Eaton Sells Fluid Conveyance Assets To Focus On Core Business

Eaton Corporation (NYSE:ETN) announced that it has completed the sale of its Automotive Fluid Conveyance Division to Quantum Capital Partners. The company had made the decision to sell this division last March but was waiting for the right purchaser.

The sale of this division will allow the firm to concentrate on other businesses wherein it is a market leader.

Acquisition & Divestment of Assets

Eaton has been acquiring and divesting assets to sync its asset portfolio with long-term growth objectives. This will allow Eaton to focus on higher-margin businesses.

In October 2019, the company entered into an agreement to sell the Lighting business to Signify N.V. for a cash purchase price of $1.4 billion. Last December, it had completed the acquisition of the Souriau-Sunbank Connection Technologies business of TransDigm Group Incorporated (NYSE:TDG) for $920 million.

This acquisition will expand Eaton’s presence in the growing market for electrical content on aircraft. Also, the move perfectly fits in with its strategy of providing broad electrical expertise to new markets.

Wide Market Reach

Eaton sells products in a number of markets and faces a wide array of competitors in varied niches. The quality of products supplied by the company enables it to retain strong market position. Eaton supplies products to around 175 countries and most importantly, this in a sense provides stability to the revenue generation ability of the company, as the loss of a customer will not have any significant impact on revenues and margins.

Rising production of Lockheed Martin’s (NYSE:LMT) F-35s will come as a relief for Eaton. Its order book is likely to be adversely impacted in 2020, thanks to Boeing Company’s (NYSE:BA) decision to temporarily stop the production of Boeing 737. Notably, Eaton supplied Stabilizer trim actuator for Boeing 737 model.

Price Performance

The company’s shares have outperformed its industry in the past 12 months.

Zacks Rank

Eaton currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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