Power management company Eaton Corporation ETN recently announced that it has acquired Fibrebond for $1.4 billion. Fibrebond designs and constructs innovative, dependable structures that safeguard people and mission-critical equipment across data center, fiber, industrial and utility markets.

This strategic acquisition will ensure ETN’s expanding presence in the market for modular solutions tailored to multi-tenant and hyperscale data center customers. Eaton will also be able to provide power infrastructure solutions to industrial, utility, and other customers.

Shares of Eaton have lost 18.5% in the past year, wider than its industry’s decline of 17.7%.

ETN’s Share Price Performance (One Year)

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Should you consider adding ETN stock to your portfolio only based on weakness in share price compared to its industry? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add ETN stock to their portfolio.

How Will Eaton Gain From the Fibrebond Acquisition?

Eaton operates in several markets globally and has been making strategic acquisitions that allow it to expand into new markets and enhance its revenue stream.

Eaton’s acquisition of Fibrebond marks a transformative step in expanding its power infrastructure solutions. Fibrebond’s customized power enclosures and service capabilities strengthen Eaton’s offerings, enabling faster response times for data center, industrial and utility customers. This acquisition enhances Eaton’s ability to serve growing markets with innovative and customer-focused solutions.

Fibrebond, through its innovative and reliable structure, has been successfully catering to the needs of various customer groups and its revenue for the 12 months ending Feb. 28, 2025, is expected to be $378 million. Eaton will extend these critical services to its existing customers and gain from the same. The U.S. Data Center construction backlog is currently more than $234 billion, which indicates a huge demand for power solutions, and ETN is well poised to address the rising demand.

Eaton’s High-Quality Products Supplied Globally

Eaton’s products are supplied to around 160 countries, which provides stability to the company's revenue-generating ability. This way, the loss of a customer does not have any significant impact on revenues and margins. Its diversified product portfolio offering energy-efficient solutions will help to serve a broad customer base. Ongoing improvement in end-market conditions has been boosting orders and revenues.

Reindustrialization and megatrends worldwide create fresh demand for Eaton’s efficient power management products. The company continues to receive orders from its customers across the globe and registers an increase in the backlog. Courtesy of ongoing orders, Eaton’s backlog increased 29%, 16% and 16% in Electrical Americas, Aerospace and Electric Global, respectively, on a rolling 12-month basis.

Courtesy of ongoing investment in research and developments, expanding operations and new advanced products being offered to a wide customer base, the company expects organic revenue growth and a positive impact on its margins.

Eaton Expanding Operation via Acquisition

Eaton operates in several markets globally, and strategic acquisitions allow it to expand into new markets and enhance its revenue stream. The company completed two acquisitions in the first half of 2024, further strengthening its Electrical Americas and Electrical Global segment. Currently, demand for the electric vehicle (EV) charging infrastructure is on the rise globally and Eaton, with its expertise, can help it grab a larger market share in the fast-expanding EV charging business.

Fibrebond, with its exclusive product offering, is expected to generate $110 million adjusted EBITDA in 2025. Eaton expects the deal will be neutral from an earnings-per-share standpoint in 2025. Undoubtedly, this new acquisition will contribute to the company’s long-term performance as data centers are expanding at a rapid pace.

Eaton Upgrades Products via Research and Development

Eaton has laid out a 10-year plan that includes a $3 billion investment in research and development (R&D) programs, allowing the company to create sustainable products. Its approach to R&D is focused on leveraging technology to design solutions that meet the needs of its customers today and into the future.

In 2024, the company invested $794 million in the R&D program, which is 5.3% higher than the comparable year-ago period. The ongoing investment will allow ETN to develop new advanced products and upgrade existing products, allowing it to maintain a strong position in different markets and countries where it supplies its products.

Eaton Stock Earnings Estimates Are Moving Upward

Eaton now expects adjusted earnings per share in the range of $11.8-$12.2 for 2025, indicating an increase of 11% at the midpoint from the prior-year levels. The long-term (three to five years) earnings growth of ETN is currently pegged at 10.44%.

The Zacks Consensus Estimate for ETN’s 2025 and 2026 earnings per share has increased 0.1% and 0.2% in the last 30 days, respectively.

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The Zacks Consensus Estimate for fiscal 2025 earnings per share for Powell Industries POWL, another operator in this space, has moved up by 0.1% in the last 60 days. Powell Industries’ long-term earnings growth is currently pegged at 14%.

Eaton’s Return on Equity Better Than Industry

Eaton’s trailing 12-month return on equity is 22.62%, ahead of the industry average of 7.53%. Return on equity (ROE) measures how efficiently the company is utilizing its equity funds to generate profits. The current ROE of Eaton indicates that it is using shareholders’ equity more resourcefully compared to its peers and generating a better return.

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Eaton Raises Shareholder Value

Eaton has been increasing shareholder value through dividend payments and share repurchases. In 2025, it expects free cash flow in the range of $3.7-$4.1 billion. Eaton expects to buy back shares in the range of $2-$2.4 billion in 2025.

ETN’s management has raised its annual dividend five times in the past five years. The current annual dividend is $4.16 per share, reflecting a dividend yield of 1.47%, better than its industry’s yield of 0.39%. For more details on ETN’s dividend, kindly click here.

Eaton Stock Trading at a Premium

Eaton shares are trading at a premium compared to its industry. The company’s forward 12-month Price/Earnings of 21X is higher than its industry’s 20.96X.

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Another company, Emerson Electric Co. EMR, is operating in the same space and is trading at a discount to its industry. Emerson Electric is currently trading at P/E F12M of 16.45X.

Wrapping Up

Eaton continues to benefit from stable contributions from its organic assets spread across the globe. Strategic acquisitions are expanding its product portfolio and market reach.

Eaton’s positive movement in earnings estimates, strong return on assets and rising backlog make the stock attractive. Existing investors should hold the stock and enjoy the benefit of regular dividends and share buybacks.

However, the stock currently has a Zacks Rank #3 (Hold), and it is trading at a premium. New investors should wait and look for a better entry point later.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Emerson Electric Co. (EMR) : Free Stock Analysis Report

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

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