New Price Target for This Electric Pain Point Position

Eaton Corp. (ETN) shares have recaptured some of their post-earnings sell-off from earlier on Tuesday as the market digested the company’s earnings call and management’s remarks.

While we’ve said it many times before, it bears repeating: While the herd reacts to a company’s earnings press release, oftentimes, what’s revealed on the earnings call and the context it provides can be both insightful and invaluable.

With that in mind, the selloff in Eaton’s shares on Tuesday morning was in part due to the company delivering a Q1 2026 top- and bottom-line beat while serving up in-line guidance for 2026 that was largely unchanged compared to the guidance issued in early February. Coming into the current earnings season, we explained that, on the back of pronounced moves in stocks like Eaton, companies would need to deliver a beat-and-raise guidance that soared past consensus expectations to see their shares move higher.

While we didn’t get that from Eaton, which still sees organic top-line growth of 9% to 11% this year with EPS of $13.05 to $13.50, up from $12.07 in 2025, Eaton’s earnings call brought some other insight.

On a rolling 12-month basis, organic order acceleration in the company’s Electrical Americas was up 42%, while orders at the Electrical Global and Aerospace segments grew 13%. In terms of backlog, it was up 44% at Electrical Americas, 73% at Electrical Global and 28% for Aerospace. That places Eaton’s total backlog at $14.5 billion, up 42% year over year and 10% sequentially.

The only weak performance was at Eaton’s Mobility Sector, but Eaton announced in January that it would spin that business out with the completion of that effort by January 2027. The key for us with that spin is that it will remove the profit drag that is the mobility business. For example, Q1 2026 operating margins company-wide came in at 22.6%, but the one for the remaining three segments was more like 24%. Given the spin, we and the market are understandably focused on the aggregate electrical business and the Aerospace segment.

On those fronts, Boeing’s (BA) backlog exiting Q1 2026 stood at a record $695 billion with more than 6,100 aircraft, while Airbus’s (EADSF) backlog was for more than 9,000 commercial aircraft. Dominion Energy (D) , Next Era Energy (NEE) , and others have lifted their multi-year capital plans with American Electric Power (AEP) joining that group on Tuesday morning. AEP signaled it has transmission and generation project opportunities beyond the new $78 billion capital plan with a line of sight to over $10 billion in additional investment anticipated.

With more public power companies yet to report, including Constellation Energy (CEG) , we’ll have a more complete picture on spending plans in the coming weeks. However, as we discussed on Monday with you, data center power demand is one aspect of the electrical pain point issue.

Per the U.S. Energy Information Administration, the U.S. is facing a massive surge in electricity demand, requiring an estimated 80 gigawatts (GW) of additional capacity annually over the next 20 years to meet rising needs from AI data centers, manufacturing and electrification. By 2030, electricity consumption could jump 20%, requiring peak load capacity to rise significantly from current levels. On a global basis, we turn to the International Energy Agency and its findings that across the globe, electricity capacity is projected to more than triple by 2050, reaching approximately 30 terawatts.

Those are two powerful tailwinds blowing on Eaton’s business and that keeps us bullish on the company’s shares, and they give us enough clearance to boost our ETN target to $450. With about 10% upside to that new target, we’ll maintain our Two rating. We’ll revisit that target once we’ve assembled a more updated view on electric utility spending plans as well as comments from Eaton about demand trends and the integration of two acquisitions completed during the quarter.

The businesses were the previously announced acquisition of Boyd Thermal, a leader in thermal components, systems and ruggedized solutions for data centers, aerospace and other end markets, and Ultra PCS Limited, a producer of innovative solutions for safety and mission critical aerospace systems.

With about 3.8% of the Portfolio’s assets in ETN shares, we have a relatively full position. For those who have a smaller position size in ETN shares, Tuesday they are battling their 20-day moving average near $410, and the next layer of support shows up closer to $381, which is the 50-day moving average. That offers a far more compelling risk to reward trade-off, and it is one that if ETN shares are dragged there by market forces, would be a place we’d consider upgrading our rating.

At the time of publication, TheStreet Pro Portfolio was long ETN.