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Eaton CEO Sees Europe Boosting Product Demand in 2014

Eaton Corp. (ETN) Chief Executive Officer Sandy Cutler forecast an increase in demand in its markets of as much as 4 percent next year, spurred by economic recovery in Europe.

“The biggest turnaround in a region is likely be Europe,” Cutler said in a phone interview today. “Whether you think growth’s a half-point positive or a point positive, it’s sure going to be better than negative 1 percent for a couple of years in a row.”

A recovery in the company’s orders in the third quarter has marked a “change in momentum,” Cutler said today. Eaton, which is based in Dublin and operates from Cleveland, is forecasting zero growth for its markets this year, Cutler said.

Eaton, which makes electrical equipment for buildings and hydraulics for machinery, reported quarterly earnings today in line with analysts’ estimates while sales trailed projections. Orders for aerospace, electrical and hydraulics equipment each rose 6 percent or more in the third quarter, and bookings have “started out quite strong in October,” Cutler said.

Along with higher demand, Eaton’s earnings next year will get a boost from $95 million in additional efficiencies related to its $13 billion acquisition of Cooper Industries Plc in 2012, as well as a $20 million reduction in pension-related costs, Cutler said.

Next year, the U.S. economy will continue to expand, Cutler said. China is “working its way through this very challenging transition,” he said, referring to the country’s move to a domestic-focused economy away from being export-led.

Shares of Eaton increased 4.6 percent to $71.64 at the close in New York, their highest value since at least 1980. The stock has gained 32 percent this year.

To contact the reporter on this story: {Thomas Black} in Dallas at tblack@bloomberg.net

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

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