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AO Smith Corp.

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Over the past six months, A.O. Smith’s stock has outperformed the industry average. A flourishing water heater industry, robust consumer product demand in China and positive industry trends are likely to drive top-line growth, going forward. However, on the flip side, appreciation in steel prices is expected to put margins under pressure. Devaluation of the Chinese currency and rising selling and administrative expenses are expected to act as headwinds, going forward. Moreover, transition of the Chinese economy to a consumer driven one has resulted in a significant slowdown that might impact the company’s sales in the region.  Also, strong competition in the water boilers and heaters industry compounds the company’s challenges. This apart, costs related to ERP implementation and expansion pose as major threats for the company’s profitability.

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