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A. O. Smith (AOS) Q4 Earnings Beat, Revenues Decline Y/Y
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A. O. Smith Corporation’s (AOS - Free Report) fourth-quarter 2022 adjusted earnings (excluding $1.64 from non-recurring items) of 86 cents per share surpassed the Zacks Consensus Estimate of 79 cents. This compares with our estimate for adjusted earnings of 80 cents.
Net sales of $936.1 million outperformed the Zacks Consensus Estimate of $912.3 million. Our estimate for net sales was $915.5 million. The top line declined 6% year over year due to U.S. residential water heater de-stocking activity.
Segmental Details
A. O. Smith’s quarterly sales in North America (comprising the United States and Canada water heaters and boilers) dipped 3% year over year to $692 million due to weak residential water heater demand. Our estimate for North America sales in the fourth quarter was $664.2 million. Pricing actions and higher boiler volumes partly offset the adversity.
A. O. Smith Corporation Price, Consensus and EPS Surprise
Adjusted segment earnings decreased 2% year over year to $161.2 million. The downside was due to lower residential water heater volumes.
Quarterly sales in the Rest of the World (including China, India and Europe) decreased 13% year over year to $249.7 million. Our estimate for sales in the Rest of the World segment was $259.2 million. The decline in sales was primarily due to lower consumer demand in China, thanks to COVID-19-related lockdowns. However, sales in India increased 16% due to strong demand for water heaters and water treatment products.
The segment’s earnings were $31.6 million, up 4% year over year. Despite lower volumes in China, the performance was driven by reduced incentive and selling costs in the region.
Margin Details
In the reported quarter, A.O. Smith’s cost of sales was $587.5 million, down 7.5% year over year. Selling, general & administrative expenses were $168.9 million, down 8.3%.
Gross profit decreased 3.3% year over year to $348.6 million. Gross margin was 37.2%, up 1 percentage point year over year. Interest expenses surged more than 100% to $3.4 million.
Liquidity & Cash Flow
As of Dec 31, 2022, A.O. Smith’s cash and cash equivalents totaled $391.2 million compared with $443.3 million at the end of December 2021.
At the end of the reported quarter, long-term debt was $334.5 million compared with $189.9 million at December 2021-end.
In 2022, cash provided by operating activities totaled $391.4 million compared with $641.1 million in the year-ago period.
Share Repurchases
In 2022, A.O. Smith repurchased 6.6 million shares for $403.5 million. Approximately 0.4 million shares are yet to be repurchased under the existing share repurchase authorization. In January, AOS’ board boosted the existing share buyback program by authorizing to repurchase of an additional 7.5 million shares. The company expects to buyback $200 million worth of shares in 2023. In 2022, the company paid dividends of $177.2 million, up 4.2%.
2023 Outlook
A.O. Smith expects net sales of $3,640-3,865 million in 2023. The mid-point of the guided range — $3,752.5 million — lies above the Zacks Consensus Estimate of $3.69 billion. The company expects adjusted earnings per share of $3.15-$3.45 for the year. The mid-point of the guided range — $3.3 — lies above the Zacks Consensus Estimate of $3.19.
Zacks Rank & Other Key Picks
A.O. Smith presently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks worth considering within the broader Industrial Products sector are as follows:
The Zacks Consensus Estimate for Allegion’s 2022 earnings has remained steady in the past 60 days. The stock has gained 8.6% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI delivered a trailing four-quarter earnings surprise of 12.5%, on average.
The Zacks Consensus Estimate for Valmont’s 2022 earnings estimate has been revised upward by a penny in the past 60 days. The stock has rallied 22.2% in the past six months.
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A. O. Smith (AOS) Q4 Earnings Beat, Revenues Decline Y/Y
A. O. Smith Corporation’s (AOS - Free Report) fourth-quarter 2022 adjusted earnings (excluding $1.64 from non-recurring items) of 86 cents per share surpassed the Zacks Consensus Estimate of 79 cents. This compares with our estimate for adjusted earnings of 80 cents.
Net sales of $936.1 million outperformed the Zacks Consensus Estimate of $912.3 million. Our estimate for net sales was $915.5 million. The top line declined 6% year over year due to U.S. residential water heater de-stocking activity.
Segmental Details
A. O. Smith’s quarterly sales in North America (comprising the United States and Canada water heaters and boilers) dipped 3% year over year to $692 million due to weak residential water heater demand. Our estimate for North America sales in the fourth quarter was $664.2 million. Pricing actions and higher boiler volumes partly offset the adversity.
A. O. Smith Corporation Price, Consensus and EPS Surprise
A. O. Smith Corporation price-consensus-eps-surprise-chart | A. O. Smith Corporation Quote
Adjusted segment earnings decreased 2% year over year to $161.2 million. The downside was due to lower residential water heater volumes.
Quarterly sales in the Rest of the World (including China, India and Europe) decreased 13% year over year to $249.7 million. Our estimate for sales in the Rest of the World segment was $259.2 million. The decline in sales was primarily due to lower consumer demand in China, thanks to COVID-19-related lockdowns. However, sales in India increased 16% due to strong demand for water heaters and water treatment products.
The segment’s earnings were $31.6 million, up 4% year over year. Despite lower volumes in China, the performance was driven by reduced incentive and selling costs in the region.
Margin Details
In the reported quarter, A.O. Smith’s cost of sales was $587.5 million, down 7.5% year over year. Selling, general & administrative expenses were $168.9 million, down 8.3%.
Gross profit decreased 3.3% year over year to $348.6 million. Gross margin was 37.2%, up 1 percentage point year over year. Interest expenses surged more than 100% to $3.4 million.
Liquidity & Cash Flow
As of Dec 31, 2022, A.O. Smith’s cash and cash equivalents totaled $391.2 million compared with $443.3 million at the end of December 2021.
At the end of the reported quarter, long-term debt was $334.5 million compared with $189.9 million at December 2021-end.
In 2022, cash provided by operating activities totaled $391.4 million compared with $641.1 million in the year-ago period.
Share Repurchases
In 2022, A.O. Smith repurchased 6.6 million shares for $403.5 million. Approximately 0.4 million shares are yet to be repurchased under the existing share repurchase authorization. In January, AOS’ board boosted the existing share buyback program by authorizing to repurchase of an additional 7.5 million shares. The company expects to buyback $200 million worth of shares in 2023. In 2022, the company paid dividends of $177.2 million, up 4.2%.
2023 Outlook
A.O. Smith expects net sales of $3,640-3,865 million in 2023. The mid-point of the guided range — $3,752.5 million — lies above the Zacks Consensus Estimate of $3.69 billion. The company expects adjusted earnings per share of $3.15-$3.45 for the year. The mid-point of the guided range — $3.3 — lies above the Zacks Consensus Estimate of $3.19.
Zacks Rank & Other Key Picks
A.O. Smith presently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks worth considering within the broader Industrial Products sector are as follows:
Allegion plc (ALLE - Free Report) presently sports a Zacks Rank #1 (Strong Buy). ALLE pulled off a trailing four-quarter earnings surprise of 8.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
The Zacks Consensus Estimate for Allegion’s 2022 earnings has remained steady in the past 60 days. The stock has gained 8.6% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI delivered a trailing four-quarter earnings surprise of 12.5%, on average.
The Zacks Consensus Estimate for Valmont’s 2022 earnings estimate has been revised upward by a penny in the past 60 days. The stock has rallied 22.2% in the past six months.