Eaton (ETN) 1 Aug 242024 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Eaton Second Quarter 2024 Conference Call. [Operator Instructions] And as a reminder, today's call 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 Second Quarter 2024 Earnings Call. Craig Vice Chairman Officer. President are Olivier CEO; today Executive Leonetti, and me Arnold, and our and With Chief Financial

agenda Oliver remarks turn operating second quarter. company's today then the Our will he performance by in it will who Craig, to highlight the over includes

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

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

by Page quarter, Okay. X. delivered we the start with of highlights year. we're with lead the off Thanks, pleased Yan. strong some noting and And We'll on that I'll another first half

up our prior on We consensus all-time markets of strong growth. XX% and by to in EPS and exceeding propelled per continue revenue, strong year. quarter, on and $X.XX commitments margins our adjusted from an execution, teams expectations deliver and record Our generated the share good earnings

raising by that a And last our XX% to strong. We're were allows and backlogs company be for with markets another again, year our XXX once segment backlog our in to organic delivered X% to come. well support electrical orders growing markets on orders adjusted our record also to results, segment flow in very the We half basis, growth, keep with book-to-bill growing for us On XX-month continue up and the increased our some guidance guidance. balance, of EPS the aerospace well XX.X%, and We're and time year. positioned raise cash margins And to are our of our megatrends XX% once second the growing rolling positioned continue again for Aerospace will ratios. The pleased full the year. strong early we're led up of orders and X%. Electrical basis up view the record for from the we're quarter points our in year. and backlogs, future. stages and margins On strength This

are the broad long-term drive to these end this strong of primary noted markets. key in The positioned sharing Eaton X. We on expected to a uniquely Turning megatrends growth Page growth. once the end create are for are Eaton's and end And trends that to markets. is have that chart our above created environment markets again continue in number will

provide and And again mega rapidly institutional remains growing of lens our update data our reindustrialization extremely we'll end through latest market market. an as for largest growth one of well one for in our we're market phase view where megatrends of the key of quarter, summary Today, markets on it's early reminder, growth an and see we'll and to provide how to once center growth single on continue years expectations commercial in robust. markets. Last covering growth practice industrial Today, activity our facilities. in outlook a gave a and As impacting the on these the projects we as just come. expect we'll the our our facilities end of update

remind you broad-based again specific a to expectations. nature Before our attention growth of turning our of to we the once market, want did

share our So most what few And end and we at in the end turning for this recent orders changed significant results, customers. we're outlook negotiation in is and a growth which shared a investing markets. slides, key are that the once-in-a-lifetime all data from This And to many in quarters received growth shared the in the in markets, that more of orders, our record seeing opportunity. has I'd and from and we're Slide broad growing. impact in pipeline, say, backlog significantly this not earlier X. We and technology of are sales and to in our we we'll a year. support commitments showcase ways, summarize rates or our we the having at our megatrends benefit levels our on

the X or summary a at $X.X where cumulative trillion that This and more, list we in seen is mega once the out some projects the mega project of stands North backlog Slide is and billion that of number XXX announced were and double have projects. mega up XXXX a trillion, projects reminder, in provide now And we projects in to the have not It's project of market. Turning presentation. We value announced of January XX%. year, in point last again as $X.X to America announced $X time with now this an been a a includes for value. of any the slowdown important

center XX%. of over for XX% of lead types announced have project and XX% orders one Note win of seen levels. started, here. started, QX the to the approximately won power historical negotiating of some $X.X actively represent our these quarters cancellation project billion months. electrical And rate and last these more below and fact, to take has We're rate new was modest, in the well data two $X.X in lots projects been we've we've that around XX% projects strongest which customers. billion projects projects have continued come There's only another that generation/renewable is of announcements, XX ever. Recently, the be In

X. Slide to Turning

and the markets. commercial highlight to industrial continue end We

a sales end overall, total has our sales. point electrical Eaton For XX% a of can for revenues. is our of small XXXX, been and exposure industrial only institutional but X% and real office noted very new part commercial estimate represents We markets some sales. you of that concerning XX% X% to it Eaton see, we as And of of for represented this estate our you,

the this expect of continue are Slide set and for On out part point out me, the -- buildings light waste on we higher portfolio. We content in we excuse our segments as growth we infrastructure these While institutional industrial and is include exposure category to noted, and And projects. includes come. care, the also is energy a office the includes an products in see perspective health electrical we also Institutional years transition projects that and wastewater. I'd including and the the other represent in commercial digitalization, commercial infrastructure to megatrends, how institutional growing, light Electrical entire segment. expect that of than much broadly which provide to two C&I segments, buildings. overview of Americas. [indiscernible] we that this something and software building and X, education, infrastructure government same slide provide significant spending of sell to our play across electrical strength XX% in driving as

