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Here's Why it is Worth Investing in A. O. Smith (AOS) Now
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A. O. Smith Corporation (AOS - Free Report) currently boasts strong prospects, supported by its solid product portfolio, robust demand environment, strong retail and direct-to-consumer sales channel, and a sound capital-deployment strategy.
The Zacks Rank #2 (Buy) company has a market capitalization of $13.1 billion. In the past three months, it has gained 15.3% compared with the industry’s growth of 1.5%.
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Let’s delve into the factors that make this company investment-worthy at the moment.
Solid Demand Environment: A. O. Smith is witnessing robust demand for water heaters, boilers, and water treatment products, supported by its strong sales channel and pricing actions. For 2021, it anticipates its water treatment and boiler businesses in North America to generate year-over-year sales growth of 12% and 13%, respectively. Growth in demand in China and India along with AOS’ focus on product developments and production efficiency will likely drive its performance in the quarters ahead. For 2021, it anticipates total revenues to increase in the range of 20-21% on a year-over-year basis.
Acquisition Benefits: AOS intends to strengthen and expand its businesses through acquisitions. Its buyout of Master Water Conditioning Corporation (July 2021) is expected to strengthen its water treatment business in North America. Also, the Giant Factories acquisition (October 2021) is likely to expand its commercial and water heater offerings. The Giant Factories buyout is expected to be accretive to its earnings by 6-8 cents per share in 2022.
Strong Cash Flow & Rewards to Shareholders: Strong cash flows enable A. O. Smith to effectively deploy capital for repurchasing shares and paying out dividend. At the end of third-quarter 2021, the company had cash, cash equivalents and marketable securities of $685 million. For 2021, it expects cash flow from operations to be $550-$575 million. In the first nine months of the year, it paid out dividends worth $125.4 million and repurchased shares worth $212 million. For 2021, it targets to repurchase shares worth $400 million. Also, the quarterly dividend rate was hiked by 8% in October 2021.
Estimate Revisions: The Zacks Consensus Estimate for A. O. Smith’s earnings is pegged at $2.92 for 2021, up 6.6% from the 30-day-ago figure. The consensus estimate for 2022 earnings is pegged at $3.54, up 9.3% over the same time frame.
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Some other top-ranked companies in the industry are discussed below.
In the past 30 days, SPX FLOW’s earnings estimates have increased 8% for 2021 and 17.9% for 2022. Its shares have gained 2.6% in the past three months.
AZZ Inc. (AZZ - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 25.47%, on average.
AZZ’s earnings estimates have increased 2% for fiscal 2022 (ending February 2022) and 5.1% for fiscal 2023 (ending February 2023) in the past 30 days. Its shares have gained 7.5% in the past three months.
Franklin Electric Co., Inc. (FELE - Free Report) presently carries a Zacks Rank #2. Its last four quarters average earnings surprise was 16.27%.
Franklin Electric’s earnings estimates have increased 1% for 2021 and 1.5% for 2022 in the past 30 days. Its shares have gained 13.3% in the past three months.
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Here's Why it is Worth Investing in A. O. Smith (AOS) Now
A. O. Smith Corporation (AOS - Free Report) currently boasts strong prospects, supported by its solid product portfolio, robust demand environment, strong retail and direct-to-consumer sales channel, and a sound capital-deployment strategy.
The Zacks Rank #2 (Buy) company has a market capitalization of $13.1 billion. In the past three months, it has gained 15.3% compared with the industry’s growth of 1.5%.
Let’s delve into the factors that make this company investment-worthy at the moment.
Solid Demand Environment: A. O. Smith is witnessing robust demand for water heaters, boilers, and water treatment products, supported by its strong sales channel and pricing actions. For 2021, it anticipates its water treatment and boiler businesses in North America to generate year-over-year sales growth of 12% and 13%, respectively. Growth in demand in China and India along with AOS’ focus on product developments and production efficiency will likely drive its performance in the quarters ahead. For 2021, it anticipates total revenues to increase in the range of 20-21% on a year-over-year basis.
Acquisition Benefits: AOS intends to strengthen and expand its businesses through acquisitions. Its buyout of Master Water Conditioning Corporation (July 2021) is expected to strengthen its water treatment business in North America. Also, the Giant Factories acquisition (October 2021) is likely to expand its commercial and water heater offerings. The Giant Factories buyout is expected to be accretive to its earnings by 6-8 cents per share in 2022.
Strong Cash Flow & Rewards to Shareholders: Strong cash flows enable A. O. Smith to effectively deploy capital for repurchasing shares and paying out dividend. At the end of third-quarter 2021, the company had cash, cash equivalents and marketable securities of $685 million. For 2021, it expects cash flow from operations to be $550-$575 million. In the first nine months of the year, it paid out dividends worth $125.4 million and repurchased shares worth $212 million. For 2021, it targets to repurchase shares worth $400 million. Also, the quarterly dividend rate was hiked by 8% in October 2021.
Estimate Revisions: The Zacks Consensus Estimate for A. O. Smith’s earnings is pegged at $2.92 for 2021, up 6.6% from the 30-day-ago figure. The consensus estimate for 2022 earnings is pegged at $3.54, up 9.3% over the same time frame.
Other Key Picks
Some other top-ranked companies in the industry are discussed below.
SPX FLOW, Inc. (FLOW - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise in the last four quarters was 40.42%, on average.
In the past 30 days, SPX FLOW’s earnings estimates have increased 8% for 2021 and 17.9% for 2022. Its shares have gained 2.6% in the past three months.
AZZ Inc. (AZZ - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 25.47%, on average.
AZZ’s earnings estimates have increased 2% for fiscal 2022 (ending February 2022) and 5.1% for fiscal 2023 (ending February 2023) in the past 30 days. Its shares have gained 7.5% in the past three months.
Franklin Electric Co., Inc. (FELE - Free Report) presently carries a Zacks Rank #2. Its last four quarters average earnings surprise was 16.27%.
Franklin Electric’s earnings estimates have increased 1% for 2021 and 1.5% for 2022 in the past 30 days. Its shares have gained 13.3% in the past three months.