The electronics manufacturing industry serves as the foundation of modern industrial economies, involving the design, production, and assembly of electronic components and systems. It plays a crucial role in supporting diverse markets such as consumer electronics, automotive, telecommunications, healthcare, and industrial automation.

The rapid advancement of mobile technology, the rising adoption of electric vehicles, and the expansion of AI-powered data centers are fueling the demand for smarter, faster and more energy-efficient electronic products. Two prominent operators in the Zacks Manufacturing – Electronics industry are Eaton Corporation ETN and ABB Ltd. ABBNY.

Eaton boasts a diversified portfolio that includes electrical components, aerospace, and industrial systems. The company strategically focuses on high-margin, electrification-driven sectors — such as data centers, utilities, and electric vehicles — that align with powerful long-term trends. Through disciplined capital allocation, steady dividend growth, and targeted acquisitions, Eaton has strengthened its profitability and expanded its global footprint. With stable cash flows and exposure to a wide range of end markets, Eaton is well-positioned to take advantage of major megatrends and the ongoing wave of reindustrialization.

ABB is a leader in automation, electrification, and robotics, and has refined its portfolio to concentrate on high-growth areas such as smart buildings, electric mobility, and industrial automation. ABB’s cutting-edge technologies — from advanced robotics to energy-efficient drives and grid solutions — empower customers to enhance performance while minimizing carbon emissions. ABB's strong presence in emerging markets, order backlog, and strategic investment in digital platforms position it for long-term growth. ABB decided to spin off its robotics division to focus on electrification and automation.

Ongoing innovation, automation, and the continued digital transformation of manufacturing processes are driving the industry. In the given backdrop, let’s closely compare the fundamentals of these two stocks to determine which one is better for investment now.

ETN & ABB’s Earnings Growth Projections

The Zacks Consensus Estimate for Eaton’s 2025 earnings has gone down by 0.33 in the past 60 days, and 2026 earnings per share remained unchanged in the same time frame.

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The Zacks Consensus Estimate for ABB’s 2025 earnings has remained unchanged in the past 60 days and 2026 earnings per share has dropped 0.38% in the same time frame.

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Return on Equity (ROE)

ROE measures how efficiently the company is utilizing its unitholders’ funds to generate profits. ETN’s current ROE is 22.62% compared with ABB’s ROE of 28.31%. Both companies are performing better than their peers in the industry. ROE of the industry is currently pegged at 7.55%.

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Debt to Capital

Debt-to-capital measures a company’s financial leverage. It indicates how much interest-bearing debt has been taken by a company to run its operation successfully.  At present, ETN’s debt-to-capital is 33.06% compared with its industry average of 26.41%. ABB’s debt-to-capital is 31.58%. It indicates that both companies are using more debt to run operations than their industry peers.

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ETN and ABBNY’s Dividend

Eaton’s current dividend yield is 1.55%. The firm has raised its distribution every year for the last five years. The annualized average dividend growth for the last five years is 6.96%.

ABB’s current dividend yield is 1.15%. The firm has raised its distribution every year for the last five years. The annualized average dividend growth for the last five years is 3.35%. It is evident that both companies are increasing their shareholders’ value through regular dividend payments.

Systematic Capital Expenditure

Eaton has invested more than $8 billion in transformative portfolio management and will be able to focus on the remaining businesses that will allow it to further improve earnings in the long run. Eaton is maintaining a stable capital expenditures plan and intends to invest $900 million in 2025 to further strengthen its operations.

ABB also plans to invest nearly $900 million in 2025 to further strengthen its operations.

ETN and ABB’s Shares Are Trading at a Premium

Both Eaton and ABB’s shares are a little expensive relative to its industry. ETN’s current forward 12 months price/earnings is 21.53X compared with its industry’s 19.31X and ABB’s P/E-F12M of 21.24X.

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Price Performance

In the past year, ABB’s shares have gained 5%, while Eaton’s shares have declined 16.1%. The industry has declined 22.8% in the same time frame.

Eaton and ABB shares have both outperformed their industry in the past year but ABB’s share performed better than ETN in the past year.

Price Performance (One Year)

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Wrapping Up

Eaton and ABB are both providing efficient power management solutions to their customers. Both companies are capitalizing on the global shift toward smart energy infrastructure and industrial digitization.

Even though both stocks currently carry a Zacks Rank #3 (Hold) each, ABB is a better pick for investors based on its better ROE, healthier price performance, lower debt levels, stable dividend, and is still trading at a discount compared with Eaton. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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