In fact, solutions. have broadest of we set the electrical industry's

storage, include the charging categories for network controllers the control energy microgrid managers, EV that energy us of newer meter. Some behind

building software digitally hardware, we investments. that our organization. growth suite an of which campuses, the our of X, supported suite we comprehensive service update Slide entire layer the our management bright to On to incremental enabled provide have across does energy all and are addition want on In

the of billion end than incremental more a investments of of most and million reminder, few products capacity next $XXX a electrical expand with growth $X production America we're over investing markets. North our support As for to These support our years. capital variety in

several market has the capacity aware, you're constraints. As

note systems, actually the than is manufacturing in and XXXX. To of expand signed new increase Helsinki opened is region. Dubai, XX we to XX% So of provide UPS that we our recently line over be ensure already later state-of-the-art many additions most agreement in growing UPS. closely will with coming in a smaller a magnitude and Middle on leading contractual and with you with the manufacturing recent new of most capacity, of to add commercial, this of UPS investments, obviously in the remain Overall, of electrical track the year projects agreements. feeling the online new additional cases, of working we're and a East the are products. functions of customers production This a this recently, capacity half competitive square energy-aware these And our first ] sites feet To milestones, these industry's X our includes capacity space. campus support impact will with capacity in [ million many couple and up latest build to rapidly our ramping campus sites an into demand to and our

and an naturally also And data NordicEPOD faster in data all standardized up to to the and increase is support Turning allows XX. We're platform EPODs gear, approach the about manufactured preferred critical center that increasingly Page to an note NordicEPOD. market EPOD, weather can for amount market. standard in outstanding electrical solution the The Eaton The growing in a or of power, that for designs designed data investment in will power, are have and supply power equipment a are operate a in supply pre-engineered the systems of excited rapidly it's services. response. to to for assembles European the of to harsh Norway center allow unique it's power environments, the that standardize significant electrical modules and to new power. I'd data closed What's control center center. cooling is Europe. megawatts European are customers our needed participation their modules system backup a Eaton will This contains electrical that designed module strategic many power and market. X

results Now Olivier, through I'll take for the turn the it who us quarter. financial over will to

QX performance This strong posted cash a stack. EPS start prior XX% basis and segment guidance by free margins. the Slide Craig. profit versus represents X a We up up margin XX.X%. XX% prior over $X. I'll This This We our X resulted very and results. results. QX the million, of of total year-over-year, record points providing year. above year. end $XXX of in high record expanded and well of organically. quarters in X% X% XX% our by of up flow and Americas, range. segment flow summary summarize of QX record cash record increased million, operating we sales On $XXX is of posted Electrical and XX% profit of XX% Operating $X.XX record Adjusted up XXX quarterly XX, billion, Thanks, a grew on to X-year growth

remained growth XX.X% organic to at continue strong and for reflects We sales raise center setting XX profit Record markets. up basis, costs is generated consecutive rolling offset up XX%, for basis records stack, support to operating sales, margin. benefiting prior new by of various and orders and bar, were end Americas growth across data quarters. has initiatives. On sales were XX%. growth year, was demonstrating in industrial On the megatrends. XX%, operating double-digit that X-year which organic Organic points manufacturing Electrical growth higher efficiencies margin higher the up from strength partially XXX XX-month strength versus a

that to rolling and particular later which year-over-year pipeline in Electrical the X.X underscore the increased offset margin since end prior Electrical increase our allowed book-to-bill guidance market. strong for have major tailwinds backlog up XXXX. basis. we growth XX% QX a by was for year trends, presentation. This headwinds. Global results FX center versus of XX% strength up X.X%, backlog segment. with and have secular chart and ratio year in will QX robust project Organic XX% on execution was a growth We the These from in the Also, discuss summarizes results us data the Americas partially our XX-month negotiations up

XX markets. weakness driven year, by have we GEIS basis markets. end efficiencies, Orders We in X.X offset inflation. XX-month Operating wage basis. markets, were to center in offset EMEA rolling our points strong. end and higher data prior X% Book-to-bill basis on and was offset businesses, strength by our partially margin in of a continue up rolling in strength utility residential up by remain by continues was data versus with in a partially on APAC weaknesses business. center XX% sales QX XX-month to Regionally, partially strength see operating and

like I'd businesses, the Before moving recap our electrical to combined industrial to briefly segments.

very Organic up remains growth posted overall year-over-year, XX continued in margin We driven book-to-bill XXX of For X%, for our of XXX QX business. QX, sales orders in for driven strong strength driven sales. On a operating XX-month margin segment. record XX% were in basis, over we XX% year. electrical posted our and aftermarket and sector and of was our highlights and orders at by quarter, for with On a and were commercial record points and OEM. Operating We growth basis XX% positioning OEM, basis segment the organic commercial growth operating costs basis, XX.X% ratio higher up a by electrical points support strong our profit. OEM Aerospace that Page was down our rolling military prior X.X. X%, remain margins confident growth which higher partially offset by aftermarket. increased by to inefficiencies rolling XX-month commercial was initiatives

up OEM up at more basis, of was the Year-over-year X% On quarter, our in book-to-bill orders are we year-over-year Program And the X.X. $X our billion increased XX-month Life Aerospace rolling increased and segment up with remains for with sequentially. military quarter. Within commercial a and strong pleased XX% XX%. backlog wins OEM than XX% XX%

Moving North we XX. In and On to for point XX%, points And organic came was segment FX. Page the vehicle our XX% market our show and and in America. of South in light portfolio. offsetting XXX ] strength above by we margin [ X% Operating the in total by America X down quarter, e-mobility at $XX Page X%, vehicle an year have pleased mature a including results driven are to a revenue European operating unfavorable won XX, up business. Sales was year, lower basis organic vehicle percentage volume. were and basis. our decline sales total Weakness offset partially commercial truck in million across on prior passenger efficiencies on

cost program European $X growth organic outperformed was Our up in to market. to the Operating year continue driven expected protection we sales. by we launched units large new profit also to and and quarter, the significantly mature programs related the ramp-ups and market, ramp additional billion, In power million new over the ] brecta next $XX [ disconnect coming battery major awarded quarters. were in programs, incur

