Eaton raises its adjusted outlook, but guides reported earnings per share flat on 2025

Eaton makes the switchgear, transformers and power-distribution equipment that data centres, utilities and factories run on, and orders for it are rising quickly in its electrical and aerospace businesses. The company has lifted its adjusted earnings-per-share guidance above its latest guide for the third time since FY26 began, to $13.70 to $13.80, up from the ranges it gave in July and February. Its results also carry a second forecast that drew less attention. Earnings per share as reported under US accounting rules are guided at $10.39 to $10.49, against $10.45 last year. On the reported measure, Eaton expects this year's earnings per share to end about where last year's did.

The difference between the two measures is mostly the cost of buying businesses. Adjusted earnings leave out the amortisation of intangible assets that came with acquisitions, such as customer relationships and technology written off over several years, along with acquisition and divestiture charges. Both have grown with Eaton's dealmaking, above all the purchase of Boyd Thermal, a maker of thermal components and systems for data centres and aerospace, for $9.55 billion in March. Calculated from the guidance midpoints and the company's own reconciliation, adjusted earnings per share rise by $1.68 on last year, while the per-share items excluded from that measure rise by $1.69. The increase in adjusted earnings is matched almost exactly by the increase in what it leaves out.

The September 2026 quarter shows the same pattern in dollars. Total segment operating profit, the profit of Eaton's businesses before corporate costs, rose 29.4% on a year earlier. Boyd sits in Electrical Global, whose operating profit rose 75%. Pre-tax profit rose 7.5%. Between the two lines, amortisation of acquired intangibles more than doubled and net interest expense nearly tripled.

Interest is the part of the cost that the adjusted figure keeps. Long-term debt has roughly doubled since December, to $17.8 billion at the end of September, and that interest weighs on adjusted and reported earnings alike, one reason adjusted earnings per share rose 19.9% last quarter while segment profit rose 29.4%.

There are sound reasons to read the adjusted figure as the better guide to the business. Amortisation is an accounting charge that uses no cash, and free cash flow in the quarter was $1.03 billion. Segment margin was a record 25.3%. The flat year is also mostly a first-half story. Reported earnings per share fell year on year in the March and June quarters, then rose last quarter, and the fourth-quarter guidance midpoint sits above the year-earlier figure, which is calculated from the full-year and nine-month results.

The deals are not finished. Eaton has agreed to buy COL Group, a European maker of medium-voltage distribution equipment, for €810 million, and expects to combine its Mobility business with Dana early next year. Management said it would give guidance for 2027 in February; the reported range printed beside the adjusted one will show how much of this year's gap carries into the next.