Power management company Eaton (ETN) announced that it has reached two important milestones in completing the sale of its Hydraulics business to Denmark-based engineering solutions provider Danfoss. Eaton offers wiring devices, industrial and electrical components, lighting, fire detection and residential products.
The first milestone is the filing of a proposed settlement by the U.S. Department of Justice (DOJ) in the District Court, which, if approved, will resolve the department’s concerns related to the transaction.
Under the settlement, Eaton needs to sell certain orbital motor and steering unit assets to an entity approved by the DOJ. However, it does not need to complete the asset sale before closing the transaction with Danfoss.
Both, Danfoss and Eaton have agreed to the proposed settlement. (See Eaton stock chart on TipRanks)
The next milestone is the European Commission’s (EC) approval of Italy-based water pumps maker Interpump Group as a suitable purchaser of orbital motor and steering unit assets. The commission requires Eaton to divest these assets under the conditional approval that it granted in March.
The Chairman and CEO of Eaton, Craig Arnold, said, “We are excited to reach these important milestones and look forward to closing the transaction, which we currently expect to occur in the next several weeks.”
On July 14, Deutsche Bank analyst Nicole DeBlase maintained a Buy rating on the stock and raised the price target from $166 to $196 (27.8% upside potential).
The analyst said, “Investor sentiment around ETN has become much more mixed as of late, with bears highlighting an expensive valuation vs. key electrical peers, as well as a less clear catalyst path vs. the past two years.”
Overall, the stock has a Moderate Buy consensus rating based on 6 Buys and 4 Holds. The average Eaton price target of $160.60 implies 4.7% upside potential. The company’s shares have gained 64.2% over the past year.
According to TipRanks’ Smart Score rating system, Eaton scores a 9 out of 10, suggesting that the stock is likely to outperform market averages.
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