Eaton Corporation (NYSE:ETN) shares rose around 2% intra-day today after RBC Capital analysts increased their price target for the stock to $392 from $374, maintaining an Outperform rating. The revision underscores Eaton’s enhanced positioning following strategic portfolio adjustments and its ability to capitalize on long-term growth trends in the electrical sector.
Eaton’s recent divestitures of its Lighting and Hydraulics businesses have streamlined its operations, transforming it into a more focused electrical solutions provider. This repositioning aligns the company to benefit from an ongoing “Electrical Supercycle,” driven by over 500 megaprojects valued at more than $1 billion each. These projects collectively expand Eaton’s total addressable market by approximately $60 billion across key sectors, including data centers, aerospace, electric vehicles, and onshoring manufacturing facilities.
The company’s backlog, now three times larger than 2019 levels, has also mitigated cyclicality and improved earnings visibility. Eaton’s portfolio could see further optimization through a potential divestiture of its Vehicle joint venture, a move that would enhance its growth and margin profile and potentially trigger a higher valuation.
With a well-signaled CEO transition expected to be seamless, the analysts believe Eaton is poised to sustain its operational momentum and capitalize on its growth opportunities.