Eaton and Atkore, they Year that Was and What’s Next

It’s earning season so that means it’s time for Kevin Coleman to share analysis and insights regarding leading manufacturers in the electrical industry. Below he shares input on Eaton and Atkore.

Eaton’s Strong Growth and Margins Led By Explosive Electrical Demand in Data Centers

Eaton announced 4Q 2025 earnings on February 3.

For total Eaton, the quarter again had record results with accelerating orders and strong backlog. Q4 sales were $7.1 billion, up 13% y-o-y, with 9% organic growth plus an additional 2% contribution from acquisitions, and 2% from foreign exchange. Segment margins were a record 24.9% during Q4, growing 20 bps y-o-y.

Eaton’s Q4 2025 growth was driven mainly by explosive demand in its Electrical businesses—especially data centers—plus strong commercial and defense aerospace, all supported by a large, fast‑growing backlog.

Sales for the Electrical Americas segment grew to $3.5 billion, up 21% y-o-y. Data‑center revenue was up roughly 40% and data‑center orders were up around 200%, driving record sales and profit for the segment. (Note that while Eaton does not disclose country level details, recent investor materials and third-party analysis consistently state that the US typically represents about 85–90% of the Electrical Americas Segment’s revenues). According to Channel Marketing Group sources, over 90% of Eaton’s switchgear / power distribution business is sold direct to customers, bypassing the electrical distribution channel.

Spinning Off Mobility Group, Leaving a More Focused Electrical (and Aerospace) Eaton

Eaton announced that the Mobility Group (comprised of the Vehicle and eMobility segments) will be spun off to unlock shareholder value through a more focused Eaton and an independent publicly traded company by the end of Q1 2027. Mobility is a leading provider of mission-critical and safety-critical engineered components and solutions for creating, distributing, and optimizing power for all types of vehicles and propulsion systems. Mobility offers deep domain knowledge, proprietary technology, and system-level integration. The segment is smaller in terms of revenue ($3 billion) and has lower margins (about 13%) and has grown about 2% from 2021.

Building on prior portfolio actions like divesting Lighting (2020) and Hydraulics (2021), the move positions Eaton as a pure-play in power management for electrical and aerospace markets. Will they invest more in these markets or seek something else to diversify into? The bet is something tied to data centers / power generation to support the growing utility spend.

Strong Backlog Provide Foundation for 2026 Growth

As of Q4 2025, there is a $3 trillion backlog of megaprojects in North America, about $78 billion per month, with 866 projects announced thus far and Eaton wins about 40% of those. Eaton’s backlog is now over $19 billion, and the Electrical Americas backlog has grown 4 times since 2019 to nearly $10 billion.

Stakeholder Concerns

During the earnings call, shareholders and analysts raised questions around near-term margin pressure, Q1 2026 guidance conservatism around the 1Q 2026 EPS estimate, capacity ramp risks, and the pace of data-center order conversion, despite the headline beat and strong backlog.

Multiple questions focused on the 180 basis-point y-o-y drop in Electrical Americas operating margin to 29.8%, despite 15% organic growth and 40% data-center revenue surge; shareholders wanted specifics on the ~130 basis-point drag from capacity investments and when quarterly margins would inflect positively.

Management acknowledged multi-year plant expansions (not complete until late 2026) were creating temporary under-absorption and ramp costs, heaviest in Q4 2025 and Q1 2026, but framed sequential improvement as locked in thereafter with strong pricing and productivity offsets

Investors drilled into whether 200% order growth and $13.2 billion backlog (up 31%) in Electrical Americas signaled durable multi-year demand or risked slowdown if hyperscalers capex cooled; specific probes included 800-volt DC tech timelines and competitive positioning versus peers. Management certainty in structurally higher growth through 2030, citing broad-based acceleration across data centers (up 50%+ quarterly orders), commercial/institutional, and utilities, but noted monitoring for any softening in non-data-center end markets.

The Mobility spin-off drew queries on execution risks, tax-free status timing, Q1 2027, with some shareholders questioning if it fully unlocked value given Mobility’s lower growth/margins.

