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Here's Why A. O. Smith (AOS) Stock is Worth Investing in Now

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A. O. Smith Corporation (AOS - Free Report) currently boasts robust prospects on strength in its businesses, solid product portfolio, acquired assets and a sound capital-deployment strategy.

Notably, the Zacks Rank #2 (Buy) company has a market capitalization of $9.1 billion. In the past three months, it has gained 15.6% compared with the industry’s growth of 13.8%.

Let’s delve onto the factors that make investment in the company a smart choice at the moment.

Business Strength: Strength in A. O. Smith’s North America operating segment, owing to robust demand for water treatment products and residential water heater products, is likely to prove beneficial for its top-line performance, going forward. Notably, for 2020, it expects sales growth of 22-24% from its water treatment business in North America on a year-over-year basis. Also, for the year, it anticipates residential water heater sales volumes to grow 4% in the United States. In addition, recovery in demand environment for its products in China is likely to be beneficial.

Acquisition Benefits:  The company intends to strengthen and expand its businesses through acquisitions. For instance, its buyout of Water-Right (April 2019) has been enhancing its growth opportunities in the water treatment industry, especially in the wholesale and independent dealer array. As a matter of fact, A. O. Smith continues to believe that the Water-Right business will generate incremental sales in this year.

Rewards to Shareholders: It remains committed to rewarding shareholders through dividend payouts and share repurchases. In the first nine months of 2020, the company paid out dividends worth $116.5 million to shareholders besides repurchasing 1.3 million shares for $56.7 million. Also, in October 2020, it announced an 8% hike in its quarterly dividend rate. It’s worth mentioning here that although there is no change in its dividend plans, its share buyback activities have been temporarily halted owing to the coronavirus crisis since the second quarter of 2020.

In the past 30 days, the Zacks Consensus Estimate for its 2020 earnings has trended up from $1.86 to $1.98 on nine upward estimate revisions against none downward. Also, the consensus estimate for its 2021 earnings has moved up from $2.28 to $2.37 on eight upward estimate revisions against one downward.

Other Stocks to Consider

Some other top-ranked stocks from the same space are Regal Beloit Corporation (RBC - Free Report) , Rexnord Corporation (RXN - Free Report) and Franklin Electric Co., Inc. (FELE - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Regal Beloit delivered a positive earnings surprise of 28.42%, on average, in the trailing four quarters.

Rexnord delivered a positive earnings surprise of 20.62%, on average, in the trailing four quarters.

Franklin Electric delivered a positive earnings surprise of 12.82%, on average, in the trailing four quarters.

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