We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
A. O. Smith (AOS) Q4 Earnings Beat Estimates, Sales Rise Y/Y
Read MoreHide Full Article
A. O. Smith Corporation’s (AOS - Free Report) fourth-quarter 2023 adjusted earnings of 97 cents per share surpassed the Zacks Consensus Estimate of adjusted earnings of 96 cents. The bottom line jumped 13% year over year, driven by the continued strong demand for residential water heaters in North America.
Net sales of $988.1 million narrowly missed the consensus estimate of $989 million. However, the top line increased 5.6% 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 6.7% year over year to $738 million, driven by higher water heater volumes. Our estimate for North American sales in the segment was $729.3 million.
Adjusted segment earnings increased 7.5% year over year to $173.3 million due to higher water heater volumes.
Quarterly sales in the Rest of the World (including China, India and Europe) segment increased 4% year over year to $260.2 million. Our estimate for sales in the segment was $240.1 million. The increase in sales was primarily due to the introduction of kitchen appliance products in China. Sales in India increased 11% in local currency.
The adjusted segment’s earnings were $29.8 million, down 5.7% year over year due to promotions and advertising expenses related to the launch of kitchen products in China.
Margin Details
In the reported quarter, A.O. Smith’s cost of sales was $618.3 million, up 5.2% year over year. Selling, general & administrative expenses were $185 million, up 9.5%.
Gross profit increased 6.1% year over year to $369.8 million. The gross margin was 37.4% compared with 37.2% in the year-ago period. Interest expenses were $1.1 million, down from $3.4 million from the year-ago quarter.
Liquidity & Cash Flow
As of Dec 31, 2023, A.O. Smith’s cash and cash equivalents totaled $339.9 million compared with $391.2 million at the end of December 2022.
At the end of the reported quarter, long-term debt was $117.3 million compared with $334.5 million at the end of December 2022.
In 2023, cash provided by operating activities totaled $670.3 million compared with $391.4 million a year ago.
Share Repurchases
In 2023, A.O. Smith repurchased 4.4 million shares for $306.5 million. Exiting 2023, 3.5 million shares were left to be repurchased under the existing share repurchase authorization. In January 2024, AOS’ board boosted the existing share buyback program by authorizing the repurchase of an additional 2 million shares. The company expects to repurchase $300 million worth of shares in 2024. In 2023, it paid out dividends of $183.5 million, up 3.6% year over year.
2024 Outlook
A.O. Smith expects net sales of $3,970-$4,050 million for 2024. The figure indicates an increase from the $3,853 million reported in 2023.
The company expects adjusted earnings per share of $3.90-$4.15 for the year, whereas it reported $3.81 in 2023. AOS’ adjusted earnings guidance indicates a 5.6% year-over-year increase at the mid-point.
Zacks Rank & Other Stocks to Consider
A.O. Smith currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:
The Zacks Consensus Estimate for AIT’s fiscal 2024 (ending June 2024) earnings remained steady in the past 60 days. Shares of Applied Industrial have jumped 18.2% in the past three months.
Flowserve Corporation (FLS - Free Report) currently carries a Zacks Rank of 2. FLS delivered a trailing four-quarter average earnings surprise of 27.3%.
In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has remained steady. The stock has risen 12.4% in the past year.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 25.1%.
In the past 60 days, the Zacks Consensus Estimate for Crane’s 2024 earnings has increased 0.6%. The stock has risen 20.9% in the past three months.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
A. O. Smith (AOS) Q4 Earnings Beat Estimates, Sales Rise Y/Y
A. O. Smith Corporation’s (AOS - Free Report) fourth-quarter 2023 adjusted earnings of 97 cents per share surpassed the Zacks Consensus Estimate of adjusted earnings of 96 cents. The bottom line jumped 13% year over year, driven by the continued strong demand for residential water heaters in North America.
Net sales of $988.1 million narrowly missed the consensus estimate of $989 million. However, the top line increased 5.6% 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 6.7% year over year to $738 million, driven by higher water heater volumes. Our estimate for North American sales in the segment was $729.3 million.
Adjusted segment earnings increased 7.5% year over year to $173.3 million due to higher water heater volumes.
Quarterly sales in the Rest of the World (including China, India and Europe) segment increased 4% year over year to $260.2 million. Our estimate for sales in the segment was $240.1 million. The increase in sales was primarily due to the introduction of kitchen appliance products in China. Sales in India increased 11% in local currency.
The adjusted segment’s earnings were $29.8 million, down 5.7% year over year due to promotions and advertising expenses related to the launch of kitchen products in China.
Margin Details
In the reported quarter, A.O. Smith’s cost of sales was $618.3 million, up 5.2% year over year. Selling, general & administrative expenses were $185 million, up 9.5%.
Gross profit increased 6.1% year over year to $369.8 million. The gross margin was 37.4% compared with 37.2% in the year-ago period. Interest expenses were $1.1 million, down from $3.4 million from the year-ago quarter.
Liquidity & Cash Flow
As of Dec 31, 2023, A.O. Smith’s cash and cash equivalents totaled $339.9 million compared with $391.2 million at the end of December 2022.
At the end of the reported quarter, long-term debt was $117.3 million compared with $334.5 million at the end of December 2022.
In 2023, cash provided by operating activities totaled $670.3 million compared with $391.4 million a year ago.
Share Repurchases
In 2023, A.O. Smith repurchased 4.4 million shares for $306.5 million. Exiting 2023, 3.5 million shares were left to be repurchased under the existing share repurchase authorization. In January 2024, AOS’ board boosted the existing share buyback program by authorizing the repurchase of an additional 2 million shares. The company expects to repurchase $300 million worth of shares in 2024. In 2023, it paid out dividends of $183.5 million, up 3.6% year over year.
2024 Outlook
A.O. Smith expects net sales of $3,970-$4,050 million for 2024. The figure indicates an increase from the $3,853 million reported in 2023.
The company expects adjusted earnings per share of $3.90-$4.15 for the year, whereas it reported $3.81 in 2023. AOS’ adjusted earnings guidance indicates a 5.6% year-over-year increase at the mid-point.
Zacks Rank & Other Stocks to Consider
A.O. Smith currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank #2. It has a trailing four-quarter average earnings surprise of 10.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for AIT’s fiscal 2024 (ending June 2024) earnings remained steady in the past 60 days. Shares of Applied Industrial have jumped 18.2% in the past three months.
Flowserve Corporation (FLS - Free Report) currently carries a Zacks Rank of 2. FLS delivered a trailing four-quarter average earnings surprise of 27.3%.
In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has remained steady. The stock has risen 12.4% in the past year.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 25.1%.
In the past 60 days, the Zacks Consensus Estimate for Crane’s 2024 earnings has increased 0.6%. The stock has risen 20.9% in the past three months.