A happy marriage of sustainability and stock market prosperity isn't some made-up storyline in a romance novel. Need proof? Consider Eaton, which reminds at least one analyst of Microsoft in a certain way.
The smart power management company is a true story about how building a business around products infused with sustainability DNA can equate to a powerful profit-making engine and winning investment.
Eaton's IBD technical and fundamental stock ratings combined with its strong Morningstar Sustainalytics climate management score put the company solidly atop our 2025 list of the 50 most sustainable companies.
Eaton offers investors a rare combination of bullish drivers. It designs electrical components that are green friendly. Plus, these products also happen to be sold to customers taking advantage of today's hottest secular growth trends.
Eaton Looks Ahead To Future Megatrends
Artificial intelligence? Check. Electrification? Check. Digitization? Check. Factory reshoring? Check. Data centers? Check. Clean energy transition? Check.
"Eaton's alignment to multiyear megatrends is steering earnings higher," said Jonathan Sakraida, an analyst at CFRA.
Eaton's low carbon transition score of 74.3 from Morningstar Sustainalytics ranks in the "strong" category. And it places near the top percentile for sustainability in Sustainalytics' Electrical Equipment industry group, ranking 35th out of 302 companies.
Eaton's sustainability chops, coupled with the robust returns it creates for shareholders, are what catapult it to the top of our list of most sustainable companies.
Eaton is on track to earn an estimated $12.05 per share in 2025, up nearly 12% from last year, and nearly double the $6.62 it made in 2021, according to Sakraida, who rates Eaton a "strong buy." And its sales are expected to grow 9.9% this year to $27.3 billion and another 9.4% to $29.9 billion in 2026, the analyst says.
Shares were up 13.7% through Oct. 9.
Read More About The Winning Stocks On Our Most Sustainable Companies List: Nvidia and Eli Lilly.
Eaton Diversifies Its End Markets
The company is at the intersection of powerful long-term trends, ranging from the build-out of AI to the rebuilding of the nation's aging and outdated electrical grid. Eaton's end markets are varied and diversified. The $144.5 billion industrial manufacturer makes parts and equipment for the data center, utility, industrial, commercial, machine-building, residential, aerospace, and e-mobility markets.
As demand for electricity takes off in the power-hungry digital age after more than a decade of slow growth, Eaton's growth runway grows longer, analysts say.
The company's focus on improving the environment and quality of life for people everywhere follows a simple game plan. Build products and parts that solve their customers' business problems. That means making energy usage less costly. More reliable, efficient and safe. And, of course, cleaner, says Harold Jones, Eaton's chief sustainability officer.
To Eaton, sustainability is more than a buzzword, says Jones. It's a business imperative.
"Sustainability is a very pragmatic thing," Jones told IBD. "You're trying to make things better. Yes, sustainability is about climate change and all of that, but it's good business. After all, business is about solving real problems."
Eaton helps preserve the environment by helping their customers in over 160 countries manage their energy needs more efficiently, says Jones.
Clean, Efficient, Safe, Reliable
"The core of our business is understanding what our customers need, and making sure we're addressing those needs for them," said Jones. "So, essentially, the way we think about sustainability is, this is what we do. It's about clean, efficient, safe, and reliable power."
The company is also taking steps to reduce its own carbon footprint and reports progress toward its goal. Eaton's goal is to reduce 50% of greenhouse emissions from its operations by 2030 and be net zero by 2050. Since 2018, it has reduced emissions by 35%, according to its 2024 Sustainability Report.
But what makes Eaton stand out when viewed through a sustainability lens, however, is that sustainability is part of their business strategy, says Jonathan Pragel, lead utilities and clean energy analyst at Calvert Research and Management, a leader in responsible and sustainable investing.
"Sustainability is more than a number or score," said Pragel. "Sustainability is a question of strategy. And Eaton is pursuing that strategy as well as anyone. What Eaton does is they sell solutions."
Eaton's business strategy and sustainability strategy are, in effect, serving the same goal, says Pragel.
"It's important to note that Eaton isn't pursuing sustainability as a side project," said Pragel. "This isn't a marketing effort. It's tied into the levers of value creation. When they are pursuing sustainability, they're growing, they're enhancing their markets, they're doing things that are creating value for their shareholders. And that's very powerful, and that's not easy to replicate."
New Products Focused On Impact
Two key statistics from Eaton's 2024 Sustainability Report highlight how committed the company is to producing components that will boost their customers' sustainability goals.
In 2024, three-quarters (76%) of net sales came from products and solutions that contribute to sustainability. And more than 90% of Eaton's top new product development programs started in 2021 enable a positive sustainability impact.
Back in 2020, Eaton made a commitment to invest $3 billion in sustainability solutions by 2030. It has invested $1.7 billion so far toward that research and development goal, according to its 2024 Sustainability Report.
A good example of Eaton meeting the growing demand for power solutions is its recent collaboration with chipmaker Nvidia to better manage power-hungry data centers. Eaton is enabling the shift to high-voltage direct current (HVDC) power infrastructure in AI data centers.
The upshot of the shift to HVDC, says Eaton's Jones, is that AI data centers have smaller odds of suffering some form of outage or electrical event that interrupts data processing.
"Data centers can't afford to go down," said Jones. "They measure themselves in uptime. So, by going to the HVDC structure, we now have more efficiency, we have more reliability, we have more protection for the data center."
Eaton Eyes AI Data Center Role
It's selling into growth markets like AI data centers that positions Eaton for continued growth, says CFRA's Sakraida.
"The sustainability story with Eaton has a lot to do with the markets they're selling into," said Sakraida. "They're really at the epicenter of these electrification trends, where in order for companies to electrify, lower their emissions, transition from fossil fuels, they're going to need Eaton products. So, they're helping the world decarbonize, lower their emissions, and electrify."
Sakraida says Eaton reminds him of Microsoft in that it has been able to reposition and reinvent itself as a leader in fast-growing areas of the economy.
"It's like Microsoft, where it's a value stock forever, and all of a sudden it wakes up and becomes a growth stock," said Sakraida. "It's hard to see that thesis getting derailed. There's too much momentum."
