ETN Eaton Corporation 10-Q 2026-09-30 section summaries

Eaton (ETN) — Q3 and first nine months of 2026

Consolidated results

Sales grew 28.0% in Q3 and 22.2% in 9M, while cost of products sold increased faster in both periods. Despite revenue growth, 9M attributable net income and EPS declined, reflecting higher costs, sharply higher interest expense, and other items.

Segment results

Electrical Global 9M operating profit was $1,449M versus $983M; Mobility’s was $345M versus $299M. Electrical Global growth was especially strong, though its segment and product growth rates eased from Q3 to 9M. Mobility’s eMobility revenue turned down 1.9% for 9M despite Q3 growth; Vehicle revenue grew 3.6% for 9M versus 8.1% in Q3. Eaton reorganized in Q1, combining legacy Vehicle and eMobility into Mobility and recasting prior segment results.

These items reconcile segment operating profit to consolidated operating profit. The corresponding 9M values were, respectively, $(709)M / $(365)M, $(505)M / $(171)M, $2M / $15M, $(59)M / $(97)M, and $(1,035)M / $(698)M.

Cash flow and capital allocation

Working capital used $1,050M of cash, compared with $1,313M in 9M 2025. Investing activities used $12,007M versus $783M; financing activities provided $8,951M versus using $1,812M, including $9,871M of borrowing proceeds. Cash declined $94M to $528M. Eaton made no 2026 repurchases; 9M 2025 repurchases were 5.2M shares for $1,661M.

Balance sheet and funding

Eaton shareholders’ equity less goodwill and other intangible assets was negative $11,586M. Long-term debt plus current portion had carrying value of $18,512M and fair value of $17,171M at September 30, versus carrying value of $9,894M and fair value of $9,587M at year-end. Commercial paper outstanding was $1,592M; no revolving-credit borrowings were outstanding. Eaton issued $8.5B face amount of U.S. notes and €1.2B face amount of euro notes in March, and terminated an $8B delayed-draw term loan facility without borrowing. The revolver and commercial-paper program limits increased from $3B to $4B each. Supply-chain-finance obligations were $763M, up from $543M.

Business developments, outlook and risks

Firm backlog was approximately $26.2B at September 30, with about 72% targeted for delivery within 12 months. Boyd Thermal, acquired for $9.55B net of cash, contributed $1,058M of sales and $257M of segment operating profit through September 30. Ultra PCS, acquired for $1.53B, contributed $166M of sales and $47M of segment operating profit. Purchase-price allocations remain preliminary; goodwill additions included $4,636M, primarily anticipated synergies from the acquisitions. Boyd and Ultra PCS added substantial identifiable intangible assets and goodwill, with Boyd goodwill not expected to be tax-deductible.

Eaton invested $75M for an approximately 7% stake in SPAN. It agreed to acquire COL Group for €810M (approximately $921M), with closing expected in Q1 2027 subject to approvals; COL’s grid and power-distribution products will join Electrical Global.

Eaton plans to combine Mobility with Dana through a Reverse Morris Trust. Eaton shareholders are expected to own 50.1% of the combined company, and certain Eaton subsidiaries are expected to receive an approximately $1.1B pre-closing cash distribution, subject to adjustments and taxes. Closing is expected in the first four months of 2027; if the deal does not close, Eaton intends to spin off Mobility. Mobility remains in continuing operations until closing.

The 9M effective tax rate rose to 23.5% from 18.7%, partly due to income mix and withholding tax associated with Boyd funding. The IRS proposed $290M of additional taxes and $120M of penalties for 2014–2016; Eaton disputes the adjustments and plans to petition Tax Court, but an adverse outcome could be material. Eaton’s restructuring program had incurred $394M through September 30 and is expected to conclude in 2026, with $36M of additional estimated costs.

Eaton (ETN) — Q3 and nine months ended September 30, 2026

Consolidated results

Sales growth reflected organic growth of 19% in Q3 and 14% for 9M, acquisitions of 8% and 7%, and foreign exchange of 1% in both periods. Despite strong sales, gross margin fell: commodity and wage inflation reduced it by 360 basis points in Q3 and 380 basis points for 9M, while higher acquired-intangible amortization reduced it by 210 and 140 basis points, respectively. Adjusted earnings grew in both periods, while reported 9M earnings declined amid acquisition/divestiture charges, higher interest and amortization, and tax effects. The effective tax rate increased to 21.3% from 20.7% in Q3 and to 23.5% from 18.7% for 9M, reflecting higher earnings in higher-tax jurisdictions and withholding taxes related to funding Boyd Thermal.

Segment performance

Electrical Global’s Q3 revenue growth of 58% (27% organic and 31% from acquisitions) exceeded its 9M growth of 41%; 9M revenue was $7.189B versus $5.086B, and operating profit was $1.449B versus $983M. Data center and machine OEM demand supported Global, with utility markets and Asia Pacific also strong in Q3. Americas’ growth was led by data center, machine OEM, and commercial/institutional markets; inflation and costs to support growth weighed on margin. Aerospace grew organically by 6%, with a 5% acquisition contribution; commercial OEM and aftermarket strength was partly offset by military aftermarket weakness and inflation-related margin pressure. Mobility’s Q3 organic sales grew 9%, with North American and European strength; favorable mix and efficiencies supported profit growth. For 9M, Mobility sales were $2.460B versus $2.399B, while operating profit was $345M versus $299M; organic sales were flat.

Backlog and demand indicators

Book-to-bill was 1.3 versus 1.1 in Americas, 1.1 versus 1.0 in Global, and 1.2 versus 1.1 in Aerospace.

