[Stay on top of transportation news: Get TTNews in your inbox.]
Commercial vehicle supplier Eaton Corp. reported net income and revenue fell in the fourth quarter amid weaker-than-expected market growth.
For the period ended Dec. 31, net income was $453 million, or $1.09 per diluted share, on revenue of $5.23 billion. That compared with net income of $632 million, or $1.46, on revenue of $5.45 billion in the 2018 period.
Its largest business segment in terms of sales is electrical products followed, respectively, by electrical systems and services, hydraulics, aerospace, vehicle and eMobility.
“During the fourth quarter, the company recorded a pretax charge of $50 million for expected warranty costs in our vehicle segment,” Eaton Chairman and CEO Craig Arnold said. “The costs are being incurred to correct the performance of a product which incorporated a defective part from a supplier.”
The vehicle segment posted sales of $664 million, down 19% from the fourth quarter of 2018. Organic sales were down 18% and negative currency translation was 1%. Operating profit in the fourth quarter was $63 million. Excluding the $50 million expected warranty costs, operating profit was $113 million, down 23% from the fourth quarter of 2018.
“Our revenue in vehicle declined due to the impact of the General Motors strike, Class 8 original equipment manufacturer shutdowns and continued global weakness in light vehicles,” Arnold said. “Operating margins in the quarter were 9.5%. Excluding the warranty costs, adjusted operating margins were 17%.
“We are pleased to have completed the divestiture of our automotive fluid conveyance business at the end of 2019.”
We are proud to announce the formation of Eaton eMobility, a new group that brings together our strengths in electrical and vehicle know-how. Bring us your technical challenges, and we’ll bring you innovative, forward-thinking solutions. Learn more at: https://t.co/6HhSy31Wof pic.twitter.com/9LiyZ75TLl— Eaton (@eatoncorp) June 26, 2018
Eaton’s commercial vehicle products include transmissions, clutches, and fluid and air conveyance solutions, among others.
The eMobility segment’s sales were $75 million, down 6% from the fourth quarter of 2018, driven entirely by a decline in organic sales. Growth in electric vehicle platforms was more than offset by weakness in legacy internal combustion engine platforms. Operating profits in the fourth quarter were $1 million, reflecting a significant step-up in research and development, and manufacturing startup costs for new electric vehicle programs.
In part one of a two-part exploration of autonomous technology today, our latest RoadSigns podcast revisits conversations with CEOs Alex Rodrigues of Embark and Cetin Mericli of Locomation. Hear them explain what testing automated trucks and developing platooning technology has taught them about the road ahead — and get new perspective with host commentary. Listen to a snippet from Rodrigues above, and to hear the full episode, go to RoadSigns.TTNews.com.
“Since the formation of the segment in the first quarter of 2018, the mature year revenue from our new program wins is expected to be $450 million,” Arnold said.
And eMobility combines elements of its electrical and vehicle businesses to deliver electric vehicle products to passenger car, commercial vehicle and off-highway OEMs.
For the full year, net income improved to $2.21 billion, or $5.25, compared with $2.14 billion, or $4.91, a year earlier. Revenue slipped to $21.39 billion compared with $21.60 billion.
Bloomberg News reported Arnold said, at a recent gathering in Florida of CEOs, cash flow should be stable even in a slump, which gives the company share buyback ammunition that could keep earnings per share flat in a standard recession.
Dublin-based Eaton sells products in more than 175 countries and has about 101,000 employees.
Want more news? Listen to today's daily briefing: