Al Root

Sometimes good isn't good enough. Shares of the electrical equipment supplier Eaton dropped after the company announced better-than-expected fourth-quarter earnings.

Investors wanted more.

On Tuesday, Eaton reported adjusted earnings per share of $3.33 from sales of $7.1 billion. Wall Street was looking for earnings per share of $3.31 from sales of $7.1 billion. A year ago, Eaton reported earnings per share of $2.83 from sales of $6.2 billion.

The backlog of orders in the electrical business grew 29% year 0ver year, with orders for data centers up 200%. The backlog increased 16% in Eaton's aerospace business.

Earnings grew 18% year over year, beating Wall Street estimates. Still, Eaton stock was down 6.6% in premarket trading at $335.77, while S&P 500 and Dow Jones Industrial Average futures were up 0.1% and down 0.1%, respectively.

Management's financial forecasts aren't helping. For 2026, Eaton expects sales growth of between 7% and 9%, a slight increase in profit margins, and earnings per share of between $13 and $13.50. Those are all solid metrics.

The problem is that Wall Street is projecting sales growth of about 12%. The consensus call is that earnings per share will be $13.50.

For the first quarter of 2026, Eaton is projecting earnings per share of about $2.75. Analysts currently project closer to $3.

Bernstein analyst Chad Dillard pointed out the margin guidance was "light" in a Tuesday report, saying that management's guidance for first-quarter margins, at about 22.4%, is two percentage points behind Street estimates.

He rates shares Buy and has a $395 price target for the stock.

The midpoint of Eaton's range of forecasts for 2025 earnings per share was $12, while the company ended up reporting $12.07. Still, investors don't want to wait for guidance to catch up with Wall Street's expectations.

Coming into Tuesday trading, Eaton stock was up about 14% over the past 12 months. It was trading for about 27 times estimated 2026 earnings.

Write to Al Root at allen.root@dowjones.com

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February 03, 2026 09:19 ET (14:19 GMT)

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