Eaton Corporation plc (ETN) Earnings Call Transcript & Summary

Good afternoon, everybody, and welcome to our next session. This is my last session of the 3-day tour, but I'm very excited to end it with Eaton. We have the Chairman and CEO, Craig Arnold here with us today. Craig, thanks so much for being here with us.

Joe, my pleasure. Always good to be with you.

So I know, Craig, I'm going to turn it over to you for maybe -- for you to just kick us off with a couple of minutes, and then we'll just go into Q&A right after. Does that work?

No, that's perfect. I appreciate the opportunity just to say a couple of words before we get into the formal Q&A. And I really want to take a couple of minutes to really provide a framework maybe for how investors can think about investing in Eaton, especially at this point in time. And I'll begin with kind of secular growth trends, which we think will be very favorable for our company for many years to come. First, it all begins with climate change, which is really driving this unprecedented level of government spending and regulations towards a low carbon.com and low-carbon infrastructure. As a result of that, we're seeing significant growth in renewal. Estimated that some 75% of new power generation will come from solar and wind over the next 30 years. This is leading to this thing we call this energy transition, which has resulted basically in more electrical content in everything from cars to buildings and almost anything that touches our lives. And distributed energy generation and resources what we call "Everything as a Grid" is the other kind of major trend that's very much tied to this as well as what we're seeing today in the digitalization of the economy, more intelligent products, driving explosive growth in data, the need for more data centers and the need for more edge computing and solutions to actually monetize the insights that comes off of this data. These are all kind of important trends that will help our company grow faster in the future than we have in the past. And so as a result of these growth prospects, we say, never been a better time to be an investor in Eaton. But each of these are certainly perfectly fitted into what we think about the company as being an intelligent power management company. Our internal plans, as you saw from our Investor Day, call for some 6% to 8% growth over the next 5 years. We've hedged that number back to 4% to 6% in terms of what we committed externally. So naturally, if things go well, there should be some upside to what we've laid out in our external case. You can also count on us to continue to expand margins. We've expanded margins of 600 basis points over the last 20 years or so, and you can count on this to continue as we move forward. And the commitment that we've laid out over the next 5 years is that we would expand our margins by another 400 to 500 basis points. We'll do this by continuing to really drive the Eaton business system, to improve our execution. We'll be delivering great operational execution in both our manufacturing plants and our functions. And then lastly, we'll continue to improve the portfolio, very much like what you've seen from us over the last couple of years or so. And lastly, you can count on us to wisely deploy capital. We generate very strong free cash flow. What we said is some $9 billion of free cash flow over the next 5 years or so, which gives us the ability to continue to invest in organic growth, to continue to pay a very strong dividend, to pursue value-creating acquisitions, which will be focused in our electrical and our aerospace business and then continue to buy back shares 1% to 2% a year. So each of these factors, when you put them all together, is really what gives us the confidence to say that we can deliver 11% to 13% per year earnings per share growth over the next 5 years. And so -- and at the midpoint of our guidance for this year, some 24% growth in our earnings per share. So -- to say it again, we don't think there's ever been a better time to be an investor in Eaton.

Should we just stop there? I mean that's a pretty good preamble. Well, look, I appreciate all those thoughts. It is an exciting time for your company. I'm sure everybody within the organization is invigorated to see what the next few years hold. Before we get into all the goodness, there is some badness, I guess, within the market these days with inflation and how it's impacting your business. I'm just curious, like how are you thinking about inflation for the rest of the year? What kind of impact did it have for you in the first quarter? And then what are some of the mitigating actions that you're taking to make sure you're staying ahead of this?