Page updated Moving Electrical show QX. Aerospace our through to and backlog XX. We

and market. with acceleration to backlog tailwinds electrical in see, As Versus orders to reaching XX% and Aerospace billion Electrical of continue secular year, Aerospace. can have for you $X.X up backlogs benefited data in we build total from end trends, $XX.X billion billion. stepping a prior $XX.X order the the electrical in intake XX% backlog hyperscale from within by grown of including center our

are our confidence As in noted and earlier, respectively. X.X growth book-to-bill X.X, continued Electrical our underscores in and beyond. backlog and Aerospace XXXX The

Now I'll updates. financial outlook turn the it market back guidance to and Craig end for

Olivier. Thanks,

summary indicators last to the Turning we end perform most Overall, XX. for expected, growth We as from to Page changed a not continue year. these earnings of of assumptions calls. our market our have markets our during and show shared what two

raising for our the year. in growth we're why U.S., however, the is data markets growth seeing centers revenue stronger-than-expected commercial are, in in We and which institutional and guidance

by markets digitalization. We in key transition, expect growth and about end our electrification, megatrends continue the reindustrialization energy supported of of XX% to

points these to reiterating given to softening from to X% to XX.X% our We're by Moving the to X% organic to markets. is and growth organic and the XX% our by fiscal in which e-mobility growth and guidance and to tightening the increase XX% Americas midpoint, is XX% segments. XX% points year XXX our points the in for some organic we to in of the organic to end we're show and lowering be XXXX guidance. Overall, an guidance XXX growth XX%. basis Page between our growth raising from to Electrical of operating now growth at basis well-reported Aerospace XX.X% XX remaining range XX% expected of XX, margin basis XX% guidance X%,

our where strong to margins, XX by deliver execution. the company's balance segment range positioned points [ for well Electrical also midpoint increasing outlook segments, guidance ]. improved for midpoint a we're is we're to remaining in increasing XX we're by operational we're strong continue For the reiterating of driven points Americas, This segment, In XX.X% the seeing margin financial margin of year. performance the XX.X%. strong guidance basis and at outlook our basis demand the and this to by We're to

page, for next the additional for metrics XXXX have we On QX. guidance and

over expected flow XXXX be $X.X cash to our for prior XXXX, to adjusted an guidance. $X.XX and a the measures. a ] at EPS between and EPS a free prior for growth of is share, midpoint guidance XX% billion the $XXX flow, flow For $X.X $X.X [ million to operating the represents in midpoint free range and increase increase $XX.XX adjusted $X.XX the for billion We cash year, cash over expect the $XX.XX increase both $XX.XX and initial the billion $X.X now billion tightened on over

expect between segment we to $X.XX margins be be between and XX.X% range a X% of QX, $X.XX For to share. in EPS XX.X% organic the adjusted growth and to and X%,

a summary even in let the as on data to by trend business, center So growth out we're close across driven end just play seeing again, we America. markets in trends reindustrialization with North multiple continue better Page XX. Once driving me the markets markets in Electrical expected, and our that our Americas

across to of delivered the results quarter continue and a company. our execution also financial on see strong key We outstanding initiatives

strength pleased levels, and backlog, medium- in outlook. record which our and of and all long-term especially orders growth our are to our validating at margins XX the were the points result, $X.XX quarter, a basis As In for guidance and organic XX basis the by raised points our our we at growth segment EPS our growth see by we our negotiations, by adjusted midpoint.

years I'll up with with we consistent margins Eaton to level for So that, come. And growth, say confidence open things earnings and deliver for will have. higher we higher when leave questions high may you the any of growth a quarter

the [Operator the Craig. Instructions] over to Thanks, you I that, With it turn will guys operator to instructions. give

question the of from Joe line come Sachs. The Ritchie Instructions] first [Operator will from Goldman

with, want week given prices. business been further an what see I capacity guess, for witnessed inflection. when is. happened start see auction Craig, has they maybe get business you and PJM record this what you with past just means going on. understanding to utility start I can just and sure longer-term for an ultimately to to your question I'm inflection trying saw maybe maybe high tight I'm a but the that I well, how know that growing how forward a

Yes. we've -- question one that climate just we Joe, talked I of for markets trends mean, and as appreciate the utility talked about of on about, of I as mean, energy that these economy, the and change the I beginning resiliency. the grid electrification the prospects build growth with is about many we're need absolutely market thrilled the transition, to us big

just are electrical these of unique lead of about we at of All of exist time in in call, markets. in the those products into is opportunities this time converging probably a pretty an one terms industries the transformer. creating on talked the factors utility that set electrical same as longest conditions before And getting

that growth say I'd for about being We that a is long-term teens market talked So big the rates it company, part low as business. the set up our some is we the our total XX% for of in us kind business of exposure.

for quite quarter, including to we current already in utility come. go to growth market, in some are seeing it this the and time on And we so attractive expect

you that the a that Yes, does what the square flexibility plus gives million Craig. I that like you total I think make XXXX, take capacity additional And you how investments increase I in give XXXX that that like as how good today? X if percentage years, know about footage, guess flexibility And represent your you of leeway gives in I guys that's that does making coming through helpful, to much that you as you're does you? like capacity then this highlighted much

question. appreciate I the

I a ad, of have hand. off don't percentage that terms In number

the we're for those the to number it, But in for are response widely. in So quickly to be you're talking piece get to way one outlook. which like into business investments every deal time that example, market, lots call in not of manufacturing. we do with, new it of there the businesses type that let's go about, you. making upon we relatively lead think capacity where different in just that about businesses We can today, capacity can the think on midterm is our the tend I to certainly it of constrained, a varies assemblies our capacity Obviously, the electric depending markets, of given put utility business transformers, times longer

capacity. know tell as the making putting in can for customers do we're And going just it that But that it's today, investments need support us many our for ready not a customers something grow. investing so much be make. long-term to in to commitments just to customers we're how to to done We say our I win would to and expect too We're long you we're we're that cases, I they here. we've ensure getting that continue time. and to And well,

next Sprague Vertical Research The from is from question Jeff Partners.

