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Mark Duncan, Associated Press
This Jan. 25, 2012 photo, shows large, stainless steel, hydraulic couplings at the Eaton Corp. plant in Berea, Ohio. Eaton Corp.'s fourth-quarter earnings surged 29 percent, helped by a 10 percent revenue increase despite slowdowns in key global markets, the diversified manufacturer reported Thursday.

CLEVELAND — Eaton Corp. said Thursday that fourth-quarter earnings surged 29 percent, helped by a 10 percent revenue increase despite slowdowns in key markets.

Still, revenue fell short of the manufacturer's expectations in December, results missed Wall Street estimates and Eaton's shares fell 2.5 percent in afternoon trading.

The company, which makes electrical, hydraulic and transmission systems for the auto and space industries and military, said U.S. customers delayed shipments of major products, while the weak European economy and tight credit in China also hurt revenue growth. About 75 percent of problems were in its Electrical division.

Eaton said that was partially offset by a lower tax rate and better operating margins — how much revenue a company keeps after accounting for costs.

"We believe that many of the factors behind the shortfall in fourth quarter revenues are temporary and, as a result, should not have a significant impact on 2012 revenues," said Chairman and CEO Alexander Cutler.

In a conference call with analysts, Cutler gave an evolving outlook on the global economy.

"We're expecting a year of slow global growth on the order of 2 percent GDP," he said. Recently Eaton has become more optimistic on the U.S. economy, he said, while Europe and developing countries look weaker than they did three months ago.

The global economic volatility underscores the need for agile managers, Cutler said in a phone interview.

"Your leaders have got to be just in touch on a daily basis with what's happening on their end markets and they've got to be able to turn and spin fairly quickly," he said. "We have to have both a plan A and a plan B and a plan C in case the operating environment starts to change."

The Cleveland company reported net income rose to $362 million, or $1.07 per share, in the last three months of 2011, up from $280 million, or 82 cents per share, a year earlier.

Excluding charges, the company earned $1.08 per share. Analysts expected adjusted earnings of $1.11 per share.

Its revenue rose to $4.03 billion from $3.66 billion a year ago. Analysts expected revenue of $4.14 billion.

For all of 2011, Eaton earned $1.35 billion, or $3.93 per share, up from $929 million, or $2.73 per share, a year ago. Revenue rose to $16 billion from $13.7 billion.

Eaton also said its board declared a 12 percent increase in its dividend to 38 cents from 34 cents per share. It is payable Feb. 24 to shareholders of record on Feb. 6.

Its shares slipped $1.19 to $48.35.

Online: http://eaton.com