Yes. I appreciate the question and like the rest of the market we, too, are seeing fairly significant inflation in most parts of our business. And I will say that in the first quarter, our supply chain organization did an outstanding job of mitigating the impact. And so we really didn't see a big negative in our Q1 results. We also had some hedges in place. And so there were some things that we did as an organization that really mitigated the impact of inflation in our Q1 numbers. We certainly will see it hit kind of in earnest in Q2. And so we'll see probably the biggest impact for the year in our Q2, and that's already factored into the guidance that we provided. And then as we really roll out into Q3 and Q4, we'll have enough pricing momentum to, we think, cover inflation in our business. And so what we've always said is that we don't expect to -- for inflation to be a net positive or net negative in terms of the price versus the inflation trade-off that we're doing. But we think that we'll fully cover it during the course of the year, and that's what's baked into our guidance. And so yes, these are really challenging times. We're dealing with unprecedented levels of inflation. But I always say the good news in all of that is that, that means there's a lot of economic activity. And our businesses are seeing the benefit of that and so we think we'll certainly manage through this well. And we think it's probably more of a positive indicator of the underlying strength of the global economy than it is anything else. And we think on net nobody ever likes to deal with inflation, but we think on balance, it's probably a good thing.

Yes. No, that's -- you're right. And I think in a lot of your -- a lot of your customers sure don't love getting price increases, but it seems like everybody understands kind of the environment that we're in right now, and there's been some receptivity to that. Part of the problems, I guess, that we're kind of seeing right now, it's a good -- I guess, good problems to have with the growth that we're expected to see is having enough labor availability to meet that growth. The jobs number, last week, disappointed. I'm just curious, as you're thinking about your own business or your own customers, are you seeing any constraints from a labor standpoint at this point?

Yes. I can say, we really have not -- and it's something that we're monitoring closely because we obviously are reading the same economic data that you're -- reading the same headlines that you're reading. But I say to date, we really have not had any significant issues around labor to essentially run our manufacturing facilities in any of our support front. So I think one of the things that makes us a little different, perhaps from some of these other industries is that we never shut down. We are in one of these deemed essential industries. And so our employees continue to come to work throughout the pandemic. And so we don't have to go through this massive rehiring cycle that many of these companies who were struggling to find labor are dealing with. And then also, certainly, in the manufacturing sector, we generally pay a higher wage than perhaps many of these other industries who are struggling to find talent. And so to date, things are looking just fine. No issues finding labor, but obviously, we continue to watch it and make sure that we stay on top of it.

That makes sense. And that's great to hear. I guess, shifting back to growth, right? And look, your -- you saw some pretty good order momentum in the first quarter. I'd love to just get a little bit more color, what are some of the end markets that drove that momentum? Do you think that there is any significant kind of prebuy just in advance of the price increases that were expected? Just any thoughts around that would be helpful.

Yes. I'd say that we talked about this kind of pattern that we saw during the course of Q1, which is really, there's a number of markets that are strong and probably have even strengthened. If you think about what happened in residential markets, what happened in data center markets. And quite frankly, even what happened in some of the industrial markets. Markets really, I'd say, we expect them to be fairly strong during the course of the year and probably came in even stronger in Q1. The big question as it relates to our business is often around what's happening in what we call commercial and institutional. And if you recall that some 20% of our electrical business goes into this commercial -- 29% goes into commercial and institutional, some 20% goes into commercial. And then within commercial, 1/3 of it is aftermarket and then of the 2/3 that's remaining, you have some segments that are doing well, segments like warehousing, which is booming right now. And even there, I would tell you, as we look during the course of the quarter, even the commercial markets, retail and the like, saw a little bit of strengthening towards the end of the quarter and into April. And so I would say today that we're feeling incrementally better certainly than we had -- we were in the beginning of the year around how all of these markets are going to perform and have performed. And you think about some markets that really are booming. We talked about data center, residential. But also markets like wastewater, water -- wastewater, orders up some 60-plus percent in Q1. And so there's a number of these markets that we say are certainly inflecting quite positively. One of the things that we look at specifically what proceeds in order is a negotiation, and we track negotiations in our business. And so in our negotiations, through, let's say, the month of April we're actually up some 8% versus last year, all in, including commercial. And so we think markets are really performing very well right now, and there's certainly reason for optimism. Obviously, we're not going to get ahead of ourselves. But right now, things feel like they're trending a little better than what we thought.

