Stock Analysis on Net
Stock Analysis on Net

Eaton Corp. plc (NYSE:ETN)

Analysis of Income Taxes

Microsoft Excel

Income Tax Expense (Benefit)

Eaton Corp. plc, income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Ireland 42 3 50 15 26
Foreign 744 570 730 441 410
Current income tax expense 786 573 780 456 436
Ireland 1 13 (2) — 3
Foreign (183) (141) (28) (125) (61)
Deferred income tax benefit (182) (128) (30) (125) (58)
Income tax expense 604 445 750 331 378

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Current income tax expense Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Eaton Corp. plc current income tax expense decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.
Deferred income tax benefit Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Eaton Corp. plc deferred income tax benefit decreased from 2021 to 2022 and from 2022 to 2023.
Income tax expense Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Eaton Corp. plc income tax expense decreased from 2021 to 2022 but then increased from 2022 to 2023 not reaching 2021 level.

Effective Income Tax Rate (EITR)

Eaton Corp. plc, effective income tax rate (EITR) reconciliation

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Income taxes at the applicable statutory rate 25.00% 25.00% 25.00% 25.00% 25.00%
Ireland tax on trading income -1.30% -1.30% -0.70% -0.20% -1.00%
Nondeductible interest expense 2.60% 1.00% 0.60% 2.70% 3.90%
Ireland Other, net -0.20% -0.50% -0.20% 0.40% 0.10%
Ireland operations 1.10% -0.80% -0.30% 2.90% 3.00%
Tax impact on sale of businesses 0.00% 0.00% 9.10% 3.90% 0.00%
Earnings taxed at other than the applicable statutory tax rate -9.90% -10.20% -8.00% -14.00% -14.80%
Other items 2.20% 1.60% -0.10% 1.60% 3.30%
Foreign operations -7.70% -8.60% 1.00% -8.50% -11.50%
Adjustments to tax liabilities -0.20% -0.40% 0.20% -0.60% -0.50%
Adjustments to valuation allowances -2.40% 0.10% 0.00% 0.20% -1.40%
Worldwide operations -2.60% -0.30% 0.20% -0.40% -1.90%
Effective income tax expense rate 15.80% 15.30% 25.90% 19.00% 14.60%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Effective income tax expense rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Eaton Corp. plc effective income tax expense rate decreased from 2021 to 2022 but then slightly increased from 2022 to 2023.

Components of Deferred Tax Assets and Liabilities

Eaton Corp. plc, components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Employee benefits 328 266 348 553 514
Depreciation and amortization (929) (1,067) (1,087) (1,101) (1,245)
Other accruals and adjustments 408 397 385 505 498
Accruals and other adjustments (193) (404) (354) (43) (233)
Ireland income tax loss carryforwards 2 1 1 1 1
Foreign income tax loss carryforwards 3,878 4,151 3,127 1,815 1,826
Foreign income tax credit carryforwards 247 280 263 309 349
Valuation allowance for income tax loss and income tax credit carryforwards (3,828) (4,184) (3,139) (1,863) (1,914)
Other valuation allowances (50) (44) (65) (67) (52)
Deferred income taxes, noncurrent assets and liabilities 56 (200) (167) 152 (23)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Deferred income taxes, noncurrent assets and liabilities Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Eaton Corp. plc deferred income taxes, noncurrent assets and liabilities decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Deferred Tax Assets and Liabilities, Classification

Eaton Corp. plc, deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Deferred income taxes, noncurrent assets 458 330 392 426 372
Deferred income taxes, noncurrent liabilities 402 530 559 277 396

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Deferred income taxes, noncurrent assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Eaton Corp. plc deferred income taxes, noncurrent assets decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.
Deferred income taxes, noncurrent liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Eaton Corp. plc deferred income taxes, noncurrent liabilities decreased from 2021 to 2022 and from 2022 to 2023.

Adjustments to Financial Statements: Removal of Deferred Taxes

Eaton Corp. plc, adjustments to financial statements

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Adjustment to Total Assets
Total assets (as reported) 38,432 35,014 34,027 31,824 32,805
Less: Noncurrent deferred tax assets, net 458 330 392 426 372
Total assets (adjusted) 37,974 34,684 33,635 31,398 32,433
Adjustment to Total Liabilities
Total liabilities (as reported) 19,363 17,940 17,576 16,851 16,672
Less: Noncurrent deferred tax liabilities, net 402 530 559 277 396
Total liabilities (adjusted) 18,961 17,410 17,017 16,574 16,276
Adjustment to Total Eaton Shareholders’ Equity
Total Eaton shareholders’ equity (as reported) 19,036 17,038 16,413 14,930 16,082
Less: Net deferred tax assets (liabilities) 56 (200) (167) 152 (23)
Total Eaton shareholders’ equity (adjusted) 18,980 17,238 16,580 14,778 16,105
Adjustment to Net Income Attributable To Eaton Ordinary Shareholders
Net income attributable to Eaton ordinary shareholders (as reported) 3,218 2,462 2,144 1,410 2,211
Add: Deferred income tax expense (benefit) (182) (128) (30) (125) (58)
Net income attributable to Eaton ordinary shareholders (adjusted) 3,036 2,334 2,114 1,285 2,153

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Eaton Corp. plc, Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Eaton Corp. plc, adjusted financial ratios

