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Eaton Corp PLC (NYSE:ETN)
Altman Z-Score
1.98 (As of Today)

Eaton Corp PLC has a Z-score of 1.98, indicating it is in Grey Zones. This implies that Eaton Corp PLC is in some kind of financial stress. If it is below 1.81, the company may faces bankrupcy risk.

The zones of discrimination were as such:

When Z-Score is less than 1.81, it is in Distress” Zones.
When Z-Score is greater than 2.99, it is in Safe Zones.
When Z-Score is between 1.81 and 2.99, it is in Grey” Zones.

ETN' s 10-Year Altman Z-Score Range
Min: 1.51   Max: 3.43
Current: 1.97

1.51
3.43

During the past 13 years, Eaton Corp PLC's highest Altman Z-Score was 3.43. The lowest was 1.51. And the median was 2.37.


Definition

Z-Score model is an accurate forecaster of failure up to two years prior to distress. It can be considered the assessment of the distress of industrial corporations.

Eaton Corp PLC's Altman Z-Score for today is calculated with this formula:

Z=1.2*X1+1.4*X2+3.3*X3+0.6*X4+1.0*X5
=1.2*0.1006+1.4*0+3.3*0.0462+0.6*1.7444+1.0*0.6576
=1.98

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Trailing Twelve Months (TTM) ended in Sep. 2014:
Total Assets was $34,239 Mil.
Total Current Assets was $8,431 Mil.
Total Current Liabilities was $4,986 Mil.
Retained Earnings was $0 Mil.
Pretax Income was 642 + 57 + 453 + 429 = $1,581 Mil.
Interest Expense was 0 + 0 + 0 + 0 = $0 Mil.
Revenue was 5728 + 5767 + 5492 + 5527 = $22,514 Mil.
Market Capitalization (Today) was $30,792 Mil.
Total Liabilities was $17,652 Mil.

X1=Working Capital/Total Assets
=(Total Current Assets - Total Current Liabilities)/Total Assets
=(8431 - 4986)/34239
=0.1006

X3=Earnings Before Interest and Taxes/Total Assets
=(Pretax Income + Interest Expense)/Total Assets
=(1581 + 0)/34239
=0.0462

X4=Market Value Equity/Book Value of Total Liabilities
=Market Capitalization/Total Liabilities
=30792.000/17652
=1.7444

X5=Revenue/Total Assets
=22514/34239
=0.6576

The zones of discrimination were as such:

Distress” Zones - 1.81 < “Grey” Zones < 2.99 - “Safe” Zones

Eaton Corp PLC has a Z-score of 1.98 indicating it is in Grey Zones.

Study by Altman found that companies that are in Distress Zone have more than 80% of chances of bankruptcy in two years.


Explanation

X1: The Working Capital/Total Assets (WC/TA) ratio is a measure of the net liquid assets of the firm relative to the total capitalization. Working capital is defined as the difference between current assets and current liabilities. Ordinarily, a firm experiencing consistent operating losses will have shrinking current assets in relation to total assets. Altman found this one proved to be the most valuable liquidity ratio comparing with the current ratio and the quick ratio. This is however the least significant of the five factors.

X2: Retained Earnings/Total Assets: the RE/TA ratio measures the leverage of a firm. Retained earnings is the account which reports the total amount of reinvested earnings and/or losses of a firm over its entire life. Those firms with high RE, relative to TA, have financed their assets through retention of profits and have not utilized as much debt.

X3, Earnings Before Interest and Taxes/Total Assets (EBIT/TA): This ratio is a measure of the true productivity of the firm’s assets, independent of any tax or leverage factors. Since a firm's ultimate existence is based on the earning power of its assets, this ratio appears to be particularly appropriate for studies dealing with corporate failure. This ratio continually outperforms other profitability measures, including cash flow.

X4, Market Value of Equity/Book Value of Total Liabilities (MVE/TL): The measure shows how much the firm’s assets can decline in value (measured by market value of equity plus debt) before the liabilities exceed the assets and the firm becomes insolvent.

X5, Revenue/Total Assets (S/TA): The capital-turnover ratio is a standard financial ratio illustrating the sales generating ability of the firm’s assets.

Read more about Altman Z-score and the original research.


Be Aware

Z score does not apply to financial companies.


Related Terms

Total Assets, Total Current Assets, Total Current Liabilities, Retained Earnings, Pretax Income, Interest Expense, Revenue, Market Capitalization, Total Liabilities, Financial Strength


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Eaton Corp PLC Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
X1 0.10140.05970.09790.08250.0630.11270.13180.12250.06660.1075
X2 0.23270.23250.24490.24250.23520.23780.25780.28520.1620.1934
X3 0.09330.10320.09410.07750.06840.02780.06790.09350.04070.0607
X4 2.00981.54181.54281.71990.79441.11241.74441.39911.23221.9339
X5 1.07021.06421.07140.97040.92320.72920.7950.89790.45550.6212
Z-score 3.032.732.772.702.031.962.582.591.642.38
Zones Safe ZonesGrey ZonesGrey ZonesGrey ZonesGrey ZonesGrey ZonesGrey ZonesGrey ZonesDistress” ZonesGrey Zones

Eaton Corp PLC Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
X1 0.13670.13230.06660.09410.09210.10510.10750.110.09350.1006
X2 000.1620000.1934000
X3 0.09280.08930.04070.0440.0480.05270.0590.05870.04320.0462
X4 1.26021.50981.23221.46281.56961.69771.93391.96492.00971.7038
X5 0.87230.85160.45550.50490.54440.59050.62120.63040.63510.6576
Z-score 2.102.211.641.641.761.912.382.142.101.95
Zones Grey ZonesGrey ZonesDistress” ZonesDistress” ZonesDistress” ZonesGrey ZonesGrey ZonesGrey ZonesGrey ZonesGrey Zones
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