Eaton (NYSE:ETN) Should Beat in Fourth Quarter

Eaton Corporation (NYSE:ETN) has pretty high expectations, but UBS (NYSE:UBS) says they think they'll be able to meet them, and offer guidance above consensus.

UBS says, "ETN sold off last Thurs. (although partly recovered Fri.), we believe primarily because of disap pointing results at Parker Hannifin (NYSE:PH) (a close comp). We believe investors reacted negatively to PH earnings ($1.39 vs. cons. $1.30) because (1) beat was largely on taxes, and (2) expectations were high after solid beats in each of the last 6 quarters. While we believe expectations are fairly high for ETN (reports 4Q on 1/27), we anticipate a 4Q beat, and we expect initial ‘11 guidance above consensus.

"Given recent improvements in end market conditions, we are raising our 4Q10 EPS estimate to $1.70, from $1.64 (cons. $1.67 and guidance $1.55-$1.65) and our 2011 EPS estimate to $7.55, from $7.30. We believe the midpoint of guidance for next year is likely to be somewhere between the consensus ($7.25) and our estimate ($7.55), with room for guidance to move higher over the course of 2011."

UBS maintains a "Neutral" rating on Eaton Corporation (ETN), which closed Monday at $102.70, up $0.25, or 0.24 percent. UBS raised their price target on Eaton from $98 to $106.