Eaton Ready for Next Recession as Power Management Focus Pays Off
Eaton, a 100-year-old industrial giant, has weathered storms before and is poised to do so again. The author, a long-time shareholder since 2015, believes Eaton will pass the next recession test with flying colours. The company's transformation, including the acquisition of Cooper Industries, has made it more resilient and focused on power management.
Eaton's journey towards resilience began with the acquisition of Cooper Industries. This move significantly increased Eaton's exposure to electricity management, with Cooper's electrical products and industrial tools now operating as a key business unit. Post-acquisition, Eaton shifted its focus to streamlining operations and exiting cyclical businesses like hydraulics.
Over time, Eaton's profit margins have been on the rise. The company's strategy to achieve long-term growth, higher margins, and economic cycle resilience has paid off. Today, electricity-related businesses account for around 70% of Eaton's revenue. This diversification and focus on power management have made Eaton more robust, as seen during the dot.com crash and the Great Recession.
As the next recession looms, Eaton stands ready for the challenge. Its history of resilience, strategic acquisitions, and focus on power management make it well-positioned to navigate economic cycles. The author's confidence in Eaton's future, reflected in their long-term investment, is a testament to the company's strength and potential for further growth.
