Key Takeaways
- Eaton stock fell 16% in the past month as AI-power stocks sold off, and GE Vernova and Vertiv fell too.
- The worst drop came after Meta raised its 2026 capex plans and its free cash flow turned negative. That made investors ask how hyperscalers will pay for AI capacity.
- Eaton’s third-quarter report showed record sales, orders and margins, and it raised its 2026 adjusted EPS guidance to $13.70-$13.80.
- Demand is still speeding up and the stock costs less than its usual multiple, so the drop looks like a chance to buy.
Eaton (ETN) put up record third-quarter sales, orders and margins before the open this morning, and raised its full-year outlook again. That’s quite a reply to a month in which the stock fell 16%.
It wasn’t alone. GE Vernova (GEV) is down 13% over the same month and Vertiv (VRT) 11%, while the Nasdaq 100 lost 9%. The worst of it came after Meta Platforms (META) said it would spend even more on AI.
Eaton was supposed to be the safer way to play the theme. On the Oct. 13 Mad Money, Jim Cramer told viewers to wait on newly public Accelevation Holdings, given political uncertainty around data centers before the midterms: “I’d rather stick with more established players like Vertiv or Eaton.”
Meta spooked the power trade
Meta reported after the close on Oct. 21. It raised the low end of its 2026 capital spending range, which now runs $135-$145 billion, said it expects to keep investing aggressively beyond 2026, and turned free cash flow negative. It also created non-voting Class C shares, partly so it can raise capital.
Eaton fell 6% the next day, alongside GE Vernova and Vertiv.
That’s a strange reaction on its face. Meta’s capex is Eaton’s demand. The worry was about who pays: if Meta needs new shares to fund the buildout, how long can it keep going? Meta’s own stock is down [16%] over the month.
TIKR tracks 28 analysts on Eaton. How many say “Buy”?
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Eaton’s orders kept climbing
This morning’s report shows that demand is still accelerating:
- Sales hit a record $8.9 billion, up 28%, with 19% organic growth, above the high end of guidance
- Adjusted EPS was a record $3.68, above the $3.46-$3.56 it guided to in July
- Twelve-month rolling average organic orders rose 39% in Electrical Americas and 51% in Electrical Global, both at record order dollars
- Electrical backlog grew 46% from a year earlier
Eaton also raised its organic growth guidance for the third time this year, and now expects 2026 adjusted EPS of $13.70-$13.80, up from $13.40-$13.60 in July.
That’s good news for Vertiv and GE Vernova too, since they sell into the same data-center buildout. (Vertiv topped Wells Fargo analyst Stephen Tusa’s AI industrial picks in late September, with Eaton also on the list.) Their next reports will show whether their orders look like Eaton’s.
Analysts were already counting on growth
Going into the report, analysts expected normalized EPS of $13.60 for 2026, rising to $16.31 in 2027:
Eaton’s new guidance sits above that 2026 figure, so I’d expect those estimates to move up.
Cheaper than usual
At Monday’s close, Eaton traded at 24x forward earnings, a touch below its five-year average of 25x and well off the 33x it hit in April:
Analysts didn’t flinch, either. Bernstein kept the Street’s highest target, $534, on Nov. 2, and the 28 analysts who cover Eaton held their consensus target at about $485 all month, 33% above Monday’s close:
Time to load up
Investors marked down the whole AI-power group this month over how hyperscalers will pay for their spending. Eaton’s quarter shows that spending still reaching it, faster than before, and the stock trades below its usual multiple.
Frankly, I’d be buying. A customer like Meta promising to keep investing aggressively is about the best thing Eaton could hear.
Of course, if hyperscalers do cut their capex plans, Eaton’s orders would follow, and the stock would likely fall with the group again. Their next spending updates are what I’d watch.
So what is Eaton stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