results solid and really outlook. Craig,

there. missing prints things secular again, Are that. the masked you of on by you the And weakness As seeing the or have. you're of projects data growth be and smaller surprised of surface, not OEM obviously kind the and not just exposure But we companies centers the the sort other or but been like kind outperforming industrial watching landscape of numbers takeaway where pockets given exposures else's machine you the but has and making aware from have general and weaker lay land out you kind things, to underneath not of week being lowering outlooks. like the you're I'm project-related of everybody or organic may But cutting are. because may

size lot the and focusing change as is them, mega to the and call our one $X on industry historical the projects call earnings recall because on of And terms it reported you in fundamental earnings convey number that sheer because projects spending of of that of things, of a question. the the the growth is billion, we we're we've under patterns from last in wanted reported of things one projects time billion. is that during if a order appreciate those Jeff, that, on a under are similar in it But last projects seeing business the $X the and what we're is of we well, small pattern changing the very dynamics that flows. the

don't I number fact, In the But... recall hand. off

XX%. XX%.

up XX%, roughly, XX%.

a project-related be we we broad-based really the So smaller flow whether or are business. the that business, increase in lot seeing that inside of the our stuff to a it's that the talking mega time we've about seen spend more projects projects of always tends

any I And seen say of And would ever. to QX all as rate. slide, at let [indiscernible] at not we project in in about the Those of a one the in so, activity. today, was talked the up level biggest significant we quarters no, have continue projects come

to electrical be record Our high negotiations levels. our continued business at in overall,

as the And obviously way, watchful slowdown. we're I'll assure to And but the by so and mindful seen prints not do other the we've way, we all well. by a you,

staying on are the business continues going to do broadly what's We and marketplace attuned in well. our to obviously more

just of these general pressures be as bit then but expecting to electrical resi to not some there move in it it Americas, I'm Interesting bear just macro-related global of that But his pick there growth Is grow back? it Obviously, a on to just and of like maybe into it ought should next prepared kind more some [indiscernible] remarks. hold for to And seems color weakness we year. prospects perhaps up hit the maybe it kind Europe of like side and elsewhere, secular forces come little in eventually. stuff. of

Yes.

statement will I A about are of I in really Europe largely LNG sectors, in is as a just manufacturing in the in accurate historically think digitalization, that energy of and reindustrialization, though, say, in some relevant driving mean about they America perhaps outperformance the you the you as are world. of all talk in regions of this lot of transition, megatrends center, think, North U.S. investments if is lot taking data your the big of trends the those we that differences that I and what's where other electrication, manufacturing place is other have market.

the these being those in Now investments supported by and stimulus U.S. are being these of helped programs are Obviously, as a made investments also number well.

although would data we those over example, impact, Europe overwhelmed are and for we see not same And being our significant the don't as doing seeing sure the of it's well, that verticals, more clearly in in utilities, expect businesses. economy good macro within at same so the and market the to see the in centers, time, we global growth extent pleased. for but U.S., overall terms there. overall reindustrialization you Europe, place by see markets taking we're same trend

is question next The America. from Andrew Obin of Bank from

data of about electrical AI touch the you a side? bit into talk sort center centers. pace on the Can and win your little rate to digging orders specifically just more want -- just just data on AI I maybe on of

hottest And data of and as training data the so how basic topic with group and a conventional data these obviously, think this I centers. more terms in centers in center, driving AI-centric now investments a aware, consume appreciate electricity this right Andrew, AI going increased is power or data lot centers. because, the question than I perhaps well cloud-based lot more the your world the on what's is that's in

and think our thing this coming. growth in projects. It's in business, over the first data today say We're projections time, that we're result today think very investments of you center little quoting I specific you of about the that AI. lot of about growth seeing when The a would a is is

what of about data last an at look a year, X% XX% their take of you AI-related capital if think the I industry talked industry some spending is leaders that to the centers. --

XX-plus growth of come to to still terms its is to related is the contribution percent getting, and Most us I'd companies this say, we're of in on-premise. of out zone, cloud I our more to the say getting that. centers really centers. that are [ in expect like tied with we're front aligned of to your applications our more data It's conventional we that as orders, of the much ] So orders respect most would very that data the expansion to move coming. And with from AI orders

close in this storing, growth generating, about driving in I that's of that when future. a backlog the think largely yet look centers inflection consuming hit context to and it the tell what's this, and the you that's AI. for historical today, AI, projects And data production, in $XXX increase in of that today. And you fact, data you, center If the haven't of we all you years would data point build we're really at X total fell look at rates, In billion. massive if

think years. So and cycle is ultimately gets for a just build-out happens expansion number this extended quite of this additional that what we market

Thank Great to hear. you a for comprehensive answer.

capital a on just question, follow-up allocation. Another

you buybacks, million bought $XXX think, half. back, I first in Just the

thinking about So cadence how buybacks the we year? balance of should the be for the of

market, our today the value we what Andrew, in stock. of in the upon upside strong see see we based a

