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A. O. Smith (AOS) Q2 Earnings & Revenues Surpass Estimates

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A. O. Smith Corporation (AOS - Free Report) has reported better-than-expected second-quarter 2021 results, wherein adjusted earnings of 73 cents per share beat the Zacks Consensus Estimate of 65 cents. The bottom line also increased 62.2% from the year-ago figure of 45 cents.

Top-Line Details

The company’s second-quarter net sales increased 29.5% year over year to $859.8 million. The increase was driven by higher sales in North America and China. The top line surpassed the Zacks Consensus Estimate of $825 million.

A.O. Smith’s quarterly sales in North America (comprising the U.S. and Canada water heaters and boilers) moved up 25.6% year over year to $603.6 million. The segment’s results were driven by higher sales of water heaters, boilers and water treatment products.

Segmental operating earnings were up 34% to $141.7 million on a year-over-year basis. The increase was on account of higher sales volume and inflation-related price increases, partially offset by higher material and freight costs.

Quarterly sales in Rest of the World (including China, India and Europe) grew 38.7% year over year to $263.2 million. The increase was primarily backed by higher consumer demand for all major product categories in China.

The segment’s operating earnings were $22.3 million against loss of $5.8 million recorded in the year-ago quarter. Higher sales volume and lower operating costs boosted the segment’s income.

Margin Details

In the quarter, A.O. Smith’s cost of sales was $538.4 million, up 29.3% on a year-over-year basis. Selling, general & administrative expenses were $173.1 million, up 11%.

Gross profit increased 29.9% year over year to $321.4 million with margin of 37.4%, up 10 basis points. Interest expenses declined 64% to $0.9 million.

Liquidity & Cash Flow

On Jun 30, 2021, A.O. Smith’s cash and cash equivalents totaled $444.8 million compared with $573.1 million as of Dec 31, 2020.

At the end of the reported quarter, long-term debt was $99.6 million compared with $106.4 million as of Dec 31, 2020.

In the first six months of 2021, cash provided by the operating activities totaled $196 million compared with $179.3 million in the year-ago period.

Share Repurchases

In the first six months of 2021, the company repurchased shares worth $198.1 million compared with $56.7 million in the year-ago period. It paid dividends worth $83.9 million compared with $77.8 million a year ago.

Guidance

The company raised revenue and earnings guidance for 2021. For the year, it anticipates revenues to increase 17-18% from the previous year, higher than growth of 14-15% guided earlier.

It currently expects adjusted earnings of $2.70-$2.76 compared with $2.55-$2.65 guided previously.

A. O. Smith Corporation Price, Consensus and EPS Surprise

A. O. Smith Corporation Price, Consensus and EPS Surprise

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

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks are AZZ Inc. (AZZ - Free Report) , Brady Corporation (BRC - Free Report) and Donaldson Company, Inc. (DCI - Free Report) . While AZZ currently sports a Zacks Rank #1 (Strong Buy), Brady and Donaldson carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AZZ delivered an earnings surprise of 21.24%, on average, in the trailing four quarters.

Brady delivered an earnings surprise of 1.58%, on average, in the trailing four quarters.

Donaldson delivered an earnings surprise of 9.02%, on average, in the trailing four quarters.