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Here's Why You Should Add A. O. Smith (AOS) to Your Portfolio
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A. O. Smith Corporation (AOS - Free Report) is poised to benefit from strength across its businesses, acquired assets, healthy liquidity position and focus on operational excellence. The company remains committed to investing in growth opportunities and strengthening its long-term market position.
This Zacks Rank #2 (Buy) company has a market capitalization of $11.8 billion. Over the past year, the stock has risen 11.2%. However, both the stock and the industry have declined 1.3% in the past month.
Image Source: Zacks Investment Research
Let’s delve into the factors that have been aiding the firm for a while now.
Business Strength: A. O. Smith has been witnessing solid demand for its water heater products and higher shipments in North America. The company expects sales from both the North American boiler and water treatment businesses to increase about 8-10% year over year in 2024. Also, healthy demand for tankless water heaters and kitchen appliance products in China has been supporting the Rest of the World business.
Driven by strong demand for its products, management has issued bullish guidance. A. O. Smith forecasts sales to increase approximately 3-5% from the prior-year levels in 2024. It estimates adjusted earnings in the band of $3.90-$4.15 per share in the year, implying growth of 5.6% at the midpoint from the year-earlier figure.
Acquisition Benefits: AOS remains focused on acquiring businesses to gain access to new customers, regions and product lines. In the first quarter of 2024, AOS acquired a California-based water treatment company, Impact Water Products. The buyout is expected to expand its water treatment business in the West Coast region. Also, the acquisition of Atlantic Filter in June 2022 enhanced its position in the water treatment industry and strengthened its customer base in Florida and the adjacent regions.
Shareholder-Friendly Policies: Management is committed to rewarding shareholders through dividend payouts and share repurchases. In the first quarter, it paid dividends worth $47.3 million and repurchased shares worth $74.5 million. In October 2023, it hiked its dividend by 7% to 32 cents per share.
Strong Liquidity Position: The company’s sound liquidity position adds to its strength. It exited the first quarter with cash and cash equivalents of $251.6 million, higher than the total debt of $119.7 million. This implies that it has sufficient cash to meet its debt obligations.
Other Key Picks
Some other top-ranked stocks from the same space are presented below.
ENS delivered a trailing four-quarter average earnings surprise of 2.7%. In the past 60 days, the Zacks Consensus Estimate for Enersys’ fiscal 2025 (ending March 2025) earnings has increased 3.9%.
Emerson Electric Co. (EMR - Free Report) presently carries a Zacks Rank of 2. EMR delivered a trailing four-quarter average earnings surprise of 10.7%. In the past 60 days, the Zacks Consensus Estimate for its 2024 earnings has risen 1.3%.
ESCO Technologies Inc. (ESE - Free Report) carries a Zacks Rank #2 at present. In the past 60 days, the Zacks Consensus Estimate for ESE’s fiscal 2024 (ending September 2024) earnings has advanced 0.5%.
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Here's Why You Should Add A. O. Smith (AOS) to Your Portfolio
A. O. Smith Corporation (AOS - Free Report) is poised to benefit from strength across its businesses, acquired assets, healthy liquidity position and focus on operational excellence. The company remains committed to investing in growth opportunities and strengthening its long-term market position.
This Zacks Rank #2 (Buy) company has a market capitalization of $11.8 billion. Over the past year, the stock has risen 11.2%. However, both the stock and the industry have declined 1.3% in the past month.
Image Source: Zacks Investment Research
Let’s delve into the factors that have been aiding the firm for a while now.
Business Strength: A. O. Smith has been witnessing solid demand for its water heater products and higher shipments in North America. The company expects sales from both the North American boiler and water treatment businesses to increase about 8-10% year over year in 2024. Also, healthy demand for tankless water heaters and kitchen appliance products in China has been supporting the Rest of the World business.
Driven by strong demand for its products, management has issued bullish guidance. A. O. Smith forecasts sales to increase approximately 3-5% from the prior-year levels in 2024. It estimates adjusted earnings in the band of $3.90-$4.15 per share in the year, implying growth of 5.6% at the midpoint from the year-earlier figure.
Acquisition Benefits: AOS remains focused on acquiring businesses to gain access to new customers, regions and product lines. In the first quarter of 2024, AOS acquired a California-based water treatment company, Impact Water Products. The buyout is expected to expand its water treatment business in the West Coast region. Also, the acquisition of Atlantic Filter in June 2022 enhanced its position in the water treatment industry and strengthened its customer base in Florida and the adjacent regions.
Shareholder-Friendly Policies: Management is committed to rewarding shareholders through dividend payouts and share repurchases. In the first quarter, it paid dividends worth $47.3 million and repurchased shares worth $74.5 million. In October 2023, it hiked its dividend by 7% to 32 cents per share.
Strong Liquidity Position: The company’s sound liquidity position adds to its strength. It exited the first quarter with cash and cash equivalents of $251.6 million, higher than the total debt of $119.7 million. This implies that it has sufficient cash to meet its debt obligations.
Other Key Picks
Some other top-ranked stocks from the same space are presented below.
Enersys (ENS - Free Report) presently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ENS delivered a trailing four-quarter average earnings surprise of 2.7%. In the past 60 days, the Zacks Consensus Estimate for Enersys’ fiscal 2025 (ending March 2025) earnings has increased 3.9%.
Emerson Electric Co. (EMR - Free Report) presently carries a Zacks Rank of 2. EMR delivered a trailing four-quarter average earnings surprise of 10.7%. In the past 60 days, the Zacks Consensus Estimate for its 2024 earnings has risen 1.3%.
ESCO Technologies Inc. (ESE - Free Report) carries a Zacks Rank #2 at present. In the past 60 days, the Zacks Consensus Estimate for ESE’s fiscal 2024 (ending September 2024) earnings has advanced 0.5%.