QS Research · Michael Burry's Scion Capital analyst template · 2006
Eaton Corp plc (ETN)
As of 2026-11-06 · 11/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction high · base case -57% · downside -68% · upside -48%
At $341.95 (N1), ETN trades at 34.1x TTM P/E and 20.6x EV/EBITDA (N28, N26), while TTM net income of $3.90B (N14) is already +37% above the FY2020-FY2025 average of $2.85B and TTM FCF of $3.79B (N17) is +42% above the $2.67B cycle-average FCF. Section 13's TTM base is the wrong one for a cyclical because those TTM figures are peak, so all three cases use the $2.85B cycle-average net income: base $2.85B x 20x = $57.0B / 388.5M shares = $146.7, -57.1% vs today; downside $2.85B x 15x = $42.75B / 388.5M = $110.0, -67.8%; upside $2.85B x 24x = $68.4B / 388.5M = $176.1, -48.5%. The market is not missing the data-center growth; it is capitalizing peak data-center earnings as if they were mid-cycle, so even the peer-high multiple on normalized earnings values ETN far below today's price. The call is short, and the balance sheet/net-debt position does not create squeeze risk that would change it.
Key numbers
- Share price: $341.95
- Market cap: $132.85B
- 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 manufacturer that booked $27.4B of revenue in FY2025 across Electrical Americas, Electrical Global, Aerospace and Vehicle/eMobility, serving customers in 180 countries, versus $17.86B of revenue in FY2020. Between the two 10-Ks the portfolio has been re-pointed at data centers, utilities and grid/modular power (2025 acquisitions of Fibrebond and Resilient, a pending Boyd Thermal deal, Ultra PCS closed January 2026) and toward a January 2026 plan to spin off Mobility, while Hydraulics is gone as a segment and headcount rose from 91,987 to 97,303. Earnings and cash tracked the revenue build: pre-tax income $1.75B (FY2020) to $4.93B (FY2025), operating cash flow $2.94B to $4.47B on capex of only $919M. Operating income is blank in the data and no TTM figures exist in these sources, so cycle normalization has to rest on pre-tax/net income and operating cash flow.
- ○ 2. Competitive advantage
The supplied sources show a larger, cash-generative business from FY2020 to FY2025, but they do not establish a durable competitive advantage. The 10-K risk factors emphasize single-source supplier dependence, limited ability to pass through costs without hurting competitive position, new entrants and technology/AI competitors, and diversification as volatility mitigation rather than a moat. No gross margin, operating margin, ROIC, market share, brand or switching-cost evidence is provided.
- ✓ 3. 10-Q takeaways
The Q3 2026 10-Q shows strong top-line growth (+28% sales, +19% organic) but gross margin compression to 34.7% on commodity/wage inflation and higher intangible amortization. Electrical Americas and Electrical Global backlog and book-to-bill point to continued demand, while adjusted EPS rose to $3.68 from $3.07. Cash flow improved, no buybacks were done in 2026, and the main new risk is completion and timing of the Mobility separation with Dana.
- ✓ 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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