That's great. So that negotiation number is a good one. I'd be curious, like when you look at some of the end markets that perhaps are just starting to maybe see some green shoots and have lagged here in some of those commercial end markets that you talked about. I know you guys look at a bunch of economic indicators as well. Whether it's like the ABI or the momentum index, the starts. How do you think about like when your business tends to inflect with some of the more macro indicators that are out there?

Yes. I appreciate that. And we're looking at all of the same indicators that you articulated. And they're all indicators for us. The architectural billing index, which is something that we do track, you mentioned that one. That's a good indicator of what's happening in the planning stages. And those numbers, as you saw from the data are inflecting positively. We look at the C-30 report. So we obviously look at Dodge data in terms of starts. And we obviously -- our negotiations are a really good indicator. And so I would say that what we're generally finding when you step back from all these different data sets, both internal and external, you can see that markets are clearly trending in a favorable direction. And some with really standout numbers. We talked about resi. We talked about data centers. We talked about places like wastewater. But even in some of the large industrial projects within our negotiations, we look at commercial projects and we look at the large industrial projects. And the large industrial projects are the ones that are really coming back at least in terms of negotiations quite strongly right now, which bodes well for the company as well.

That's great. So when you think about that, and we've been really kind of honing in here on the electrical markets and the improvement that we're seeing there. And if you go back to the conversation we just had around price cost. How are -- like when you think about what you're realizing from a pricing perspective in your electrical business, how does that differ today versus what you've been able to realize in the past? And again, going back to that comment I made around like your customers being receptive to price increases, like how are those conversations happening today?

Yes. As you articulated so rightly, Joe, it's never an easy conversation. And customers, generally speaking, don't like price increases. But I do think there is an understanding and an acknowledgment of almost irrefutable data, right? In normal data streams that we see and our cost to stream that we are in an inflationary environment and in many cases, hyperinflationary environment. When you look at some of the key commodities that are important for us, steel, copper, aluminum, silver, I mean these commodities are really, in many ways, trading at record high levels right now, and in some cases, up more than 100% from prior year. And so I think the reality is nobody likes it. But the whole market, we think, is going to need to move. And we would expect and hope that our customers are able to pass it forward into the marketplace as well. Because it -- these increases are just way too big for any company to absorb. And so I'd say that for us, we don't expect in this environment to get an incremental on top of this kind of hyperinflation, but we do expect to cover the cost of inflation. And that's what's really factored into the guidance that we laid out that, that we're going to recover the cost inflation. We're obviously doing the things that we can do internally to get cost out, to negotiate with suppliers, but so many of these commodities, it's either if you want goods, you want material, this is the price. And we really don't have any option other than to pay much higher prices. And so we do think in this environment, it's never easy. But we do think in this environment, it's perfectly understandable why we and others are having to go to marketplace and get price.

Makes sense. One of the topics that has come up a lot the last 3 days has been inventory levels. And particularly within the industrial channel, we can talk about the electrical channel as well, obviously, would love your input there. It just seems like distributors might be playing catch up, but could be playing catch up for multiple quarters. I'm just curious to hear your thoughts on that across your end markets.

Yes. No, I appreciate it. And I will say that -- on balance, I would say we wish we had more inventory, our distributors wish they had more inventory, especially in markets like residential and in some of the industrial OEM markets serving manufacturing. Clearly, they were hand of mouth today in inventory and in some cases, lead times have pushed out as well. So on balance, I'd say we've not yet put our distributors and customers in a position where they can rebuild inventories. So we think inventories today are probably running a little tighter than where our customers and distributors would like them to be. And will probably be that way for probably at least a number of quarters to come and depending upon what the outlook is for these markets. And as these markets continue to ramp, it will be a little bit of a challenge to catch it. But so far, we think we're helping our customers, and we don't think we're losing the -- our customers are losing business as a result of it. We're all in this together. Everybody's lead times have stretched out. But it is clearly hand to mouth right now.

