Eaton upgraded at Barclays on demand for electricity, AI

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Eaton (NYSE:ETN) on Tuesday was upgraded to Equal Weight from a previous investment rating of Underweight by analysts at financial-services firm Barclays. They said the maker of electrical equipment is poised to increase sales as transportation and heating become more electrified while artificial intelligence boosts demand for power-hungry data centers.
“The stock looks set to enjoy among the highest organic sales growth rates in the multi-industry sector in the next few years,” Julian Mitchell, analyst at Barclays, said in an April 2 report. “This, coupled with the widespread perception that this growth is ‘secular’ in nature, means that a sharp valuation multiple compression may not occur for some time.”
Eaton’s (ETN) share price has soared by 83% in the past 12 months as investors piled into stocks based on the likelihood of AI-related growth. The most notable example is chipmaker Nvidia (NVDA), whose share price more than tripled during that period.
“Eaton’s (ETN) valuation (P/E basis) has now returned to the highs of 2021, when interest rates were far lower,” according to Barclays. “This makes us wary of believing that further multiple expansion is easy — much of the ‘heavy lift’ on further share price appreciation is likely to have to come from earnings/cash flow growth.”

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