Critical Analysis: Eaton (NYSE:ETN) & Powell Industries (NASDAQ:POWL)

Powell Industries (NASDAQ:POWL) and Eaton (NYSE:ETN) are both industrials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, profitability, dividends, institutional ownership, risk and earnings.

Volatility & Risk

Powell Industries has a beta of 0.86, suggesting that its share price is 14% less volatile than the S&P 500. Comparatively, Eaton has a beta of 1.2, suggesting that its share price is 20% more volatile than the S&P 500.

Profitability

This table compares Powell Industries and Eaton’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Powell Industries	16.37%	31.80%	17.94%
Eaton	14.74%	24.36%	11.45%

Valuation and Earnings

This table compares Powell Industries and Eaton”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Powell Industries	$1.10 billion	4.25	$180.75 million	$14.85	26.03
Eaton	$26.63 billion	4.80	$3.79 billion	$10.00	32.91

Eaton has higher revenue and earnings than Powell Industries. Powell Industries is trading at a lower price-to-earnings ratio than Eaton, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

89.8% of Powell Industries shares are held by institutional investors. Comparatively, 83.0% of Eaton shares are held by institutional investors. 2.2% of Powell Industries shares are held by company insiders. Comparatively, 0.3% of Eaton shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

Powell Industries pays an annual dividend of $1.07 per share and has a dividend yield of 0.3%. Eaton pays an annual dividend of $4.16 per share and has a dividend yield of 1.3%. Powell Industries pays out 7.2% of its earnings in the form of a dividend. Eaton pays out 41.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Powell Industries has raised its dividend for 3 consecutive years.

Analyst Ratings

This is a summary of current recommendations and price targets for Powell Industries and Eaton, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Powell Industries	0	0	2	0	3.00
Eaton	0	7	17	1	2.76

Powell Industries presently has a consensus target price of $350.00, suggesting a potential downside of 9.45%. Eaton has a consensus target price of $391.27, suggesting a potential upside of 18.91%. Given Eaton’s higher probable upside, analysts clearly believe Eaton is more favorable than Powell Industries.

About Powell Industries

Powell Industries, Inc., together with its subsidiaries, designs, develops, manufactures, sells, and services custom-engineered equipment and systems. The company’s principal products include integrated power control room substations, custom-engineered modules, electrical houses, medium-voltage circuit breakers, monitoring and control communications systems, motor control centers, switches, and bus duct systems, as well as traditional and arc-resistant distribution switchgears and control gears. Its products have application in voltages ranging from 480 volts to 38,000 volts. The company also provide field service inspection, installation, commissioning, modification and repair, spare parts, retrofit and retrofill components for existing systems, and replacement circuit breakers for switchgear. It serves onshore and offshore production, liquefied natural gas facilities and terminals, pipelines, refineries, and petrochemical plants, as well as electric utility, light rail traction power, mining and metals, pulp and paper, data centers and other municipal, commercial, and industrial markets. The company has operations in the United States, Canada, the Middle East, Africa, Europe, Mexico, and Central and South America. Powell Industries, Inc. was founded in 1947 and is headquartered in Houston, Texas.

About Eaton

Eaton Corporation plc operates as a power management company worldwide. The company’s Electrical Americas and Electrical Global segment provides electrical components, industrial components, power distribution and assemblies, residential products, single and three phase power quality and connectivity products, wiring devices, circuit protection products, utility power distribution products, power reliability equipment, and services, as well as hazardous duty electrical equipment, emergency lighting, fire detection, explosion-proof instrumentation, and structural support systems. Its Aerospace segment offers pumps, motors, hydraulic power units, hoses and fittings, and electro-hydraulic pumps; valves, cylinders, electronic controls, electromechanical actuators, sensors, aircraft flap and slat systems, and nose wheel steering systems; hose, thermoplastic tubing products, fittings, adapters, couplings, and sealing and ducting products; air-to-air refueling systems, fuel pumps, fuel inerting products, sensors, and adapters and regulators; oxygen generation system, payload carriages, and thermal management products; and wiring connectors and cables, as well as hydraulic and bag filters, strainers and cartridges, and golf grips for manufacturers of commercial and military aircraft, and related after-market customers, as well as industrial applications. The company’s Vehicle segment offers transmissions, clutches, hybrid power systems, superchargers, engine valves and valve actuation systems, locking and limited slip differentials, transmission controls, and fuel vapor components for the vehicle industry. Its eMobility segment provides voltage inverters, converters, fuses, circuit protection units, vehicle controls, power distribution systems, fuel tank isolation valves, and commercial vehicle hybrid systems. Eaton Corporation plc was founded in 1911 and is based in Dublin, Ireland.