's the like. It's a is to upon characteristics a right Aerospace based technology. And differentiated company that It's business. like margin. within continue in we'd businesses It's good to highly a got we the high all

on decades. position huge got aftermarket You've for great a that platforms runs with

like. so of for has the set that And it right characteristics we all businesses

of including lot Electrical. we But in past, to So Electrical, Aerospace, first as said will reasons the is foremost, only continue priority a a secular these behind and we've second standpoint, for tailwinds. prioritize from

continue. there at Thank Please and further questions are queue. this no you in time,

guys. Okay, Thanks.

] questions. and any will As a always, follow-up answering Chip available Have good day, be for [ guys. I

Thank you.

you. Thank

Thank that conference you. conclude service. Thank does for And for ladies using our participation teleconference gentlemen, and AT&T and today. your you for

disconnect. now You may