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A. O. Smith (AOS) to Post Q1 Earnings: What's in the Offing?

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A. O. Smith Corporation (AOS - Free Report) is scheduled to report first-quarter 2020 results on May 5, before market open.

The company delivered a negative earnings surprise of 5.85%, on average, in the trailing four quarters, missing estimates on all occasions. In the last reported quarter, A. O. Smith posted earnings of 56 cents, which missed the Zacks Consensus Estimate of 60 cents by 6.67%.

In the past three months, the company’s shares have gained 0.2% against the industry’s decline of 15.6%.

 



 

Factors at Play

A. O. Smith is likely to have benefited from its strong position in the replacement market. Steady growth in the demand for water heaters in the commercial industry, and strong momentum of its North America boiler business, particularly in the first two months of the first quarter, are expected to have boosted the company’s top line.

Also, the acquisition of Water-Right (closed in April 2019), which has been strengthening A. O. Smith’s growth opportunities in the water treatment industry especially in the wholesale and independent dealer array, is likely to have augmented first-quarter revenues. In addition, improvement in the effectiveness of the company’s direct-to-consumer channel is likely to get reflected in the upcoming results.

However, weakness in the China end markets is expected to get reflected in A. O. Smith’s top-line results in the first quarter. Also, the impacts of the coronavirus outbreak on the demand for the company’s products along with the governmental regulations imposed in response to the crisis are expected to be reflected in the company’s quarterly results.

Moreover, given its diverse geographic presence, its operations have been subject to issues like unfavorable movement in foreign currencies, interest rate fluctuations and hyperinflation in some foreign countries. In the third and fourth quarters of 2019, weaker China currency adversely impacted sales by about $6 million and $4 million, respectively. This might have hurt its business, particularly in China, in the first quarter as well.

Amid this backdrop, the Zacks Consensus Estimate for revenues from A. O. Smith's North America segment is currently pegged at $546 million, indicating 4.6% growth from the year-ago quarter’s reported number. The consensus estimate for revenues from Rest of the World stands at $158 million, suggesting a decline of 31.9% year over year.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat. But that is not the case here as we will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: A. O. Smith has an Earnings ESP of -4.03% as the Most Accurate Estimate is pegged at 33 cents, lower than the Zacks Consensus Estimate of 34 cents.

A. O. Smith Corporation Price and EPS Surprise

 

A. O. Smith Corporation Price and EPS Surprise

A. O. Smith Corporation price-eps-surprise | A. O. Smith Corporation Quote

Zacks Rank: A. O. Smith carries a Zacks Rank #3 (Hold).

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right mix of elements to beat estimates this time around:

Intellicheck, Inc. (IDN - Free Report) has an Earnings ESP of +66.67% and a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axon Enterprise, Inc. (AAXN - Free Report) currently has an Earnings ESP of +2.13% and a Zacks Rank #3.

Ball Corporation (BLL - Free Report) presently has an Earnings ESP of +1.56% and a Zacks Rank of 3.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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