Makes sense. You mentioned -- you touched on the supply chain constraints earlier and how you're managing that situation well. Just in the context, and I guess we're dancing around it a little bit because we're talking about all the inputs without actually really talking about the output. So maybe just some color around supply chain, how you're managing the constraints? And then also, as you think about your incremental margins for the year, how does this all translate into incremental margins in 2021?

Yes. And I'd say today, we do have selective restraints in the supply chain. Everybody's read about what's going on with semiconductors, and that's certainly having an impact more so in our vehicle business than any place else, but also we're being impacted to some extent in our electrical business with semiconductors. So it's stretching lead times out a little bit and stretching the inventory perhaps a little bit more than we'd like to be at this point. But I'd say, by and large, in our electrical business, we're managing through it in terms of some of these inventory challenges, outside of what's happening largely in residential. In the residential data and what's going on in the resi markets, it's just -- sales are off the charts, and we're just struggling to keep up there. But by and large, I'd say our teams are managing well in a really difficult environment. And so what you see reflected in our incremental margins is roughly -- it's about a 30% incremental is what -- is reflected in our current guidance. Obviously, it could be better but for the inflation that we're seeing and the fact that we're not getting the normal incremental on top of all this material inflation that we're seeing in our business. But nonetheless, a 30% incremental, not bad for this point in the cycle, 24% earnings per share growth this year. And so we think we're well positioned to have a very strong year, but it could be better. But for some of the supply chain constraints and some of the inflation that we're seeing in the system.

Yes, that makes sense. We'll expect it to be better, I guess, next year. Hopefully, if we get a more stable inflationary backdrop. But I'm getting a question from the audience on cash flow and particularly around M&A. You guys have been active to start the year. We've got some pending deals that are -- that we're still waiting to close. But this person is asking around capital allocation for '21 and into 2022. And basically, as you think about your framework, it seems like you'll have, call it, $0.5 billion in excess cash flow at the end of the year. Add to that what you already have on your balance sheet and it's roughly $2 billion in cash. How are you just thinking about the priorities? And then also -- you could also potentially prefund some of your maturities. So how are you thinking about capital allocation in that context?

Yes. No, I'd say that our viewpoint really hasn't changed. We've always said and we continue to believe that our first priority inside of the company is to make sure that we're investing in organic growth to make sure that every one of our businesses have the capital that they need to grow our businesses organically. And we will be putting more dollars towards organic growth as we think about kind of what we're doing into the future and really to participate in these really big secular growth trends that we're seeing in every place. But in the context of M&A, I'd say that we are seeing a much better deal pipeline today than we were certainly a year ago. We've been fortunate to close a number of deals and announce a few others that we think are just tremendous deals that will be strategically well positioning the company to participate in some of these growth trends, and we look forward to getting the 3 that are yet to be closed-closed. And so -- but even with those deals kind of behind us, we have more capacity as an organization to do more deals. We have obviously nothing to announce today. But we continue to look and continue to have conversations and continue to think that we'll be able to create value as a company by redeploying capital into value-creating M&A.

Yes. Craig, it's interesting. You're one of the few companies that I cover that went out and did an aero deal, right? And arguably a very, very good time in the cycle to do it. You've heard a few other companies start to talk about that. When you think about your prioritization, whether it's electrical versus aero, how are you thinking about like where we are in the cycle for both? I guess -- I know you're pretty bullish on both, but just how are you thinking about prioritizing that next dollar of capital?