Corporate expenses and cash flows

Higher amortization, interest, and acquisition/divestiture costs drove the increase in corporate expense; restructuring charges were lower.

Operating cash flow benefited from working-capital balances that were $263M lower. Investing outflows primarily reflected acquisitions. Eaton expects FY2026 capital expenditures of about $1.15B to support capacity and growth. Financing cash flow reflected higher borrowings and no share repurchases, compared with $1.669B of repurchases in 9M 2025; Eaton does not intend to repurchase shares in 2026 following the Boyd Thermal acquisition.

Balance sheet, financing, and strategy

At September 30, 2026, Eaton had $528M of cash and $290M of short-term investments, versus $622M and $181M at December 31, 2025. Debt comprised $1.594B of short-term debt, $710M of current long-term debt, and $17.802B of long-term debt. Eaton upsized its revolving credit facility and commercial paper program to $4.0B each; there were no revolver borrowings and $1.592B of commercial paper outstanding. In March, it issued $8.5B face value of U.S. notes and €1.2B face value of Euro notes; the $8.0B delayed-draw term facility was terminated without borrowing. Eaton said liquidity was sufficient for operations and scheduled debt payments and that it complied with debt covenants.

Eaton paid $9.55B net of cash acquired for Boyd Thermal and $1.53B for Ultra PCS, and invested $75M for an approximately 7% stake in SPAN. It agreed to acquire Italy-based COL Group for €810M ($921M), with closing expected in Q1 2027, subject to approvals. Eaton also plans to separate Mobility and combine it with Dana through a reverse Morris trust, expected to close in the first four months of 2027. Eaton shareholders are expected to own 50.1% of the combined company, and Eaton subsidiaries are expected to receive about $1.1B before completion, subject to adjustments and taxes; if the transaction does not close, Eaton intends to spin off Mobility separately.

The separation financing includes commitments for a $350M secured Term A facility and a $1.2B secured revolver, neither drawn; the facilities are unavailable before the relevant distribution or transaction closing. Management cited electrification, digitalization, data centers, utilities, reindustrialization, and commercial aerospace and defense as growth opportunities. Risks include end-market volatility, inflation and supply constraints, trade and geopolitical disruptions, cybersecurity, acquisition integration, and execution or timing of the Mobility separation.

Acquisition, integration, divestiture, and transaction charges were $128M in Q3 versus $55M, and $391M for 9M versus $135M; 9M includes $52M of withholding taxes related to Boyd Thermal. The restructuring program had incurred $394M through the period; completion was expected in 2026 with another $36M of charges, for estimated total charges of $430M and mature-year benefits of $415M.

Issuer-and-guarantor information

Summarized issuer-and-guarantor financial information excludes non-issuer and non-guarantor subsidiaries and eliminates intercompany balances and transactions among issuers and guarantors. At September 30, 2026, this group reported total assets of $18.371B, current assets of $4.666B, noncurrent assets of $13.705B, current liabilities of $6.744B, noncurrent liabilities of $19.863B, and net amounts due to non-guarantor subsidiaries of $5.333B. At December 31, 2025, the corresponding figures were $17.514B, $4.075B, $13.439B, $4.598B, $10.788B, and $9.499B. For 9M 2026, the group reported net sales of $14.211B, including $852M to non-guarantor subsidiaries, cost of products sold of $10.087B, net expense from non-guarantor subsidiaries of $454M, and net income of $847M.

Under the 2022 and 2025 Indentures, subsidiary guarantees generally may be released in specified permitted transactions or when the subsidiary’s guaranteed or owed debt falls below 25% of total outstanding indebtedness; future guarantees are generally required when the threshold is exceeded. The 2012 and 2017 Indentures also contain future-guarantor provisions tied to borrowing or guaranteeing specified debt. Eaton’s own guarantee has no release provisions.

Eaton reported no material changes in its market-risk exposures since December 31, 2025, and no new or significantly changed exposures.

Eaton concluded that its disclosure controls and procedures were effective at a reasonable-assurance level as of September 30, 2026. During Q3 2026, no changes to internal control over financial reporting materially affected, or were reasonably likely to materially affect, those controls. Management is evaluating the effect of businesses acquired in the past 12 months on internal control over financial reporting.

Updated risk factor: Planned Mobility separation and Dana transaction

Eaton’s only material update to its previously disclosed risk factors concerns its planned separation of the Mobility business and combination with Dana Incorporated through a Reverse Morris Trust transaction. Eaton and Dana signed a definitive agreement on June 10, 2026; Eaton currently expects the transaction to close within the first four months of 2027. Completion is subject to conditions, including Dana stockholder approval and required regulatory clearances. The timing could slip, conditions may not be satisfied or waived, and completion is not assured.

The transaction is complex and could be affected by legal, macroeconomic, market, regulatory, or political changes. A delay, a change to the transaction, or failure to complete it could defer or eliminate expected benefits and materially adversely affect Eaton’s business, financial condition, results of operations, cash flows, or stock price. Pursuing the transaction could also divert management attention and resources; impair employee retention and relationships with customers, suppliers, and other third parties; result in costly litigation; and cause Eaton to delay or forgo other opportunities involving Mobility. Transaction costs may exceed expectations.

Eaton intends for the transaction to qualify as tax-free to U.S. stockholders but cannot assure that it will. Eaton reports no material changes to its other previously disclosed risk factors.

During Q3 2026 (the three months ended September 30, 2026), no director or officer adopted, amended, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement. This section reports no financial results or other business developments.