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Eaton Boosts 2010 Profit Outlook as Sales Rise on Factory-Equipment Demand

Eaton Corp., a maker of parts for factory equipment and cranes, raised its full-year profit forecast as third-quarter net income climbed 39 percent on higher sales of hydraulic components.

Full-year operating profit will be as much as $5.55 a share, compared with a July projection of at most $5.10, the Cleveland-based company said today in a statement. Third-quarter operating earnings were $1.60, exceeding analysts’ average estimate of $1.38 as revenue climbed 18 percent.

Eaton, among the first U.S. industrial companies to report third-quarter results, also sells electrical products as well as parts for cars and planes, making it a barometer for the economy. The company now sees end markets increasing 10 percent in 2010, compared with an earlier forecast of 8 percent, driven by growth outside the U.S. Hydraulics sales climbed 39 percent.

“Hydraulics are used in everything from transmissions and power management to industrial,” Brian Rayle, an analyst for Cleveland-based Northcoast Research who has a “buy” rating on Eaton stock, said today in an interview. “We’re not at the point where people are opening new factories but if you want to get more efficiencies using new hydraulics, new pneumatic systems in factories, there’s a good way to get productivity without a lot of capex.”

Third-quarter net income rose to $268 million, or $1.57 a share, from $193 million, or $1.14, a year earlier, the company said. Eaton’s revenue of $3.57 billion exceeded the average analyst estimate of $3.42 billion.

Eaton climbed $2.84, or 3.4 percent, to $86.25 at 8:31 a.m. in trading before the regular open of the New York Stock Exchange. The shares gained 31 percent this year before today.

Economic Recovery

Eaton’s raised per-share operating profit forecast exceeded the $5.14 average of analysts’ estimates compiled by Bloomberg. The company reported earnings of $2.59 on that basis in 2009.

Parker Hannifin Corp., a maker of valves and pumps used in factory equipment, boosted its annual profit forecast yesterday. Manufacturing during the U.S. economic recovery, which began in June 2009, was boosted by climbing exports, improving business investment and replenishing inventory.

Sales at Eaton’s hydraulics division, which made pumps and valves used on a drilling rig that helped free the trapped miners in Chile, climbed to $583 million. Eaton today boosted its forecast for global demand for hydraulics, now seeing markets increasing 31 percent, compared with its previous estimate of 26 percent.

Revenue at Eaton’s Electrical Americas division, the company’s largest, rose 15 percent to $967 million. The unit makes circuit breakers, power distribution systems and meters.

To contact the reporter on this story: Will Daley in New York at wdaley2@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

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