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A. O. Smith (AOS) Beats on Q1 Earnings, Revises 2023 View
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A. O. Smith Corporation’s (AOS - Free Report) first-quarter 2023 adjusted earnings (excluding 10 cents from non-recurring items) of 94 cents per share surpassed the Zacks Consensus Estimate of 77 cents. This compares with our estimate for adjusted earnings of 76 cents. The bottom line jumped 22% year over year due to water heater demand and lower steel costs.
Net sales of $966.4 million outperformed the Zacks Consensus Estimate of $925.5 million. Our estimate for net sales was $899.5 million. The top line dipped 1.2% year over year.
Segmental Details
A. O. Smith’s quarterly sales in North America (comprising the United States and Canada water heaters and boilers) increased 3% year over year to $752.7 million due to higher commercial and residential water heater volumes. Our estimate for North America sales in the first quarter was $675.3 million.
A. O. Smith Corporation Price, Consensus and EPS Surprise
Segment earnings increased 24% year over year to $188.6 million. The upside was due to higher volumes of commercial and residential water heaters and lower steel costs.
Quarterly sales in the Rest of the World (including China, India and Europe) decreased 14% year over year to $219.1 million. Our estimate for sales in the Rest of the World segment was $231.6 million. The decline in sales was primarily due to lower consumer demand in China due to COVID-19-related headwinds. However, sales in India increased 28% due to strong demand for water heaters and water treatment products.
The segment’s earnings were $5.3 million, down significantly year over year. The downside was due to an impairment charge of $12.5 million related to the company's committed plan to sell its business in Turkey and lower volumes in China.
Margin Details
In the reported quarter, A.O. Smith’s cost of sales was $592.3 million, down 6.9% year over year. Selling, general & administrative expenses were $187.2 million, up 4.1%.
Gross profit increased 9.5% year over year to $374.1 million. Gross margin was 38.7% compared with 34.9% in the year-ago period. Interest expenses surged more than 100% to $4 million.
Liquidity & Cash Flow
As of Mar 31, 2023, A.O. Smith’s cash and cash equivalents totaled $406.2 million compared with $391.2 million at the end of December 2022.
At the end of the reported quarter, long-term debt was $330.8 million compared with $334.5 million at December 2022-end.
In the first quarter, cash provided by operating activities totaled $119.9 million compared with $16.5 million in the year-ago period.
Share Repurchases
In the first quarter, A.O. Smith repurchased 0.8 million shares for $53.1 million. Approximately 7.1 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 repurchase $300 million worth of shares in 2023. In the first quarter, the company paid dividends of $45.4 million, up 2.7% year over year.
2023 Outlook Revised
A.O. Smith expects net sales of $3,680-3,830 million in 2023 compared with $3,640-3,865 million anticipated earlier. The mid-point of the guided range — $3,755 million — lies below the Zacks Consensus Estimate of $3.77 billion.
The company expects adjusted earnings per share of $3.30-$3.50 for the year compared with $3.15-$3.45 estimated earlier. The mid-point of the guided range — $3.4 — lies above the Zacks Consensus Estimate of $3.35. AOS’ adjusted earnings guidance reflects an 8% year-over-year increase at the mid-point.
Zacks Rank & Key Picks
A.O. Smith currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Ingersoll Rand has an estimated earnings growth rate of 7.6% for the current year. The stock has rallied 9.2% in the past six months.
Allegion (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 12.5%, on average.
Allegion has an estimated earnings growth rate of 11.8% for the current year. The stock has gained around 3% in the past six months.
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A. O. Smith (AOS) Beats on Q1 Earnings, Revises 2023 View
A. O. Smith Corporation’s (AOS - Free Report) first-quarter 2023 adjusted earnings (excluding 10 cents from non-recurring items) of 94 cents per share surpassed the Zacks Consensus Estimate of 77 cents. This compares with our estimate for adjusted earnings of 76 cents. The bottom line jumped 22% year over year due to water heater demand and lower steel costs.
Net sales of $966.4 million outperformed the Zacks Consensus Estimate of $925.5 million. Our estimate for net sales was $899.5 million. The top line dipped 1.2% year over year.
Segmental Details
A. O. Smith’s quarterly sales in North America (comprising the United States and Canada water heaters and boilers) increased 3% year over year to $752.7 million due to higher commercial and residential water heater volumes. Our estimate for North America sales in the first quarter was $675.3 million.
A. O. Smith Corporation Price, Consensus and EPS Surprise
A. O. Smith Corporation price-consensus-eps-surprise-chart | A. O. Smith Corporation Quote
Segment earnings increased 24% year over year to $188.6 million. The upside was due to higher volumes of commercial and residential water heaters and lower steel costs.
Quarterly sales in the Rest of the World (including China, India and Europe) decreased 14% year over year to $219.1 million. Our estimate for sales in the Rest of the World segment was $231.6 million. The decline in sales was primarily due to lower consumer demand in China due to COVID-19-related headwinds. However, sales in India increased 28% due to strong demand for water heaters and water treatment products.
The segment’s earnings were $5.3 million, down significantly year over year. The downside was due to an impairment charge of $12.5 million related to the company's committed plan to sell its business in Turkey and lower volumes in China.
Margin Details
In the reported quarter, A.O. Smith’s cost of sales was $592.3 million, down 6.9% year over year. Selling, general & administrative expenses were $187.2 million, up 4.1%.
Gross profit increased 9.5% year over year to $374.1 million. Gross margin was 38.7% compared with 34.9% in the year-ago period. Interest expenses surged more than 100% to $4 million.
Liquidity & Cash Flow
As of Mar 31, 2023, A.O. Smith’s cash and cash equivalents totaled $406.2 million compared with $391.2 million at the end of December 2022.
At the end of the reported quarter, long-term debt was $330.8 million compared with $334.5 million at December 2022-end.
In the first quarter, cash provided by operating activities totaled $119.9 million compared with $16.5 million in the year-ago period.
Share Repurchases
In the first quarter, A.O. Smith repurchased 0.8 million shares for $53.1 million. Approximately 7.1 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 repurchase $300 million worth of shares in 2023. In the first quarter, the company paid dividends of $45.4 million, up 2.7% year over year.
2023 Outlook Revised
A.O. Smith expects net sales of $3,680-3,830 million in 2023 compared with $3,640-3,865 million anticipated earlier. The mid-point of the guided range — $3,755 million — lies below the Zacks Consensus Estimate of $3.77 billion.
The company expects adjusted earnings per share of $3.30-$3.50 for the year compared with $3.15-$3.45 estimated earlier. The mid-point of the guided range — $3.4 — lies above the Zacks Consensus Estimate of $3.35. AOS’ adjusted earnings guidance reflects an 8% year-over-year increase at the mid-point.
Zacks Rank & Key Picks
A.O. Smith currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Ingersoll Rand (IR - Free Report) presently sports a Zacks Rank #1 (Strong Buy). The company pulled of a trailing four-quarter earnings surprise of 8.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Ingersoll Rand has an estimated earnings growth rate of 7.6% for the current year. The stock has rallied 9.2% in the past six months.
Allegion (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 12.5%, on average.
Allegion has an estimated earnings growth rate of 11.8% for the current year. The stock has gained around 3% in the past six months.