Bloomberg News

Eaton CEO Says Orders Point to Commercial Construction Rebound

October 24, 2011

Oct. 24 (Bloomberg) -- Eaton Corp. Chief Executive Officer Sandy Cutler said U.S. commercial construction is showing signs of a rebound, based on increasing demand for electrical circuit breakers and transfer switches used in buildings.

Orders at the Cleveland-based company’s Electrical Americas unit are up more than 20 percent from a year earlier, Cutler said today in a phone interview. The maker of products for industrial and construction markets often gets its orders three to six months before a building is constructed, he said.

“What we’re now starting to see is selected portions of so-called commercial construction are just starting to go positive,” Cutler said. “That’s good news because a major question for the U.S. economy is could we get the construction industry kind of back in the game.”

Eaton’s increased orders add to evidence that U.S. nonresidential construction is recovering. Construction jobs in September rose by 26,000, led by nonresidential building, the Labor Department reported. Construction spending rose 1.4 percent in August from a year earlier before adjusting for seasonal variations, the first positive reading this year.

Eaton rose 4.7 percent to $44.23 today at the close in New York. The company, which has a market value of $15.1 billion, today reported a third-quarter sales gain of 15 percent compared with a year earlier.

About 40 percent of sales at the company’s Electrical Americas unit are tied to nonresidential construction, Cutler said. The unit had sales of $1.07 billion in the third quarter, an increase of 11 percent from a year ago, Eaton reported today.

Cutler said he doesn’t see any signs yet of a rebound in residential construction. Only about 10 percent of the Electrical Americas unit’s sales come from residential construction, he said.

Nonresidential construction had been buoyed by projects in the oil and gas, mining and manufacturing areas, Cutler said. Now, commercial construction is beginning to kick in, he said.

“We’re encouraged about what’s happening in nonresidential,” Cutler said.

--Editors: Donna Alvarado, Stephen West

To contact the reporter on this story: Thomas Black in Monterrey at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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