KeyBanc bumps Eaton stock to ’overweight’ on growth in electrification, aerospace

Published 2025-03-12, 11:12 a/m
© Reuters

Investing.com -- KeyBanc Capital Markets upgraded Eaton (NYSE:ETN) Corp to “Overweight” with a $340 price target on company’s strong growth prospects in electrification and aerospace sector offsetting concerns over data center capital spending.

Eaton’s recent investor day reinforced confidence in its long-term growth trajectory, with the company raising its organic growth target to 6-9% annually through 2030, up from its previous 5-8% target through 2025.

While some investors worry about reduced capital spending on artificial intelligence (AI) infrastructure, KeyBanc noted that only about 20% of Eaton’s Electrical Americas backlog is tied to AI, with the majority supported by cloud-related investments.

“We believe the recent pull-back in shares provides a unique entry point into one of our highest-quality names, which is evidenced by beatable/attractive LT targets,” KeyBanc analysts wrote, adding that the company’s exposure to utilities and aerospace provides additional support for growth.

Aging power grids and increasing electricity demand are expected to drive further investment in utilities, while aerospace benefits from a rising defense budget and strong demand for commercial aircraft.

Despite broader economic uncertainty, Eaton’s $11.8 billion electrical backlog and $3.7 billion aerospace backlog provide solid revenue visibility, KeyBanc said. While order growth may slow, the company’s capacity investments should sustain its growth momentum.

Eaton’s shares have pulled back recently, bringing its valuation closer to historical norms. The stock now trades at about 18.3 times next-12-month enterprise value-to-EBITDA, compared to its historical median of 17.2 times. While KeyBanc does not expect a major re-rating, it sees share price upside driven by continued earnings growth.

The firm expects margin expansion across key segments, with electrical and aerospace units showing the most improvement.

Capital allocation also remains a key part of Eaton’s strategy, with acquisitions and organic investments driving earnings growth. The recent purchase of Fibrebond, a provider of modular power enclosures, expands Eaton’s product offerings in data centers, utilities, and communications.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.