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Milwaukee, Wisconsin-based A.O. Smith Corporation (AOS) manufactures residential and commercial gas and electric water heaters, boilers, heat pumps, tanks, and water treatment products. With a market cap of $12.1 billion, A.O. Smith’s operations span various countries in North America, Europe, and Asia.
A.O. Smith has underperformed the broader market over the past year. Over the past 52 weeks, AOS gained 18%, lagging behind the S&P 500 Index’s ($SPX) 27% returns during the same time frame. In 2024, AOS is up marginally compared to SPX’s 18.1% gains on a YTD basis.
Zooming in further, AOS has underperformed the S&P 500 Industrial Sector SPDR’s (XLI) 20.9% returns over the past 52 weeks and 13.4% gains on a YTD basis.
Shares of A.O. Smith plunged 9.4% following its Q2 earnings release on Jul. 23. The company reported an EPS of $1.06, slightly missing the consensus estimate of $1.07. Despite this, A.O. Smith saw a 6.6% annual growth in net sales, reaching $1 billion and exceeding Wall Street expectations. Sales in the North America segment rose 9% to $790.7 million, driven by higher volumes of water heaters and commercial boilers, along with effective pricing actions. Meanwhile, sales in India surged 16% in local currency in 2024 due to strong demand. Although the stock dipped initially, it rebounded quickly and remained in the green for the next three trading sessions.
For the current fiscal year, ending in December, analysts expect A.O. Smith to report an EPS growth of 6.8% to $4.07. The company’s earnings surprise history is mixed. It surpassed the consensus estimates in three of the past four quarters while missing on another occasion.
Among the 12 analysts covering the AOS stock, the consensus rating is a “Hold.” That’s based on three “Strong Buy” ratings, seven “Holds,” and two “Strong Sells.”
This configuration is slightly more bullish than two months ago when two analysts recommended “Strong Buys.”
On Jul. 24, Stifel analyst Nathan Jones upgraded to a “Buy” rating with a price target of $98 – also the Street-high target, indicating a potential upside of 18.7%.
AOS’ mean price target of $87.62 represents a premium of 6.2% from current price levels.
On the date of publication, Aditya Sarawgi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