Yes. I think the good thing for us is, I don't -- we've not yet been in a position where we had to make the trade-off, right? To your point, we have a lot of firepower, and we have the ability to lever up if we needed to, to even go beyond the numbers that you articulated. So we are fortunately unfortunately not been in a position where we had to make this trade-off between our electrical and our aerospace businesses and the way deals just naturally flow, we have the capacity to essentially do the things that we think makes sense. The Cobham deal that you mentioned in aerospace. We love that deal. We love the multiple. We love the fact that it's largely a defense business. We love the fact that it's a growth business. I mean, when you look at simply the book of business that they've already won, and the content that will grow, that business grows very nicely over the next few years. And so despite the fact that we're in a downturn on the commercial side of aerospace, on the defense side, specifically for this particular business and so much of what you do in aerospace, it's platform dependent. If you're on the right platforms at the right time, you can see tremendous growth despite the fact that the markets and the defense markets, we think are going to grow kind of low single digit. That business is going to grow a lot faster than that based upon platforms that they've already won and the growth of those -- their content on those platforms. And so we continue to like aerospace. We like the structure of the industry. It is an industry today where the paper technology. If you've run a platform for a very long time, it has a very wide moat, barriers to entry. And you made tremendous margins in the aftermarket. So we like the characteristics of that industry. And so we'll continue to look at that. But clearly, our biggest business is electric. I mean it accounts for somewhat 60-plus percent of the company. It's really tied very directly to these important secular growth trends. And so you can just naturally expect that most of the dollars will go to our electrical business.

We're 25-minutes into our discussion, and we haven't really even discussed the secular growth trends at this point. It's worth having at least a few minutes on it. What kind of momentum are you seeing across the initiatives, like whether it's your digital initiatives, the energy transition. Maybe provide some color for us on how you're feeling about those initiatives today?

Yes. I can tell you, every week, every day, we feel better and better about it in terms of there's another data point out there that really reinforces how important these secular trends are in terms of validating the importance of them. Certainly, you saw the EPA report recently around climate change. That just came out, which says it's much worse then certainly we have reported from a U.S. perspective. Already a number of the communities being impacted. So what we're seeing is it all begins with kind of this climate change piece and how that's driving growth in renewables, have the growth in renewables. It's changing the nature of the grid to this -- everything is a grid environment. And so -- and our businesses throughout the first 4 months of the year, have done very well. I mean, we're getting lots of orders. We're getting lots of customer inquiries. And so we're very pleased with our rate of progress on the energy transition work, the distributed energy resources and the microgrid work that we're doing as an organization. And then just the fact that more electrical content and everything. Whether it's a home or building or a factory, every time they put in a new solar facility, that drives incremental electrical equipment. You put in a piece of solar. Now you have the ability to take that piece of solar and create a microgrid to sell energy back to the grid. A lot of the work that we're doing today as we talk about in data centers with customers like Microsoft where they're taking their data centers through what we call our EnergyAware UPS. And then they're being able to sell services back to the grid to do things like frequency regulation. So we're absolutely thrilled that we're in the right spot. We're riding the right waves, and our businesses are doing everything they can do to keep up with all the inquiries right now.

Yes. That all sounds really promising. And congratulations on that and being in the right spot and putting yourselves in the right spot. Talk about being in the right spot. I mean, we haven't even talked about stimulus yet. There's been some measures that have already been passed. There's obviously the proposed measures that are coming through. Any just -- any thoughts on how Eaton will benefit from already passed measures and then what's being proposed?

Yes. And the already passed measures are naturally baked into our guidance already and our outlook. I mean, largely around just stimulating the overall economy, and we're obviously getting a secular benefit from that. The big stuff that's been proposed by the Biden administration around infrastructure spending, it really does, in many ways, depend upon where it goes. If it's going into roads and bridges, naturally, that doesn't impact our company much. But if it's going into anything related to renewables, energy transition, electrification of the infrastructure to support charging of vehicles. It's going into the reduction in the environmental footprint of buildings and the like, all of those things are absolutely right down mainstream for us. And those things, we think we have a great growth story without it. And with the addition of Stimulus bill, that's tied to infrastructure that's consistent with our businesses, and it just accelerates our growth. And so we think that just becomes upside on top of an already attractive growth story.

