Eaton (ETN) is well-positioned for the anticipated growth surge based on its strong data center construction backlog, RBC Capital Markets said in a Sunday note.
The company posted a beat-and-raise in Q2 with organic sales up 14%, driven by its main growth engine in its data center segment, which saw sales surge 65% and orders jump 85% for the quarter. The backlog for US data center construction grew to an implied 15 years from 12 years last quarter, net of cancellations, according to the note.
Eaton is preparing for the sustained growth by implementing dozens of capacity expansion projects while carefully managing their impacts on profit margins, RBC analysts said.
The company is also seeing further growth opportunities across electrification, grid hardening, and reshoring themes. Its Electrification business outside of data centers is seeing broad growth and narrowing the gap between its Electrical Americas and Electrical Global segments, the analysts said.
Eaton raised its 2026 adjusted EPS guidance to $13.40-$13.60 from $13.05-$13.50. Analysts polled by FactSet expect $13.35.
RBC kept the company's stock rating at outperform and raised the price target to $512 from $484.
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