Craig Arnold: I appreciate the question, Scott. And first of all, I would say that with respect to M&A more generally, we said our priorities will be Electrical. They will be Aerospace. And then on the margin, if we could find the right asset, we would consider an acquisition in eMobility as well. But I think the broader message for the company is that we have enormous growth opportunities in front of us, the organic opportunities that we’re looking at across the business and our ability to grow organically. And I’d say, today, there are just growth opportunities every place. And unlike perhaps some times past, we don’t need to do deals to significantly grow the company. And that’s true as well in eMobility. As you heard in Tom’s presentation, we just had another quarter of huge wins, $600 million, Tom, was the number, I believe, in terms of quarter-over-quarter change?
Tom Okray: Yes, yes. It’s up 25%.
Craig Arnold: So each one of these wins in eMobility just results in just enormous growth for the organization. And so we set this chart of being $2 billion to $4 billion by 2030. We will be selective. We will essentially – as we talked about in some of the prior conversations, we will make sure that we’re going to play in eMobility, where we have the ability to leverage our scale, our technology and the expertise in our core electrical business. That’s where we have the right to win. That’s where we have the right to play, and that’s where we can really deliver attractive margins for Eaton. And so that’s really strategically what we’re focused on with respect to the areas of interest that we have in eMobility.
So it really is about power distribution, power protection, doing the same things that we do in our core Electrical business. We get scale that we can leverage into eMobility at the same time, leverage that scale back into our core Electrical business. So I’d say today, you could expect us in terms of the thinking about M&A, tuck-ins, things that are very much digestible. Those are the kinds of opportunities we’re looking at in general, and those are the things today that I think makes sense for the company in terms of where we are today with respect to our organic growth opportunities in front of us.
Tom Okray: Yes. Just to add a little bit more. The long-term target, as Craig said and we said in the prepared remarks, up 25%. But even since last quarter, our mature year wins was up 145%. That said, we’ve got a ton of flexibility. Net leverage on the balance sheet, 1 5. So we’re always looking, but we do have a lot of food on the table, as Craig said.
Scott Davis: That’s helpful. And guys, just to back up a little bit. If you think about Eaton historically, had been a company that always manage price around raw materials, particularly kind of steel and copper. Is the algorithm more likely in the future going to be pricing around the value you’re adding or perhaps pricing kind of dislocates from the underlying commodities? Or is that just kind of a bridge too far from how kind of customers are conditioned?
Craig Arnold: Yes. I’d like to think, Scott, that we were always value pricing, but I think I get your broader message with respect to the whole market dynamics around price versus cost. And certainly, when you’re in a capacity-constrained market, it certainly gives you a bit more leverage than you’ve had historically. But I’d just say, in general, as we think about the strategy for the company is that we intend to earn our margin accretion by running our businesses better, by running the company better and eliminating waste and inefficiencies. And we will recover inflation where we see it through price. But the margin expansion for the company, we really intend to rely on volume leverage, improving operating efficiencies in the way we run the company.
And those opportunities, by the way, despite record profitability, as I said in my outbound commentary, those opportunities are everywhere. We’re still not running the company nearly as efficiently as we know we can.
Scott Davis: That’s very good. Helpful, thank you. Best of luck, guys. Thank you.
Craig Arnold: Thanks, Scott.
Operator: Thank you. Our next question is from Steve Tusa from JPMorgan. Please go ahead.
Steve Tusa: Hi, congrats on the good results.
Craig Arnold: Thank you, Steve.
Steve Tusa: Just trying to reconcile the $850 million in orders with I think you said 20% of the mega products have started. That’s obviously a pretty big number, but $850 million in orders is relatively small. I mean, I guess that just speaks to where you guys are, the thing starts and then you get the order. Like can you just reconcile those two numbers?
Craig Arnold: Yes. And it’s really – you really can’t necessarily recognize – reconcile those two numbers and – because a start doesn’t mean that we’ve even got an opportunity to bid the project yet much less a negotiation or a win. And so you really can’t reconcile those two numbers. And I know it’s such a big number and a very attractive one that everybody is trying to get their head around exactly how it’s going to impact revenue for the organization. But those two numbers, you really can’t reconcile them. What we’re trying to provide is a bit of a framework is this win rate of 40%, which is essentially slightly above our underlying market shares in North America as an indication of what you can expect as these projects play out into the future. But you really can’t link the 20% to the $850 million.
Steve Tusa: Well, I mean, I think you just did. You basically said it’s out in front of you. Yes. I think you just explained it. And then just one last one on the kind of stock and ship business, if you will. I know you guys do – you’re a bit more systems-oriented, but Hubbell today continue to talk about destocking, and there is a lot of other industrials talking about that. Are you guys seeing that in parts of your business, and you just kind of blowing through it because the other businesses, the supply-demand equation is just so strong that you’re kind of weathering some destock in some parts of the business? Maybe just talk about some of those flow businesses and what you’re seeing on the distribution side.
Craig Arnold: No, I think you’ve summarized it well. I mean, we are seeing very similar trends in some of the shorter-cycle businesses inside of our company, whether that’s residential or whether what we’re seeing today in the MOM segment or the IT channel. We, too, are seeing a slowdown. And we, too, are – experienced a bit of destocking in certain aspects of the business. And so that – those trends that others have talked about are certainly evident in our business as well. But I think you hit the nail on the head when you said that the other parts of the business, our systems and large project business, our data center business, the other pieces where we’re seeing the strength is just overwhelming those spots where we’re having this weakness.
Now in Europe, we talked about it in our commentary, we did see weakness in Europe. And those trends clearly showed up in our European Electrical business in the quarter. It’s one of the reasons why we reduced the guidance there. But by contrast, we had this really outside strength. And we continue to see outside strength in the systems and the project-related business in the Americas that offset the weakness in the flow business in North America as well as what we’ve seen in Europe.
