Back to top

Image: Bigstock

A. O. Smith (AOS) Q3 Earnings & Revenues Surpass Estimates

Read MoreHide Full Article

A. O. Smith Corporation (AOS - Free Report) has reported better-than-expected third-quarter 2021 results, wherein adjusted earnings of 82 cents per share beat the Zacks Consensus Estimate of 67 cents. The bottom line also increased 24.2% from the year-ago figure of 66 cents.

Top-Line Details

The company’s third-quarter net sales increased 20.3% year over year to $914.6 million. The increase was driven by higher sales in North America and China, supported by its pricing actions. The top line surpassed the Zacks Consensus Estimate of $838 million.

A.O. Smith’s quarterly sales in North America (comprising the U.S. and Canada water heaters and boilers) moved up 21% year over year to $658.2 million. The segment’s results were driven by higher sales of water heaters, boilers, and water treatment products, supported by its pricing actions.

Segmental operating earnings were up 14% to $151.8 million on a year-over-year basis. The increase was on account of higher sales volume and inflation-related price increases, partially offset by a rise in material and logistics costs.

Quarterly sales in the Rest of the World (including China, India, and Europe) grew 19% year over year to $263.1 million. The increase was primarily backed by higher consumer demand for all major product categories in China.

The segment’s operating earnings were $26.8 million, reflecting an increase of 60% year over year. Higher sales volume, partially offset by higher operating costs, boosted the segment’s income.

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

Margin Details

In the quarter, A.O. Smith’s cost of sales was $574.3 million, up 24.1% on a year-over-year basis. Selling, general & administrative expenses were $177.6 million, up 11.4%.

Gross profit increased 14.5% year over year to $340.3 million with a margin of 37.2%, down 190 basis points. Interest expenses declined 37.5% to $1 million.

Liquidity & Cash Flow

On Sep 30, 2021, A.O. Smith’s cash and cash equivalents totaled $486.1 million compared with $444.8 million in the previous quarter.

At the end of the reported quarter, long-term debt was $99.6 million, stable on a sequential basis.

In the first nine months of 2021, cash provided by the operating activities totaled $376.8 million compared with $330.4 million in the year-ago period.

Share Repurchases

In the first nine months of 2021, the company repurchased shares worth $212 million compared with $56.7 million in the year-ago period. It paid dividends worth $125.4 million compared with $116.5 million a year ago.

Guidance

The company raised revenue and earnings guidance for 2021. For the year, it anticipates revenues to increase 20-21% from the previous year, higher than growth of 17-18% guided earlier.

It currently expects adjusted earnings of $2.86-$2.90 compared with $2.70-$2.76 guided previously.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks from the Zacks Industrial Products sector are Nordson Corporation (NDSN - Free Report) , AZZ Inc. (AZZ - Free Report) , and Franklin Electric Co., Inc. (FELE - Free Report) . While Nordson currently sports a Zacks Rank #1 (Strong Buy), AZZ and Franklin Electric carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nordson delivered an earnings surprise of 17.77%, on average, in the trailing four quarters.

AZZ delivered an earnings surprise of 25.47%, on average, in the trailing four quarters.

Franklin Electric delivered an earnings surprise of 16.27%, on average, in the trailing four quarters.