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UPDATE 1-Eaton tempers full-year profit forecast, shares fall

(Adds forecast, analyst comment, shares)

July 29 (Reuters) - U.S. manufacturer Eaton Corp lowered the top end of its full-year profit forecast on Tuesday due to weaker margins in its electrical systems business, sending its shares down more than 3 percent.

The maker of electrical and hydraulic systems also posted second-quarter earnings below Wall Street's target.

Eaton now expects 2014 earnings in a range of $4.50 to $4.70 per share, lowering the top end from $4.90. Analysts on average had been looking for $4.73 for the year, according to Thomson Reuters I/B/E/S.

In a statement, Eaton Chief Executive Officer Sandy Cutler said the lower forecast reflected weaker margins in the company's major electrical systems and services segment.

The company lowered its overall margin target to 15.2 percent for the year from 15.75 percent previously.

The electrical segment is being hit by higher logistical costs and pricing pressures, Jefferies & Co analyst Stephen Volkmann said in a note.

Eaton's net income attributable to shareholders fell to $171 million, or 36 cents per share, in the second quarter ended June 30, from $494 million, or $1.04 per share, a year earlier.

The latest quarter's net income included charges related to acquisitions and litigation costs.

Excluding one-time items, earnings of $1.11 per share fell 2 cents short of the average estimate of analysts.

Sales rose 3 percent to $5.77 billion from $5.60 billion. Bookings in Eaton's electrical products business rose 6 percent, while those in its aerospace unit increased 9 percent.

Eaton shares fell 3.3 percent to $74.24 in morning trading on the New York Stock Exchange.

(Reporting by Lewis Krauskopf in New York and Sagarika Jaisinghani in Bangalore; Editing by Savio D'Souza and W Simon)