Al Root

Sometimes companies can win by losing, becoming higher-growth, higher-margin entities by selling or spinning off a slower-growing business.

Monday, electrical technology provider Eaton announced it would spin off its Mobility group to, well, boost its growth. The transaction allows Eaton to "focus on higher growth, higher-margin Electrical and Aerospace businesses directly aligned to secular megatrends," according to the company.

The transaction should be wrapped up in the first quarter of 2027.

Megatrends in aerospace mean more people getting on more planes over time. In the Electrical business, megatrends mean artificial intelligence. Eaton Electrical provides solutions for a host of industries including power-hungry AI data centers, which are boosting demand growth for electricity to levels not seen in decades.

Those are the businesses on which Eaton wants to focus and allocate capital to.

Between 2022 and 2024, Eaton's electrical business in the Americas and its Aerospace business grew sales at double-digit rates. Its Vehicle and Mobility businesses, which provide parts for traditional and electric vehicles, grew sales by an average of closer to 1%.

What's more, Eaton's electrical business in the Americas earns operating profit margins in the range of 30%, the Aerospace business north of 20%, and the mobility businesses are closer to 15%.

The move is one of the first major actions by new CEO Paulo Ruiz, who took over from Craig Arnold in mid-2025. Arnold wasn't afraid to prune the portfolio either. Eaton divested its lighting and hydraulics businesses in 2020 and 2021, respectively.

After removing those businesses, Arnold would field questions about spinning off the mobility businesses, Don Bilson, a Gordon Haskett analyst, pointed out in a Monday report. Conversations fell by the wayside during the Covid-19 pandemic, however.

Now that it's happening, the business could be worth $5 billion, based on comparable multiples of other mobility companies, including Allison Transmission.

"This is clearly an addition by subtraction move, and although a $5 billion sale at a $130 billion [market value] company is not going to move the needle, it will burnish Eaton's credentials as a group-leading compounder," added Bilson.

Investors reacted well to the news. Eaton stock was up 1% in early trading at $334.52, while the S&P 500 and Dow Jones Industrial Average were up about 0.1%.

Coming into Monday trading, Eaton's stock was down about 10% over the past 12 months.

Eaton's action is also the latest in the trend to focus business portfolios. General Electric broke into three parts. Honeywell is in the process of breaking into three parts. 3M spun off its healthcare business, Solventum. DuPont de Nemours spun off its electronics business, Qnity.

Those are a few of the actions taken by management teams to get higher growth and higher valuations for their stocks.

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

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January 26, 2026 10:01 ET (15:01 GMT)

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