So good segue there, right? You did an acquisition recently on Green Motion. And I know that you've put out some targets around, I think it was like $700 million to $1.2 billion in EV charging infrastructure revenues. How does Green Motion change that target for 2030 or help accelerate that target?

Yes. Yes. And actually, the way to think about it, at least the way we're looking at it, is it de-risks kind of the plan. As we -- as Uday Yadav talked about in the investor meeting, we were already partnering with Green Motion So from a revenue standpoint than we were already counting on some of this with respect to how we were going to partner with them and take their solutions into our markets. So the acquisition of Green Motion takes a lot of risk out of that plan with respect to our ability to execute. And certainly, it should accelerate the rate at which we get to kind of these levels of revenue activity and maybe pull it in by some number of years, which I've yet to get my team to commit to, by the way, but we're working on that. But it's obviously going to be all good. I mean it's -- today, they have a great solution for the European market. We're going to take their technology around charging infrastructure and also play these charging, and we'll bring that to the North America market. And so it's really a validation of the strategy in terms of the things that we think are important to drive future growth in the company.

Makes sense. Maybe shifting gears a little bit. Reassuring was a big theme a year ago. That didn't really materialize I think the way that folks thought it could potentially come at this juncture. But you're starting to see a lot more momentum behind it with -- especially with some of the semi-fabs that are now going to be built. Can you just maybe help us understand, like, is this an opportunity for you? How much will you guys -- how much opportunity is there for you on the semi-fab side and for reassuring specifically?

Yes. It's another one of those potential growth accelerators that we don't have baked into our base case. It's tough to really quantify how big or how much restoring will take place. We too are very much involved in these number of very large semiconductor projects that have been announced in the U.S. And obviously, it's the one region of the world where we have the highest market share. And so anything that ends up touching reassuring in any way should be -- really benefit the overall growth rate of the company as we get our normal share of the U.S. market. And these kinds of products tend to be more electrical intense than traditional commercial project, as an example. And so we are excited about those opportunities, specifically in semiconductors. We're obviously all over those. In terms of looking at opportunities to win at least our fair share of those businesses. But the broader opportunity of reassuring, I'd say, we'll see what happens with that. And to what extent some of the changes being -- by the Biden administration accelerate that. We think probably a good chance that it will. But those once again become upside to our base case anyway. Tough to really quantify today, how much of that's going to take place and at what rate.

It makes sense. Speaking of something that's tough to quantify, just commercial aero. I'd love to get your thoughts. Typically doesn't -- folks will want to talk to you -- talk about it with you guys, but I know it's a secondary end market for you. But I'm just -- I'm curious, like do you have any more bullish or bearish on the recovery in commercial aero, maybe even relative to your own guidance?

Yes. So what we -- as a part of guidance, we essentially held our guidance flat in commercial aerospace. We took up the guidance in most of our other businesses as a part of our Q1 earnings call. And I'd say it really very much depends upon what region of the world that you're in. And you've seen the data that I've seen, if you're in the domestic U.S. market, that market is coming back nicely. You look at traffic through sort of the TSA data, some of the planning that's going on today with respect to commercial markets in places like the U.S. and China, those markets are doing quite well and recovering. Maybe even will come back faster than what we anticipated. The picture in Europe, the picture in other regions of Southeast Asia and India, obviously, with the second, third wave of COVID-19 hitting some of these economies quite hard, the picture is quite different there. And so I say it's largely a mixed bag with respect to what's going on in commercial aerospace, which we said, "hey, given the puts and the takes, we think our view of the year is largely in line with our original expectation. We still think the market is likely a '23, '24 recovery story, is our perspective on when commercial aerospace really comes back. And as you think about the OE versus aftermarket piece, the aftermarket typically lags OE by a couple of quarters. And so we'll see it first in OE and the demand on the original equipment side of the business, and then it will show up in the aftermarket. But at this point, still optimistic. I mean, the reality is people haven't changed. I think the amount of pent-up demand is just extraordinary. We see it here in the U.S. And so I think as soon as we get through this COVID-19 pandemic, I think I personally would believe you that this industry is going to go through a pretty significant V-shaped recovery.

