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AO Smith Corp.

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A.O. Smith’s second-quarter 2017 earnings per share came in line with the Zacks Consensus Estimate, and was up 8.2% from the year-ago figure supported by robust sales growth. The thriving water heater industry and positive industry trends are likely to raise the top line, going forward. Acquisition of residential water treatment firm, Aquasana, has significantly boosted the company’s sales. Over the past six months, A.O. Smith’s stock has outperformed the industry average. However, on the flip side, appreciation in steel prices since the beginning of the year is expected to put margins under pressure. Also, devaluation of the Chinese currency and escalating SG&A and other corporate expenses are expected to act as significant headwinds in the forthcoming quarters. Also, strong competition in the water boilers and heaters industry compounds the company’s challenges.

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