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February 4, 2022
Operating cash flow in the fourth quarter of 2021 was $795 million. Excluding $61 million of taxes paid on the Hydraulics sale, adjusted operating cash flow of $856 million and adjusted free cash flow of $693 million were in line with the guidance.
Craig Arnold, Eaton chairman and chief executive officer, said, “We delivered a solid fourth quarter with record adjusted earnings per share, and I’m proud of how our teams are performing in a challenging environment. Our businesses are managing well under continued supply and labor constraints, achieving record fourth quarter segment margins with particular strength in Electrical Global and Aerospace.”
On full year results, Arnold continued, “Amid uncertainties, we’re very pleased with our record performance in 2021 including robust organic growth, record segment margins, transformative portfolio management and outstanding growth in earnings per share.”
For full year 2021, sales were $19.6 billion, up 10% from 2020. The sales increase consisted of 10% growth in organic sales, 5% growth from acquisitions, and 1% from positive currency translation, which was partially offset by 6% from the divestitures of the Lighting and Hydraulics businesses.
Segment margins of 18.9% for 2021 were a record and at the high end of the guidance range. This represents a 250-basis point improvement over full year 2020.
Earnings per share for 2021 were $5.34. Excluding charges of $0.90 per share related to intangible amortization, $0.23 per share related to acquisitions and divestitures, and $0.15 per share related to a multi-year restructuring program, adjusted earnings per share were $6.62, up 35% over 2020.
Operating cash flow for 2021 was $2.2 billion. Excluding $200 million of contributions to Eaton’s U.S. qualified pension plan and $340 million of taxes paid on the Hydraulics sale, adjusted operating cash flow was $2.7 billion and adjusted free cash flow was $2.1 billion.
For full year 2022, the company expects organic growth of 7-9% and adjusted earnings per share to be between $7.30 and $7.70, up 13% at the midpoint over 2021. For the first quarter of 2022, the company anticipates organic growth of 7-9% and adjusted earnings per share to be between $1.55 and $1.65.
Business Segment Results
Sales for the Electrical Americas segment were $1.9 billion, up 13% from the fourth quarter of 2020. Organic sales were up 5% and the acquisition of Tripp Lite added 8%. Operating profits were $368 million, up 3% over the fourth quarter of 2020. Operating margins of 19.2% were down 190 basis points from the fourth quarter of 2020, driven by higher commodity and logistics costs.
While quarterly sales were constrained by supply availability, order activity remained robust with the twelve-month rolling average of orders in the fourth quarter up 20% organically, with particular strength in residential and data center markets. Backlog at the end of December continues to remain strong, up 57% organically over December 2020.
Sales for the Electrical Global segment were $1.4 billion, up 14% over the fourth quarter of 2020. Organic sales were up 15%, partially offset by negative currency translation of 1%. Operating profits were $277 million, up 33% over the fourth quarter of 2020. Operating margins in the quarter were 19.5%, up 290 basis points over the fourth quarter of 2020.
The twelve-month rolling average of orders in the fourth quarter was up 22%, driven by data center, residential and utility markets. The December backlog was also strong, up 51% organically over December 2020.
Aerospace segment sales were $759 million, up 40% from the fourth quarter of 2020. Organic sales were up 4% and the acquisition of Cobham Mission Systems added 37%, which was partially offset by 1% negative currency translation. Operating profits were $189 million, up 91% from the fourth quarter of 2020. Operating margins in the quarter were 24.9%, up 660 basis points over the fourth quarter of 2020.
The twelve-month rolling average of orders in the fourth quarter was up 19% on an organic basis, driven by strength in commercial markets. On an organic basis, backlog at the end of December was up 16% versus December 2020.
The Vehicle segment posted sales of $610 million, down 2% from the fourth quarter of 2020, driven by an organic sales decline of 1% and negative currency translation of 1%. Operating profits were $100 million and operating margins in the quarter were 16.4%.
eMobility segment sales were $88 million, up 4% over the fourth quarter of 2020, driven entirely by organic sales growth. The segment recorded an operating loss of $8 million reflecting continued investment in research and development and start up costs associated with new program wins.
Eaton is an intelligent power management company dedicated to improving the quality of life and protecting the environment for people everywhere. We are guided by our commitment to do business right, to operate sustainably and to help our customers manage power ─ today and well into the future. By capitalizing on the global growth trends of electrification and digitalization, we’re accelerating the planet’s transition to renewable energy, helping to solve the world’s most urgent power management challenges, and doing what’s best for our stakeholders and all of society.
Founded in 1911, Eaton has been listed on the NYSE for nearly a century. We reported revenues of $19.6 billion in 2021 and serve customers in more than 170 countries. For more information, visit www.eaton.com. Follow us on Twitter and LinkedIn.
Notice of conference call: Eaton’s conference call to discuss its fourth quarter results is available to all interested parties as a live audio webcast today at 11 a.m. United States Eastern time via a link on Eaton’s home page. This news release can be accessed under its headline on the home page. Also available on the website prior to the call will be a presentation on fourth quarter results, which will be covered during the call.
This news release contains forward-looking statements concerning first quarter and full year 2022 adjusted earnings per share and organic sales growth, and 2022 anticipated restructuring charges. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: the course of the COVID-19 pandemic globally and government actions related thereto; unanticipated changes in the markets for the company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; competitive pressures on sales and pricing; supply chain disruptions, unanticipated changes in the cost of material, labor, and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; strikes or other labor unrest; natural disasters; the performance of recent acquisitions; unanticipated difficulties completing or integrating acquisitions; new laws and governmental regulations; interest rate changes; changes in tax laws or tax regulations; stock market and currency fluctuations; and unanticipated deterioration of economic and financial conditions in the United States and around the world. We do not assume any obligation to update these forward-looking statements.
Financial Results
The company’s comparative financial results for the twelve months ended December 31.
Contact: Jennifer Tolhurst, Media Relations, +1 (440) 523-4006
Yan Jin, Investor Relations, +1 (440) 523-7558
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