A. O. Smith Corporation (AOS - Free Report) seems to have lost its sheen to weakness in international operations, especially that in China, high expenses and issues related to international operations, among others. The manufacturer of commercial and residential water heating equipment, and water treatment products currently carry a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company belongs to the Zacks Manufacturing – Electronics industry, currently at the bottom 10% (with the rank of 229) of more than 250 Zacks industries. We believe that the industry is suffering from adverse impacts of global uncertainties, unfavorable movements in foreign currencies and softness in the housing market in the United States. Cost escalation due to tariff-related woes and commodity inflation are other concerns.
It is worth mentioning here that the company reported weaker-than-expected results for second-quarter 2019, with earnings lagging estimates by 4.69%. Also, in the first quarter of 2019, the company lagged estimates by 10.17%.
A. O. Smith’s shares have lost nearly 3.6% in the past six months compared with the industry’s growth of 0.3% and the S&P 500’s improvement of 4.8%. Also, the company’s performance was worse than the Zacks Industrial Products sector’s decline of 1.5%.
It is worth mentioning here that A. O. Smith’s stock is currently overvalued compared with the industry, using a P/E (TTM) valuation method. The stock’s current multiple is at 20.18x, higher than the industry’s current multiple of 17.19x and the industry’s six-month highest level of 17.50x.
The company’s earnings estimates have been lowered in the past 60 days, reflecting bearish sentiments. The Zacks Consensus Estimate for its earnings is pegged at $2.38 for 2019 and $2.69 for 2020, reflecting declines of 10.9% and 7.2% from the respective 60-day-ago figures.
A. O. Smith Corporation Price and Consensus