Eaton Corp. Q1 Earnings: Better Than Expected, but Still Not Good

Looking at the top line, the company had revenues of $4.8 billion, down 8% from the year-ago period. Analysts had been expecting $4.77 billion, so Eaton basically met expectations here. Note, however, that the bottom line fell further than the top, which was the result of a drop in the company's operating margins from 14.6% in the year-ago period to 13.9% in the first quarter of 2016. There's a grain of salt here, however, since the company has been slimming down. Pulling out restructuring charges, operating margins in the first quarter would have been 15.1%. Although you can't just make those costs go away, since they're real expenses, the adjusted number suggests that the company's efforts to right-size its business for the current market environment look like they're having the intended effect, even if that isn't flowing through to the bottom line just yet. Underlying the weakness in the quarter, year over year, was a 6% decline in organic sales. That's not a pleasant figure, though it's not out of line with what the company was expecting. Nor was Eaton's organic sales decline unusual. Organic sales at Rockwell Automation (NYSE:ROK), for example, fell 3.6% during its latest fiscal quarter. Even General Electric (NYSE:GE), which had a pretty solid first quarter, saw organic revenues drop 1%. Both of these industrial players noted weakness in the oil and gas markets as key issues, but from a bigger perspective, also highlighted what can best be described as sluggish global growth. Not much different from what's going on at Eaton, though the specifics aren't exactly the same.