Great. A couple of last ones for you, Craig, and I appreciate all the time already. But as we think about -- we may as well touch on vehicle. You took up your guidance there to 16% to 18%. I guess, the 2 follow-ons there is how much of that came from Class 8 versus the light vehicle market? And then also, like you're already starting to build, do you think you have some backlog for 2022, just given how strong the order rates have been for Class 8?

Yes. I mean, no question. Class 8 has been just extraordinarily strong. I mean, production was up some 12% in Q1, but the orders, at least through April, I think the orders were up close to 300%. And our call on the year is roughly a 30% -- 36% increase in North America Class 8 truck, which is obviously the most important market for us. And so yes, the market is doing extraordinarily well at this point in time. There are already -- many of the build slots for this year are already filled. They're already booking orders for next year. And so I think, absolutely, we expect that this market will be strong, certainly, again, going into 2022. And even this year, by the way, the market would be even stronger if there weren't supply chain constraints. The big issue right now is that industry as well as light vehicles really being impacted by the semiconductor issue that we're facing right now. And so lots of strength across the board in the commercial vehicle market, not only in the U.S., but really around the world. China, Europe, South America, every commercial vehicle market really in the world right now is doing very well. In light vehicle, as you saw the SAAR for April, 18.5 million cars in the U.S., running really at record high levels in terms of what was actually sold in April. Inventory levels down to 32 days of inventory, levels that I don't know that we've ever been at. The industry typically likes to run it about 70 to 75 days of inventory. So I'd say, yes, it's another market where we think the light vehicle market is well positioned to have a very good run here for the next few years. And you look at consumer savings levels, consumer saving levels, once again, at record high levels in the U.S. And so we think also light vehicle markets are well positioned to perform well for at least another few years or so.

That's great. Ending with one last one, and this one came from the audience. It is a question that I get frequently from investors. So it's a good one to end on. You take a look at your long-term guidance, your organic growth guide of 4% to 6%. And when you think about what you're going to accomplish in 2021 above that number, the question is like longer term, does the growth formula hold up? So from like 2022 to 2025, given all of these not only cyclical inflections that we're seeing but secular opportunities, is it your presumption at this point that the next few years could be still within that 4% to 6% range?

Yes. I'd say, absolutely. I mean, I'd say, once again, as I articulated in kind of my opening commentary, we have -- our businesses are running after numbers that are even higher than that. As we reported in our investor meeting, their numbers would be more in the 6% to 8% range. We've hedged that back because we all know things happen in life. And so we've kind of hedged that back to 4% to 6% in our external commitment. But yes, we think these secular growth trends that we're talking about, in many ways, we're at the very front end of these secular growth trends. And the real power and growth that these trends will deliver really haven't begun to kick in yet. And you think about today, the growth of electric vehicles and the penetration of electric vehicles. I think -- and we're running maybe 3% to 5%, depending upon the numbers around the world. But once you get to electrical vehicle penetration rate that's in the 15%, 20%, 25%, once you really get more renewable energy you brought online. Once you start to really see businesses and taking advantage of the ability to generate and sell power back to the grid. Many of these secular growth trends that we talked about, we're just in the early innings. And so I don't see any reason while over the next 5 years, that the growth rate should be very attractive.

Craig, it's a great place to end my 3 days as well. I really appreciate the time that you spent with us today and for all those that are listening, hope you have a great rest of your week, and thanks again for participating.

Thank you. Always a pleasure to be with you and share our story. Best time ever. There's never been a better time to invest in Eaton.

Take care. Thank you.

All right.