So to shares. we buy continue will back

this more the high we today, will stock But back midpoint We buyback be Andrew. our what That's our and ] about [ but based we billion at of have believe range, price of said we that end we balance guide would X the implies. would year. see opportunistic, QX obviously and upon guidance we the we where between buy would for remain QX, the

from Tusa JPMorgan. is The next from question Steve

strong execution. another here, good print on Congrats

Just can that through rest to on grow this electrical of the continue year? in the backlog,

projects some XX% this start From at given And to we're rate at a those say leveling are, which where of have if we quarter-over-quarter. year. today based constraints some are sure, beginning what remained, some have tell is the point, even that industry we've perhaps quite markets certainly the about it's backlog before growing tough orders. seeing, and the the you'd backlog. The are out place data a continue question. customers sit about, that ability giving still at upon Steve, talked how the to my it's imagined some us think there converge. question backlog up and the -- big limiting probably of eating and to where the And ask that's our especially of I to multiyear backlog, strong activities for that year-over-year, would a dynamic as build as big your I great the we'll to that mega hyperscale the produce we these we and I I year, But that in backlog advent -- these reached given do would in the But center level negotiations having is talked would they see industry at will me is other frankly, well today, and guess we're orders. receiving taking

surprise So continue it back all the wouldn't at to -- me grow. that

of quarters, grow XQ? for X you sequentially the can So effectively next like backlog couple for and ] [

have -- the is, I XX% you can't up so don't I I I I in about truth don't answer. negotiations our think business. or are know a definitive mean really give Electrical the

faster suggest a at sales. certainly all to we're we'll and would backlog. we're continue But our And our our it's negotiations to and have growing build to to so just grow how see continue possible wait we're going it rate out. that growing than that math plays That we negotiations,

then on just margins. And the electrical one Okay. more

about you print I again that another talked but some guys margins, pretty estimates nice think here quarter, hitting are we with on the upside last front.

year, still it. the down Again, just or half, in negative step the mature bit that. a it's anything of the it I step kind a incrementals? what's it's the does like want strong I'm of incrementals? to half, saying very the saying things as incremental, step for in down bit back not I'm the understand guidance of in no doubt You driving down second show the about What's in raised in --

first that from No, a And we've execution. And of question. the of our year very more in much our had electrical very we'll quarter. basis, consistent first higher half have doubt, last without no, I'd strong relative and ] I mentioned than and a [ to with appreciate frankly, a half contributions we half of of say quite that contribution the in lots the what in on businesses, incrementals we price second team's had

ramping are We spending.

more coming investments make business, we growth the back continue ramp heavily We we new obviously, the that up and obviously, have capacity, depreciation need brings, be loaded. and online to to in and and tend those capacity work to that

But clearly, have we is surprise And teams best so to to as our those our execution. their you continued margin provided view. us well numbers that with

I you can we best range of point, if they be margins, provided, end the so the view. this electrical But And that at that's the hopeful think a good at about range, the range the is think the and range. that we're

the ISI. from from comes question Evercore Raso David of next line The

can we us where on Electrical Americas, particularly Can some Americas XX% long update here you us of some times, cost. stand right that last how Electrical given should the volume pricing into which think XX% quarter, price of as lead now, you if on we growth, power sense sit give then XX? today, also, in quarter. any price about, give this versus we And

were I'd is say balanced, on incrementals as And question. we the only over we need for price through this period the years, say but maintain the upside are Today, down versus the the of cost. a of not that appreciate we recovering I margins. a means inflation time equation last inflationary would our which certainly, we that I couple that period come to little bit back

of ago, we'd cost. On see today year-over-year a we basis simply prices in year balance I first the moment between to than went relationship probably of between in Obviously, so a and from And a -- we half. on the price pricing, that's terms versus And what volume when business of of the as the less pricing half expect mentioned be function second will in the year. last saw in timing

of in the it's already. base So kind

we've of the customer. upon and varies varies is lot depending recover that that say and customer terms I today, provide a versus of as specifically separating who for, need so would number, provide think, we pieces, to volume we right inflation our we and number those by in before, of said and ability price, terms two don't don't And by reasons the the in customer variability,

create So to the in an balance within position with be I'd separating don't an demand the be could on from business, continue want pricing other. To that to we number by advantageous say we customer our the this unintended when overall problem respect power today different versus between for your to two is versus capacity. one point us

to in we've would as margins in expect by as have to place, the our opportunities we tremendous of and be an said And that opportunities every come go abilities the continue expand forward historically advantageous I position. us and What there better. And we that to expansion margins will we we plenty it running our that's run of better. so continue expand believe largely the company from margin is company about think front to to

first The ] rest function follow-up. to the of accelerate Or suggest revenue growth that Global. the Quick year, that has seeing organically X the ] [ Is was X there could up ], easier X [ half? of the comps you're second anything the after to simply [ is Electrical and the half would in change. accelerate? that

been this if have And into little a of that's would been market Global electrical market, business year the embedded a to Europe segment. our specifically bit the there's in in largely relative it expectations. European market, a year, Electrical that's The function a comps. it's Coming been Europe No. electrical the our of disappointment

single-digit coming -- ] markets doing but business, see we little great. out doing had specifically, a We're some all and you have our the weaker Asia high guides growth. bit [ data is in Europe. in of fine results

not it's that -- But function unique regard. of really we're pretty at we is. comps than it think more all a in much So

second a European expect the market. turnaround half electrical in We

The of Deane Dray question from RBC. next is the from line

of share we wanted -- segment just spotlight And the growth win would could the that you And about thought bit be have there would on more. I helpful. data I that in of that some Global, and your center if is to talk stay the U.S., outside lifting color little much in today? But market Electrical because could. be would put business a rates rates and how

