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A. O. Smith (AOS) to Post Q2 Earnings: What's in the Cards?

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A. O. Smith Corporation (AOS - Free Report) is scheduled to report second-quarter 2021 results on Jul 29, before market open.

The company delivered an earnings surprise of 14.84%, on average, in the trailing four quarters, beating estimates all through. In the last reported quarter, A. O. Smith posted earnings of 60 cents, which beat the Zacks Consensus Estimate of 56 cents by 7.14%.

Zacks Investment Research
Image Source: Zacks Investment Research

In the past three months, the company’s shares have gained 4.9% compared with the industry’s growth of 4.8%.

Factors to Consider

A. O. Smith is anticipated to have benefited from its strong position in the replacement market in the second quarter. Strength in the company’s Water-Right business, which has enhanced its foothold in the water treatment industry especially in the wholesale and independent dealer array, is likely to have augmented its revenues in the second quarter.

Robust demand for boilers and service parts in the United States and improved demand for water heaters in Canada, supported by its strong retail and direct-to-consumer sales channel, is expected to have augmented its North America segment’s sales in the second quarter. Growth in demand for the company’s major product lines in China is likely to have supported the Rest of World segment’s top-line performance.

A. O. Smith’s focus on investments in product developments and automation is likely to have been beneficial in the second quarter. Also, the company’s efforts to improve operational productivity, coupled with a healthy liquidity position, might have helped it maintain a solid margin in the to-be-reported quarter.

However, low demand for commercial water heater and boilers in North America due to the construction project delays and coronavirus outbreak-led issues is likely to have marred its top-line performance. Challenged end-market demand in India amid the pandemic might have affected its top-line.

The Zacks Consensus Estimate for revenues from A. O. Smith's North America segment is currently pegged at $578 million, indicating a 4.5% increase from the quarter-ago reported number and 20.2% growth from the year-ago reported figure. The consensus estimate for revenues from Rest of the World stands at $248 million, indicating 11.7% growth sequentially, and 30.5% increase year over year.

The consensus estimate for the company’s second-quarter total revenues is currently pegged at $821 million, suggesting increase of 6.8% and 23.6% sequentially and year over year, respectively. The consensus estimate for earnings of 65 cents suggests an improvement of 8.3% and 44.4% sequentially and year over year, respectively.

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 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at 65 cents.

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 #2.

Stocks to Consider

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:

Eaton Corporation plc (ETN - Free Report) has an Earnings ESP of +2.17% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere & Company (DE - Free Report) has an Earnings ESP of +11.97% and it currently carries a Zacks Rank #2 at present.

Colfax Corporation (CFX - Free Report) has an Earnings ESP of +1.50% and a Zacks Rank #3.