Eaton: A Great American Tech Company?

Eaton Chairman, CEO and President Sandy Cutler will be the first to say that his company has seen “quite a transformation” over the last eight years. Once known for its engines, this Cleveland, Ohio, industrial has diversified and gone international.

Just look at the numbers: About 70% of Eaton’s volumes come from its electric, aerospace and hydraulics divisions compared to 28% for its truck and autos divisions. This new portfolio of businesses has fueled earnings growth at a compounded rate of 22% over those aforementioned eight years. Just in the past 12 months alone, over 55% of revenues came from outside the U.S.

Like any great company, Eaton’s used acquisitions to fuel its growth. This past December, two takeovers – Germany’s Moeller Group and Taiwan’s Phoenixtec Power – took an already-strong domestic electric business and extended its footprint overseas. And this isn’t counting the nine other acquisitions Eaton did in 2007.

This year CEO Cutler expects top line growth of 25%, despite America’s economic woes, and 17% of that comes from these takeovers.

Why does Cramer like the stock so much? Technological innovation. In a time of high fuel prices, Eaton is taking hybrid engines to the next level. Instead of focusing on cars, it is building eco-friendly engines for much bigger vehicles like city busses and idling trucks. This type of forward thinking is the reason Cramer dubbed Eaton a “great American technology company.”

So forget about Advanced Micro Devices, Dell or Hewlett-Packard. Eaton’s the tech stock you want, Cramer said.

“That’s where all of the innovation’s coming from,” he said, “and [ETN] sells for half of the price of those bad tech stocks that you’re waiting for.”

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