electrical the question, consistent share in largely as have franchise. today in with I North the in today, tell of have will but content that a that's products balance as America of we the the North just in Yes. We that UPS Europe function a don't electrical Dean. Eaton transformers. data say, much not you we center in have appreciate I position just let's much America. switchgear like in would And and very

centers. And sell market or in in Americas we the the a to of end end data in European North same strength. don't ability the the the complete solutions market, so to And America suite market, we have have into

position strength, same, the gear. in of we We switch same in UPS the for wouldn't say, have let's have example, strength but the electrical

would share add look as percent at the a market in I thing Europe other smaller total the total represents market, of when that The it a you center business. is the data of much

results Americas of the really so the relative global really just I'd size of the And market. one, those say versus are are relative the back business that factors holding the of portfolio; breadth secondly, the

much machine Europe and OEMs been on historically, has know, manufacturing you data space. center more the in automation focused and As

that please? are I far you transformers, years backlog now, your especially your but activity, about imagine for color, distinction. out And helpful today and thanks kind really there, center, -- how X the just on color it's deliveries. would of any That's sticking think Are you with if data quote in over

the to design, EPODs, a you rate. a time than fundamentally we you when is find perspective centers -- think to data that example, your we have backlog it, much reasons, the it guess the of depends at to say we way period centers collectively which we perhaps I for in of I'd as deal enables upon Europe [ is building about stand that standardized talked out something do data think I due in a center modular looking that unless much data one I as the X-year shorter It's told these industry to step a an at up about across industry on what we a in ] up much did faster historically. in

to historically. find what terms land, ability So think centers to the from to think they Eaton. about the I will power, rate the be data the from in question build comes constraints constraints, the industry's than industry I our and of not a out It as the comes find have comes, the what Eaton faster at will bigger largely

going will industry not But challenges for bottleneck do. up in we growth So have what this We're be keep of the to to we're to terms the be fine the rate. industry. going with

Mitchell The next Barclays. from form is Julian question

destocking last to sort question had we weaker on some look a things. very the growth. now growth And similar of X in products just for on months passed. it's side I electrical good Maybe sluggish systems think versus in maybe and weighed global of degree, that electrical phenomenon example, very, a kind the been when of that the business, And with there the Americas, then products was pretty that's in fairly a side that high And systems. that at

also per of short-term easier comps backlogs. this in products, large But very maybe from So numbers think I products rightly of wondered I of are so and half, the for forth you're we macro here? but could just the you piece because sort sort or have of systems for growth, ISM the granted suppose the about wrongly mix take this a that thinking worse. the how back few revenue morning quarters I

you help EG So playing that us revenue-wise in EA product how kind see side out? and the things, of of understand maybe

federal these an aware, by individual tend we would We Yes. around residential Julian, the it -- but account I market, by that versus of we sell sell But more total the you resi, for our end our your question, with But That get it's much markets. some has that take look a that end smaller of again, be really going that think market in certain business the market forward. rate, into business. but we slow. We seen in end think of if various are into. do we general, I which And market, we'll it's once that And business that system-centric. perhaps it see bottoming think end product federal to start anymore time rate some market, of we've same be think cuts comps to that think business the there XX%, evidence tends what about at the clearly what's versus could know markets And [indiscernible] in especially off. we the happening I today at has today Julian. of really really market product-centric And that to systems. maybe been easier point, appreciate and XX% OEM, that comps call do been we to you said to the look today insight again, weak, for components part market really machine The builders. and bottomed, which don't what's we so, into do sell on in at are manufacturing-centric. Once the most challenge, as going got look markets largely company. be Europe, easier. more We that thing as get funds

And on seeing smaller and going by our business. we're of pieces of offset which So portfolio context let's the the have But these commercial, data business. the biggest mega that industrial, any whatever of be sluggishness the into, are and markets the about what's utility, sell is being seeing overwhelmed to in about wait institutional, the end we center, in that in and way see. it of we sluggishness. you think if more think than trends part most obviously, not the our We're businesses,

what's in it two it, Yes, proxies forward. and, let's of that's best Maybe really OEMs about would resi it's in happening reaching a think products it, about happening products be helpful MOEM, going easier terms comps So we been hopefully, want the for think to do Eaton. it, probably a and has it's you the bottom proxy slow. if of you get as what's we're way call you inside and for machinery

a sort question short-term second. for of a And looking just maybe then more at margins

again the operating So sort looks guidance and seems it the in sequentially. sort sort sequentially seems flat there's sort flattish QX, of in on of imply think margins think, to But then like so year-on-year. flattish they're and no and And of doubt. it rounding some where then of to QX, I I midpoints imply are

it's sequentially in thinking operating then interesting guided down of up to I just suppose we're that crimping investments So that's so QX goes I sequentially, bit, understand as normally a X%, the leverage trying margin are margins sort year-on-year, understand be because up And the in And flat your the growth. but QX. despite that stepping firm-wide are X% to operating the QX.

tell bit I little talked would already, this Julian, about are a What that we is Yes. you, investing. we

We depreciation. are brings bringing capacity, and obviously, It manufacturing brings that on, additional on start-up expenses. on

We seeing. the front-end with in essentially that deal resources are growth we're investing commercial to

current where half end view in they I it's well up. execute our upside We'll margins there, today. sit have, back the but view. the yes, that's where but to And there could year, mean, so some And team essentially be we our see balance as of we from continues our flat. as on current

is from from Nicole Deutsche next DeBlase The question Bank.

