A rule of thumb has it that technology companies are exciting and industrial companies aren’t. But Eaton (NYSE: ETN), which provides power management equipment, is an exception to the rule.
The company is 114 years old and focuses particularly on electrical equipment. Its electrical portfolio accounts for about 70% of its revenue, selling components to data centers, utilities, and commercial and residential buildings. Its industrial business accounts for 30% of revenue and sells components for commercial and passenger vehicles and aircraft.
Its stock has soared 272% over the past five years, beating tech titans Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT).
Eaton is taking advantage of data center expansion and the strong demand for energy that is coming with it. All that is sparked by the artificial intelligence boom of course.
The company also benefits from electrification trends and sustainable energy transitions, including electric vehicles. For EVs, it’s both auto components and equipment for charging systems. On the energy side, it is investing in electric grid modernization and resiliency efforts.
Data center growth, acquisitions
The overall growth of data centers has been spectacular, as you know. The value of the data-center market is estimated at $380 billion now, and is expected to reach $600 billion-$700 billion by 2030. As for Eaton’s involvement in that market, it provides uninterruptible power supplies, power distribution units, and energy storage systems among other products.
The company has grown largely through acquisitions over the years. In June it announced a deal to buy U.K.-based Ultra Precision Control Systems for $1.6 billion. Ultra PCS makes electronic controls, sensing, and data processing products for military and civilian aerospace.
In August, Eaton bought Resilient Power Systems of the U.S. for an undisclosed amount. The latter develops energy solutions for EV charging, data centers, ports, and battery storage.
Eaton’s acquisitions and its divestments of hydraulics and lighting businesses in recent years have “enhanced returns,” writes Morningstar analyst Nicholas Lieb. “It has acquired companies within its core competencies that add to its world-class product breadth.”
He cites several areas of strength for Eaton. “It manufactures mission-critical, highly engineered components designed to solve customer pain points in vital areas of the world’s infrastructure,” he said.
“A substantial portion of Eaton’s products are installed into customer operations and must be serviced or replaced at set intervals, which tends to carry higher margins than the sale of the equipment itself.”
Not too high tech
Also, technological advancements are slower in Eaton’s product areas than in other fields. “The company is therefore largely shielded from obsolescence while still being exposed to accelerating growth trends such as AI, automation, and data and energy consumption,” Lieb said.
Given all this, It’s no surprise that Eaton has strong earnings. Its revenue jumped 11% in the second quarter from a year earlier, to $7 billion. Organic revenue climbed 8%, and earnings per share gained 1%. For all of 2025, the company sees organic sales rising 8.5%-9.5% and earnings per share rising 11% at the midpoint of its estimate.
To be sure, Eaton stock isn’t cheap. Its forward price-earnings ratio is 27.4, compared to its five-year average of 23.3. The current number is also well above the S&P 500’s forward PE ratio of 22.2, an historically high number itself.
So there’s plenty of good to say about Eaton; it’s just a question of how much of that is already priced into the stock.
The author owns shares of Eaton.
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