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Why Is A.O. Smith (AOS) Up 6.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for A.O. Smith (AOS - Free Report) . Shares have added about 6.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is A.O. Smith due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
A. O. Smith Q4 Earnings Beat Estimates, Sales Rise Y/Y
A. O. Smith’s 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.
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. 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, A.O. Smith has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, A.O. Smith has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is A.O. Smith (AOS) Up 6.8% Since Last Earnings Report?
It has been about a month since the last earnings report for A.O. Smith (AOS - Free Report) . Shares have added about 6.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is A.O. Smith due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
A. O. Smith Q4 Earnings Beat Estimates, Sales Rise Y/Y
A. O. Smith’s 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.
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. 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, A.O. Smith has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, A.O. Smith has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.