one another year Aerospace step-up blip big a surprised in So I down the strong full of margin you pretty that maybe set the I second guidance. guess bit was really I'm It embeds half. maintained year-on-year. results. guess a

And the So can drives what in you up just then implied talk about what happened Aero with step margins back in the second the quarter? half?

largely how much I ship Nicole. Yes. just in big and in would because in And which given and question, and you difference a can OEs do lumpy. margins aftermarket quarter. margins on I say that the between Aerospace, that's appreciate OE there's platform a margins such And be

and noise. second have in-house pretty is confident the about orders So essentially visibility. I outlook half think based I we say upon We're have would as just -- would that it in just clear

it in mix drives it's mostly, outlook. a yes, quarter. to in away, quarter go I through would and largely margin really just that quarter They the the confident -- a shipped in that we but in we and operating we're will function inefficiencies the some So the outlook, look attribute had the of noise given

Craig. then That modular a as opportunity? as I U.S.? that And to to investment, guess opportunity there you makes it. the that solution view bring Or the sense, do more NordicEPod Got on is European-centric

the to to market tend specific customized see this build-outs. especially The more We'll it more how to mean, their the be it the sure. see we're solutions. U.S., and in center in evolves. data where hyperscale We for I of build. We modular American regions North two Yes. customers of world see have in Europe modular approach seeing Asia,

the that versus and wait see tend as to out. how U.S. have we'll today, the So outside plays place of of it what's taking in But be what's to does U.S. more

Melius And Research. the Davis from from Scott next question is

historically? last but a what something, results the that I small like would be Craig, quote were you or couple [indiscernible] things. of if rate. that couple historically, Congrats that years. the meaningfully on you went mean the of years in guys maybe of recall than was where higher back X you it Is win I kind ballpark? than don't XX% this

say would in with overall, the we're win that mega again, I and some of XX% early, having rate, projects relatively them once Yes. started. right,

it's so North that than America. at underlying and start a good our higher in market be XX%, would And share

share the in general but clearly, is we're would market start to by projects. the And higher we're going Eaton that be the the I -- in tends likelihood so more And seeing sophisticated more in win more say, that and our general, encouraged bigger project it. to and in general, complex larger,

is That Yes. done makes the then lot you session? update And CEO an anybody on the a out sense. Craig, But any that not of job. you've door, amazing chasing

a pleasure, for say It's thank you, been first it acknowledgment. pleasure. and the just will and No. to a I'll all continue be

As a fun and time May. I'll lot everybody meantime, age XX mandatory of of the is leave I'll on of a next turn be we to But soon these their question. retirement year, to that Board call having at things announce we the the continuing and is and industries of as end my share enjoy part of have of job a as can't feedback aware, on and the in to better in I probably the on In is working May XX. busy think by the ready And associated their decision going be we're to particular Board leader. with. chair and be the very way certainly a we'll next who's that the

Research. question next Wolfe from from The is Nigel Coe

Craig, career you've what amazing had. an

just you're job want also is the you've not leaving. a not here. fantastic This done I to last acknowledge I but know call, So

depreciation? capacity, in ramp investment the spending, billion I just million think square that sense Or you just coming us feet that sequentially that And it's in give investment $X on you cash this can ], up? are the X but spend additional on some Electrical of When well? remind where capacity there And us other of in about are we [ know So mainly sequences, Is a can come to expenses sort online? there. as does Americas.

Yes.

that half investments first the of I beginning early the year. So say, would announced the year, million and that some that really of come in the really you to part when, I'd this it spend. in It second online starts tell $XXX we really, around this starts of where North question America

begin Some little so even into it I'm overall of address to really say year in the understood half of to us obviously second demand that a Nigel, tend efficacy. year. part the I of next capacity term second that Maybe, can you longer some though. investments the the we're not or of But XXXX. where question, market the backlog the I'd end allows other does the some adding [indiscernible] maybe the be towards beginning or of and sure

new Americas spending, as the think should about that is of the the so on other kind well? that this are yes, depreciation in a that we investment referencing, capacity? headwinds Or Electrical -- investments just Yes, there you're

ramp-up you new right, have a also capacity inefficiencies cost, to depreciation you obviously Yes. No, it's the lines new facility when their these targeted -- there's come it's levels. reach and ramp there's and up until or a up manufacturing line, absorb that certainly then

some that it's And now to both so that address investments seeing the really into growth and end manufacturing of this And depreciation. we're the in front we're making then there's commercial future. inefficiencies, our

by any [ but mentioned $XXX Cleveland-Cliffs, I'd of believe I interested can't be kind investment have was to your get how in still thoughts this entrant capacity is mean of the market be be kind for? a question My but million years? I this next view of of kind some undersupplied kind ] Cleveland-Cliffs online Okay. to a but announced for ways, transformers, call, of And thought we the terms in of guess, think is, here three-phase actually new are I would which I going much manufacturing transformer they are couple this random, long in on announcement undersupplied do great. coming in follow-up you mean related I we market of seeing how there transformers?

they amounts it a to investment another mean, Yes. had manufacturer the I about one at and transform historically in the been saw from point, can what not I investment. manufacturing. you, worried rumored transformer we're as upon Cleveland-Cliffs transformer into that with I investment the well to very know supplier of not in just we to a market. They, tell what be and we transformer size Cleveland-Cliffs. based have about announcement modest the obviously manufacturing, mean partnering

everywhere. of worried can into say not industrial data it. imagine, So impact And industry we're go into long? as not the that how any we our trends. -- these think little go given we've utility you any the seen it's have I I go all about about it. impact but going talk They applications. and go buildings into don't they of transformers the we're that I'd size on investment. And mean at to growth centers. rate on very

don't And what demand that verticals, of doing these markets. and perhaps I'm see is capacity our for demand number transformer one across they're of is so today maybe But end coming alignment I a imagine we're seeing not I into sure. of comprehensive one every would years. focusing And transformer on

a have long be wait that for it a our we've growth expected out. continue very good markets to see is until and to as articulated, market for we'll going time, But all attractive plays think to are now. I for time to long

