QS Research · Michael Burry's Scion Capital analyst template · 2006
Eaton Corp plc (ETN)
As of 2026-11-08 · 11/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction medium · base case -39% · downside -53% · upside -27%
The market is capitalizing TTM net income of $3.90B at 34.1x [N31, N15], while FY2020-FY2025 average net income was $2.85B and average FCF $2.67B [S2]; at the 28.2x peer median that normalized base is about $207/share, -39% from $341.72. Q3 2026 operating momentum is real - record sales, 25.3% segment margin and +46% electrical backlog [S28, S30] - but GAAP EPS is dragged by $0.62/share amortization and $0.30/share deal charges and net interest tripled to $198M [S28], and no buybacks are planned in 2026 [S28]. The stock is priced for TTM earnings to persist, not for the cycle average, so the risk/reward is a short; the catalyst is Q4 organic growth slowing to 13-15% from 19% plus continued GAAP/interest drag [S30, S65].
Key numbers
- Share price: $341.72
- Market cap: $132.76B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $31.98B
- EV / EBITDA (TTM): 20.6x
- P/E (TTM): 34.1x
- Price / book: 6.33x
The 15 boxes
- ✓ 1. Long-form business notes
Eaton is a power management company founded in 1911 that sold $27.4 billion in 2025 to customers in 180 countries, organized in Electrical Americas, Electrical Global, Aerospace, Vehicle and eMobility segments, with high customer concentration in each (FY2025: 22% of electrical sales to six customers, 37% of Vehicle sales to four OEMs, 20% of Aerospace to three OEMs, 18% of eMobility to one OEM). Between the two annual reports the revenue base grew from $17.86B (FY2020) to $27.45B (FY2025), net income from $1.41B to $4.09B and operating cash flow from $2.94B to $4.47B, while capex nearly doubled from $389M to $919M. The portfolio changed materially: the FY2020 filing still had a Hydraulics segment (10,000 employees) that no longer appears in the FY2025 segment list, 2025 acquisitions added Fibrebond and Resilient Power Systems, Ultra PCS closed January 23, 2026, Boyd Thermal was announced, a Mobility spin-off was announced January 26, 2026, and a Q1 2026 re-segmentation created a Mobility segment for which no financials had yet been provided. These sources contain no segment revenue, segment margin, TTM or quarterly figures, so the business mix can be described but not sized per segment.
- ○ 2. Competitive advantage
The only hard evidence of advantage in these sources is the profit record through the cycle: revenue rose from $17.86B in FY2020 to $27.45B in FY2025 while pre-tax income rose from $1.75B to $4.93B (computed pre-tax margin ~9.8% to ~18.0%), and the trough year FY2020 was still profitable and cash-generative. Cash conversion is strong (six-year FY2020-FY2025 operating cash flow $20.05B against capex $4.05B) and funded large buybacks. What the sources do not do is name a single competitor, customer, market share, brand or licence, or give gross or operating margin, so durability of advantage is inferred from returns, not demonstrated structurally.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended Sep 30, 2026) was a demand-led quarter: sales $8,947M, +28% (organic 19%, acquisitions 8%, FX 1%), with record segment margins of 25.3% even though gross margin fell to 34.7% from 38.3% on commodity/wage inflation and intangible amortization. GAAP diluted EPS was $2.77 and adjusted EPS a record $3.68, the gap being $0.62/share intangible amortization and $0.30/share acquisition-divestiture charges; nine-month GAAP EPS is still down 6% to $7.10 on higher interest and amortization. No shares were repurchased in 2026 and short-term debt jumped to $1,594M from $1M at Dec 31, 2025, funding $11.1 billion of nine-month acquisition spending. Full-year 2026 guidance from the earnings release is organic growth 13-15%, segment margins 24.1-24.5% and adjusted EPS $13.70-$13.80.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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