A.O. Smith Corporation (AOS - Free Report) pleased its shareholders yesterday, with the announcement of 50% increase in the share buyback program set for this year. Its shares recorded 2.05% gain, closing the trading session at $41.33 per share.
As disclosed, the water heating equipment manufacturer’s board of directors added 3 million shares to its existing share buyback authorization. This move raised its total approved buyback limit to approximately 7.6 million shares.
For 2019, the company’s authorization limit was increased from the previously stated $200-$300 million. The buyback activities will be carried out, using the 10b5-1 plan and opportunistic repurchases in the open market.
We believe that this move reflects A.O. Smith’s shareholder-friendly policies and strong cash position.
It is worth mentioning here that A.O. Smith uses capital for boosting organic growth, making acquisitions and rewarding shareholders (via dividends and share buybacks). In the first quarter of 2019, the company repurchased 0.9 million shares for $45.6 million while paid $37.1 million as dividends. Also, cash and cash equivalents were $337.8 million ending the quarter.
Earlier, the company planned to return approximately $350 million to shareholders through dividend payments and share repurchases.
Zacks Rank & Stocks to Consider
With a market capitalization of nearly $6.9 billion, the company currently carries a Zacks Rank #3 (Hold). Strength in the defensive replacement business, stronger demand for popular brands and shareholder-friendly policies are boons for A.O. Smith. However, forex woes, rising steel prices and challenges in China business are concerns.
In the past three months, shares of the company have decreased 20.5% as against the industry’s decline of 10.2%.
In the past 60 days, the Zacks Consensus Estimate for A.O. Smith’s earnings has declined 0.7% to $2.70 for 2019 and 0.7% to $2.96 for 2020. On a year-over-year basis, estimates reflect growth of 3.5% for 2019 and 9.4% for 2020.
A. O. Smith Corporation Price and Consensus