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A. O. Smith (AOS) to Post Q1 Earnings: What's in the Cards?

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A. O. Smith Corporation AOS is scheduled to report first-quarter 2021 results on Apr 29, before market open.

The company delivered a positive earnings surprise of 11.59%, on average, in the trailing four quarters, beating estimates thrice and missing once. In the last reported quarter, A. O. Smith posted earnings of 74 cents, which beat the Zacks Consensus Estimate of 59 cents by 25.42%.

In the past three months, the company’s shares have gained 28.6% compared with the industry’s growth of 6.5%.

Factors at Play

Low demand environment for commercial water heater and boilers in North America, owing to the construction project delays and coronavirus outbreak-led issues, is likely to get reflected in A. O. Smith’s first-quarter results. In addition, weak end-market demand in India amid the coronavirus outbreak might have adversely impacted its top-line performance in the first quarter.

Also, the company’s restructuring and severance expenses adversely impacted its earnings by 4 cents in 2020. This trend is likely to have continued in the first quarter as well, given its focus on restructuring initiatives for aligning its business to pandemic-related market conditions. This might have hurt its margins and profitability in the quarter under review.

Further, given A. O. Smith’s diverse geographic presence, its operations are subject to forex woes, interest rate fluctuations and hyperinflation in foreign countries. Notably, a stronger U.S. dollar might have hurt its overseas business in first-quarter 2021.

However, strong demand for water treatment products and residential water heater products in the United States, supported by its strong retail and direct-to-consumer sales channel, is likely to have boosted its top-line performance. In addition, growth in demand in China, along with its focus on investments in product developments and production efficiency, is likely to have been beneficial.

Amid this backdrop, the Zacks Consensus Estimate for revenues from A. O. Smith's North America segment is currently pegged at $562 million, indicating a marginal increase from the quarter-ago reported number and a 5.4% rise from the year-ago reported figure. The consensus estimate for revenues from Rest of the World stands at $193 million, indicating 30.8% decline sequentially but 75.5% increase year over year.

The Zack Consensus Estimate for the company’s earnings for the first quarter is pegged at 56 cents, suggesting decline of 24.3% from the prior-quarter reported figure but 75% increase from the year-ago reported number. The consensus estimate for revenues of $769 million suggests a 7.9% decrease sequentially but 20.7% growth year over year.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

But that is not the case here as we will see below.

Earnings ESP: A. O. Smith has an Earnings ESP of -0.67%.

A. O. Smith Corporation Price and EPS Surprise

A. O. Smith Corporation Price and EPS Surprise

A. O. Smith Corporation price-eps-surprise | A. O. Smith Corporation Quote

Zacks Rank: The company carries a Zacks Rank #4 (Sell).

Key Picks

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Emerson Electric Co. EMR has an Earnings ESP of +3.62% and it currently carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Enersys (ENS - Free Report) has an Earnings ESP of +0.78% and a Zacks Rank #3.

Eaton Corporation, plc ETN has an Earnings ESP of +1.96% and Zacks Rank #3.

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