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net Profit Margin
Reported net profit margin 13.87% 11.86% 10.92% 7.90% 10.34%
Adjusted net profit margin 13.09% 11.25% 10.77% 7.20% 10.07%
Total Asset Turnover
Reported total asset turnover 0.60 0.59 0.58 0.56 0.65
Adjusted total asset turnover 0.61 0.60 0.58 0.57 0.66
Financial Leverage
Reported financial leverage 2.02 2.06 2.07 2.13 2.04
Adjusted financial leverage 2.00 2.01 2.03 2.12 2.01
Return on Equity (ROE)
Reported ROE 16.90% 14.45% 13.06% 9.44% 13.75%
Adjusted ROE 16.00% 13.54% 12.75% 8.70% 13.37%
Return on Assets (ROA)
Reported ROA 8.37% 7.03% 6.30% 4.43% 6.74%
Adjusted ROA 7.99% 6.73% 6.29% 4.09% 6.64%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Eaton Corp. plc adjusted net profit margin ratio improved from 2021 to 2022 and from 2022 to 2023.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Eaton Corp. plc adjusted total asset turnover ratio improved from 2021 to 2022 and from 2022 to 2023.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Eaton Corp. plc adjusted financial leverage ratio decreased from 2021 to 2022 and from 2022 to 2023.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Eaton Corp. plc adjusted ROE improved from 2021 to 2022 and from 2022 to 2023.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Eaton Corp. plc adjusted ROA improved from 2021 to 2022 and from 2022 to 2023.

Eaton Corp. plc, Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Eaton ordinary shareholders 3,218 2,462 2,144 1,410 2,211
Net sales 23,196 20,752 19,628 17,858 21,390
Profitability Ratio
Net profit margin1 13.87% 11.86% 10.92% 7.90% 10.34%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Eaton ordinary shareholders 3,036 2,334 2,114 1,285 2,153
Net sales 23,196 20,752 19,628 17,858 21,390
Profitability Ratio
Adjusted net profit margin2 13.09% 11.25% 10.77% 7.20% 10.07%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Net profit margin = 100 × Net income attributable to Eaton ordinary shareholders ÷ Net sales
= 100 × 3,218 ÷ 23,196 = 13.87%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Eaton ordinary shareholders ÷ Net sales
= 100 × 3,036 ÷ 23,196 = 13.09%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Eaton Corp. plc adjusted net profit margin ratio improved from 2021 to 2022 and from 2022 to 2023.

Adjusted Total Asset Turnover

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net sales 23,196 20,752 19,628 17,858 21,390
Total assets 38,432 35,014 34,027 31,824 32,805
Activity Ratio
Total asset turnover1 0.60 0.59 0.58 0.56 0.65
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales 23,196 20,752 19,628 17,858 21,390
Adjusted total assets 37,974 34,684 33,635 31,398 32,433
Activity Ratio
Adjusted total asset turnover2 0.61 0.60 0.58 0.57 0.66

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 23,196 ÷ 38,432 = 0.60

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 23,196 ÷ 37,974 = 0.61

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Eaton Corp. plc adjusted total asset turnover ratio improved from 2021 to 2022 and from 2022 to 2023.

Adjusted Financial Leverage

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Total assets 38,432 35,014 34,027 31,824 32,805
Total Eaton shareholders’ equity 19,036 17,038 16,413 14,930 16,082
Solvency Ratio
Financial leverage1 2.02 2.06 2.07 2.13 2.04
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets 37,974 34,684 33,635 31,398 32,433
Adjusted total Eaton shareholders’ equity 18,980 17,238 16,580 14,778 16,105
Solvency Ratio
Adjusted financial leverage2 2.00 2.01 2.03 2.12 2.01

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Financial leverage = Total assets ÷ Total Eaton shareholders’ equity
= 38,432 ÷ 19,036 = 2.02

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Eaton shareholders’ equity
= 37,974 ÷ 18,980 = 2.00

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Eaton Corp. plc adjusted financial leverage ratio decreased from 2021 to 2022 and from 2022 to 2023.

Adjusted Return on Equity (ROE)

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Eaton ordinary shareholders 3,218 2,462 2,144 1,410 2,211
Total Eaton shareholders’ equity 19,036 17,038 16,413 14,930 16,082
Profitability Ratio
ROE1 16.90% 14.45% 13.06% 9.44% 13.75%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Eaton ordinary shareholders 3,036 2,334 2,114 1,285 2,153
Adjusted total Eaton shareholders’ equity 18,980 17,238 16,580 14,778 16,105
Profitability Ratio
Adjusted ROE2 16.00% 13.54% 12.75% 8.70% 13.37%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 ROE = 100 × Net income attributable to Eaton ordinary shareholders ÷ Total Eaton shareholders’ equity
= 100 × 3,218 ÷ 19,036 = 16.90%

2 Adjusted ROE = 100 × Adjusted net income attributable to Eaton ordinary shareholders ÷ Adjusted total Eaton shareholders’ equity
= 100 × 3,036 ÷ 18,980 = 16.00%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Eaton Corp. plc adjusted ROE improved from 2021 to 2022 and from 2022 to 2023.

Adjusted Return on Assets (ROA)

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Eaton ordinary shareholders 3,218 2,462 2,144 1,410 2,211
Total assets 38,432 35,014 34,027 31,824 32,805
Profitability Ratio
ROA1 8.37% 7.03% 6.30% 4.43% 6.74%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Eaton ordinary shareholders 3,036 2,334 2,114 1,285 2,153
Adjusted total assets 37,974 34,684 33,635 31,398 32,433
Profitability Ratio
Adjusted ROA2 7.99% 6.73% 6.29% 4.09% 6.64%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 ROA = 100 × Net income attributable to Eaton ordinary shareholders ÷ Total assets
= 100 × 3,218 ÷ 38,432 = 8.37%

2 Adjusted ROA = 100 × Adjusted net income attributable to Eaton ordinary shareholders ÷ Adjusted total assets
= 100 × 3,036 ÷ 37,974 = 7.99%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Eaton Corp. plc adjusted ROA improved from 2021 to 2022 and from 2022 to 2023.