In the wake of disappointing earnings that sent shares tumbling 10 percent, Eaton CEO Sandy Cutler not only defended his company, but he charged the selloff was due, in part, to an obsession with inversion.
By, Cutler was referring to a phenomenon in which a company merges with a foreign firm, and then shifts income overseas to the nation with the lower corporate tax rate.
Speculation on the Street suggested that Eaton was planning to engage in inversion, by spinning out its vehicle division. Had it happened, the vehicle division would have immediately showed higher profits, simply due to lower taxes.
However, Cutler suggested the belief among Wall Street pros that Eaton would spinout its vehicle division was not only assumptive, it was complete unfounded.
"In every public setting, we've emphasized it was not our plan, nor our intent to divest our vehicle business," Cutler said on "Mad Money". "Unfortunately, there's been an inversion mania, in which a number of (professional) investors said it would make sense... That has never been our intent."
Nonetheless the assumption, led to a sharp selloff after earnings, in which Eaton effectively took potential off the table at least for 5 years.
Shares dropped from about $80 before the release to approximately $67.
"Yet, the story hasn't changed," Cutler added. "We hit revenue on the button and we exceeded earnings by 1 cent and we concluded painful settlements for two 10-year long pieces of litigation, and we sold 2 aerospace businesses successfully in the quarter, while still integrating our Cooper acquisition."
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Jim Cramer wasn't sure what to make of the circumstances. He quoted a downgrade from Goldman in which analysts said more disappointment could lie ahead in the second half. "We have lost some confidence…due to a series of missteps over the past 5 quarters," the analysts said.
"We understand the importance of execution," Cutler replied, "and we take it very seriously."
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