Guidance

For the full year 2026, Eaton noted strong but moderating growth expectations and anticipates organic growth of about 7%, with Electrical Americas specifically growing in the 9-11% range (this is direct and via distribution). The outlook is supported by record backlog and accelerating orders—especially in Electrical Americas with orders up 16% on a rolling 12‑month basis. and Aerospace.

The following slide from the earnings call has Eaton’s end market growth assumptions as well as % of 2025 sales:

Atkore – Met Expectations, Volume Up but Higher Pricing and Cost Pressures

Atkore announced its 1Q 2026 results on February 3. Sales were $655.5 million, slightly down y-o-y but beating expectations. Gross profit dropped 26% to $125 .9 million, down 670 basis points, driven by lower selling prices (-$18m) and higher input costs (+$25m). Atkore did increase volume 2% and there were productivity gains.

In December, Atkore sold the Tectron mechanical tube product line (and its associated De Pere, Wisconsin manufacturing facility) to Lock Joint Tube, a producer of mechanical and structural steel tubing. This is another action taken as part of broader review of strategic alternatives and helps Atkore focus on its core electrical portfolio.

The Electrical segment (about 70% of the business) increased sales 0.9% to $469.6 million. Volume accounted for +$23 million but was offset by pricing -$18 million, but adjusted EBITDA declined 40% to $55,1 million and margin 11.7% vs 19.9% a year ago, a decline of 820 basis points. Productivity improvements and manufacturing efficiency were major contributors to Electrical segment performance. Atkore generated over $30 million in product savings year‑over‑year, directly supporting segment profitability, which helped offset the pricing pressure. Long‑term structural demand was driven by data center expansions, utility‑scale solar and infrastructure investments.

The Safety & Infrastructure segment had a sales decline of 5.3% to $186.3 million, but adjusted EBITDA increased 94% to $30.2 million and margin increased to 16.2%, from 7.9% a year ago. Drivers included  better operations/cost control.

In November, Atkore announced an expansion of the scope of strategic alternatives to include “potential sale or merger of the whole company,” and “sharpening focus on electrical end markets through divestiture of non-core businesses.”  Atkore entered a cooperation agreement with Irenic Capital, an activist investor known for pushing companies toward portfolio simplification, capital returns, and strategic transactions.

Actions already taken in 2025 included divesting Northwest Polymers in February and exploring the potential sale of High-density polyethylene (“HDPE”) business and the sale of Tectron, increasing focus on electrical infrastructure markets.

Additional cost reduction actions include closing 3 manufacturing sites in 2026 and headcount reductions at the end of 2025.

The chart below shows expected sales by key product area for FY 2026 and the respective growth outlooks, overall, a 2.3% increase expected.

Guidance

Atkore’s management reaffirmed its full‑year 2026 guidance during the call after delivering results that exceeded expectations. The company emphasized that 2026 performance, with both volume and margin recovery, will be weighted toward the back half of the year, with early‑year pressure from pricing and cost headwinds.

Management highlighted the modest organic volume growth in electrical products, which helped Q1 exceed expectations and supports confidence in the full‑year outlook. The $30 million in productivity savings, which helped offset pricing pressure, is expected to continue contributing throughout 2026. Finally, management will continue its broader strategic alternatives review and focus on its core electrical infrastructure portfolio, which management views as the long‑term growth engine.

Shareholder Concerns

The major concerns were around margin compression with net income plunging 67%, unchanged full-year guidance despite the revenue beat, pricing headwinds, and H1 profitability risks. A red flag that analysts highlighted was the swing to negative cash flow, with the risks of working capital pressure, less pricing power, and a strain on capital allocations flexibility – stock buybacks, dividends, and M&A).

Even though the quarter beat expectations, net sales still declined 0.9% YoY., questioning if electrical demand is slowing and if the price/cost headwinds will persist longer than management expects

The key question for outlook is if the back‑half‑weighted 2026 guidance is realistic, given the pressures and market realities.

What will be the next strategic action? Continued disposal of non-core products or divisions or something more dramatic?