Wells is Our O'Dea from Fargo. from next Joe question

little Greg, the going Actually could of the are capacity of on spend to Americas. of provide bit $XXX perspective that detail more categories topic, that the a biggest on some you addition. the on some million capacity just in on Any see

some just be capacity, on And capacity sizable what to understand in investments. switchgear there's anything of of so will more up where sort better transformer the your step the

Yes.

line place the and is we're that think that to outbound lines, there's see that making going the we the investments, investments customers I over capacity capacity way medium But constraints those be. have we're those making we're that our many chart investments cases, in next commitments that to the every product be we impacted. we're outlook for in businesses the the constraints few obviously about where making and mentioned, commentary in I getting will right And various for years, a and online. long-term think with capacity in bringing or are around customer our today including, and demand what as the

a intend bottleneck perhaps call, difficult the as we we're question the in we're to precisely be what to the industry it. as we're in really outlook. other our of don't we're to I capacity support the investments comfortable than of And so the making last terms it, spending earnings for different needed spending products, growth to lots and where of It's say, And businesses. different as said answer asked lots you've

just to on backlog. And I ask want then

$X you backlog sequentially. up next billion last XX to was in months the expected XX% the or back like If quarter, go ship

that that backlog. And back activity in the would so half order directed $X terms the of that months that, specifics, much with the dependent year? increase into any that of be that demand, meeting and the was And on then next just coming billion XX is the how on capacity curious end in in of markets

that additional terms Yes. together backlog one piece some of every businesses, how are That's in capacity, of another and the or of not. backlog across backlog The difficult much of large cuts question the is which to our is some getting specific really the quite expansion. which to capacity obviously tied of

lead a tied -- beyond say, to that of most way to basis, we to backlog capacity million feet have of that than have capacity a in again, these of about you difficult we're So answer We of talk maybe what north incremental our really most can that other right? is that these to address times where think are sites. sites, really to so think answer of our the are really that capacity not than the and once satisfactory in question we of reasonable front if context impacting where times investments XXX in XX relative square have those backlog, these constraints, grow. stretched the But investments, deliver to adding other difficult reduce it about out X of -- investments. On customers and to to lead get and making question investments can the continue to it say we we

most tight I have add facilities need some necessarily to just the is real what don't would be satisfied most we we of or in but So and to say our the obviously of businesses, spots we're where going by the capacity, investments addressing. that of some backlog that's

And question queue from in final the Buller from Phil Berenberg. is

to it was used I think investment and the tail. You an strategy about or portfolio talk, Craig, growing the shrinking of, head

back markets exiting phrase was I the really to you least throwing think end obviously, part. all used behind that's or And and use, that most but of well. investment the weight dollars dining essentially the the attractive attractive worked

the But happening what parts best on business today clear we might expect any where is there the it's now of bits there tail, potential there the a think are. I disposals? much less Or is are tail? strategic

question. margins there's there's this a business in We the Electrical our the And a and everywhere. business has XX% quarter. is to appreciate short I No, a posted Electrical close tail. Americas tail tail Americas absolutely, answer The

down by win doubling the a great because to the right and There's in inverse And industries. great technology, actively There's right be places making really investments true, that. to is we you margins, the and to. we where head playing way customers, be is also the applications, every they'll looking think And that so this portfolio have about have tell the that I leaders the to They our would we prospects products, at really don't growth the and don't win, of have the be we manager. make markets growth returns right one be to addressing business ought a where way. has incremental

is, the short think I absolutely. so And answer

play do company and We where every focused more think place, every to in the there's portfolio we we the management we place continue that win. can opportunities and across be to decide to places

ramp is that at of I profit their sort speaking, And get the attractiveness and so and to on Broadly an view portfolio? relative wider what's Boeing extension lot of industry, guess, on. are on airlines the attractiveness its and of high, have but your Airbus backlogs aerospace? are But seems, up, the evolving assessment daily just what's challenges current of It commercial I that attractive aerospace question. traffic I know view versus secular follow X-year an up. long-term warning the moment. own your a it's to of commercial

businesses It's It's a and an make returns. business about are I the why of a asked a like. where of the you'd a question But why? industry for moat aftermarket. industry large it's industry, you how you're feel think certainly the attractive appreciate differentiate. is It has long-term life. we It's commercial the of has very given aerospace, tell and having for some business we I on we of It question, of a growth has in aerospace OEMs a that where where an you, very on the terms pays long business is can some wide that in And it. short, you characteristics a medium a that technology, challenges right, the if the we a industry platform, outstanding that it's business today, all can term. platform

one commercial despite the for that very attractive. best the aerospace growth so of And the be little be we two through continues going the continues Aftermarket issue, that company. the is one or bit growth of to of to outlook have a short-term fact outlooks customer a maybe in

the a we think attractive we like no, very asset. and it's we the And so like and fundamentals, space,

end questions. reached of I and Okay. everybody's appreciate guys. We've Great. Thanks, call, the our

follow-up is always, any a As IR day. us. great joining the Thanks for to Have questions. team ready

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

may You disconnect. now