Shares in power management group Eaton (NYSE:ETN) dropped more than 5% on Tuesday after the company delivered fourth-quarter results broadly in line with expectations but struck a more conservative tone on its outlook for early 2026.
The company reported adjusted earnings of $3.33 per share for the fourth quarter, narrowly ahead of the $3.32 consensus forecast. Revenue reached a quarterly record of $7.1 billion, in line with analyst expectations.
Sales increased 13% year on year, supported by 9% organic growth, a 2% contribution from acquisitions and a further 2% benefit from foreign exchange movements. Segment margins also set a fourth-quarter record at 24.9%, improving by 20 basis points compared with the same period last year.
Cash generation remained strong. Operating cash flow for the quarter totaled $2 billion, while free cash flow reached $1.6 billion, both quarterly highs and up 23% and 17%, respectively, from a year earlier.
“In the fourth quarter, we continued to convert strong demand into accelerated orders and organic growth. Electrical and Aerospace were standout drivers, contributing to sustained backlog growth and a book-to-bill ratio of 1.1,” said Paulo Ruiz, CEO of Eaton.
For the full year 2025, the company posted record revenue of $27.4 billion, up 10% from 2024, reflecting 8% organic growth and a 2% lift from acquisitions. Adjusted earnings per share also reached a new high at $12.07.
Looking ahead, Eaton guided to first-quarter 2026 adjusted EPS of $2.65 to $2.85, below the $3.01 consensus estimate. For the quarter, the company expects organic growth of 5% to 7% and segment margins between 22.2% and 22.6%.
For full-year 2026, Eaton forecast adjusted EPS of $13.00 to $13.50, also slightly below the consensus estimate of $13.52. The company projects organic growth of 7% to 9% and segment margins in the range of 24.6% to 25%.