William Blair & Company Analyst Nick Heymann says that aerospace & defense companies are increasingly dealing with challenged components of their businesses by setting up companies to enjoy a quicker rate of recovery when circumstances improve. Craig Arnold, the new CEO of Eaton Corp plc (ETN), is currently trying to figure out whether to exit the vehicle business.
“The vehicle business is running well, but as I mentioned, trucks are peaking this year,” Heymann says. “They make automatic truck transmissions, as well as a lot of lifters and valve components that go into auto engines.”
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Heymann says Eaton’s new CEO could take a fresh look at how to focus the company’s portfolio. Ideally, he says, whatever the company decides to sell, it will be able to minimize near-term earnings dilution.
“If Eaton were to exit its vehicle business, it would remove one of the largest and more cyclical components of its current business portfolio,” Heymann says. “These are the kinds of decisions that many diversified industrial companies are going through now.”
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