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A. O. Smith Corporation (AOS)
NYSE:AOS
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A. O. Smith Corporation
(NYSE:AOS)63Neutral
Positive Factors
Financial Strategy
AOS’s balance sheet remains quite strong, supportive of its programmatic share buybacks and tuck-in M&A strategy.
Market Position
A.O. Smith is among the largest manufacturers of water heaters worldwide with leading market share in NA residential and commercial, as well as in China.
Negative Factors
China Market Impact
Continued weakness in China significantly impacted sales, particularly in core water heating and water treatment products.
Earnings Guidance
A.O. Smith announced preliminary 3Q24 results showing lower revenue and EPS than expected.
A. O. Smith Corporation (AOS) vs. S&P 500 (SPY)
Market Cap
$9.54B
Dividend Yield1.99%
Average Volume (3M)1.50M
Price to Earnings (P/E)18.3
Beta (1Y)0.95
Revenue Growth-0.90%
EPS Growth-1.69%
CountryUS
Employees12,700
SectorIndustrials
Sector Strength66
IndustryIndustrial Goods
Share Statistics
EPS (TTM)3.62
Shares Outstanding117,659,000
10 Day Avg. Volume1,343,293
30 Day Avg. Volume1,503,235
Financial Highlights & Ratios
PEG Ratio0.20
Price to Book (P/B)N/A
Price to Sales (P/S)2.51
Price to Cash Flow (P/CF)10.80
P/FCF Ratio10.70
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$78.17Price Target Upside19.14% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering7
A. O. Smith Corporation Business Overview & Revenue Model
Company DescriptionA. O. Smith Corp. manufactures residential and commercial water heating equipment and air purification products. It operates through the following two segments: North America and Rest of World. The North America segment manufactures and markets comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks. The Rest of World segment comprises of China, Europe, and India; and manufactures and markets water treatment products. The company was founded by Charles Jeremiah Smith in 1874 and is headquartered in Milwaukee, WI.
How the Company Makes MoneyA. O. Smith Corporation generates revenue primarily through the sale of its water heaters, boilers, and water treatment products. The company's revenue model is centered around manufacturing and distributing these products to a diverse customer base, including homeowners, businesses, and industrial facilities. Key revenue streams include sales from its North American operations, which account for a significant portion of its earnings, and international sales, particularly in fast-growing markets such as China and India. Additionally, A. O. Smith benefits from strategic partnerships with distributors and retailers, enabling broader market reach and customer access. The company's focus on energy efficiency and innovative product offerings also contributes to its competitive position and revenue growth.
A. O. Smith Corporation Financial Statement Overview
Summary
A. O. Smith Corporation demonstrates strong financial health with robust profitability, low leverage, and efficient cash flow management. While revenue growth has slightly contracted, the company continues to maintain high margins and a strong equity position, suggesting stability and resilience in its operations.Income Statement
A. O. Smith Corporation demonstrates steady revenue and profit generation with a gross profit margin of 38.1% and a net profit margin of 14.0% in the latest year. However, the revenue growth is slightly negative at -0.9% compared to the previous year. The company maintains strong EBIT and EBITDA margins, both at 18.8%, showcasing operational efficiency.78
Positive
Balance Sheet
The balance sheet reflects a robust equity base with a debt-to-equity ratio of 0.11, indicating low financial leverage. The company exhibits a healthy return on equity of 28.3%, signifying effective use of shareholders' investments. The equity ratio stands at 58.1%, highlighting a strong capital structure with more than half of the assets financed by equity.82
Very Positive
Cash Flow
A. O. Smith Corporation's cash flow performance remains solid, with a free cash flow to net income ratio of 0.89, indicating strong cash conversion. However, the free cash flow has declined by 20.7% year-over-year, suggesting potential challenges in cash generation. The operating cash flow to net income ratio of 1.09 signifies efficient operating cash flow management.75
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 3.82B | 3.85B | 3.75B | 3.54B | 2.90B | Gross Profit |
| 1.46B | 1.48B | 1.33B | 1.31B | 1.11B | EBIT |
| 716.80M | 757.40M | 233.10M | 629.90M | 458.90M | EBITDA |
| 786.50M | 823.80M | 310.00M | 707.80M | 531.20M | Net Income Common Stockholders |
| 533.60M | 556.60M | 235.70M | 487.10M | 344.90M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 276.10M | 363.40M | 481.80M | 631.40M | 689.60M | Total Assets |
| 3.24B | 3.21B | 3.33B | 3.47B | 3.16B | Total Debt |
| 216.70M | 155.20M | 366.90M | 219.00M | 147.60M | Net Debt |
| -22.90M | -184.70M | -24.30M | -224.30M | -425.50M | Total Liabilities |
| 1.36B | 1.37B | 1.58B | 1.64B | 1.31B | Stockholders Equity |
| 1.88B | 1.84B | 1.75B | 1.83B | 1.85B |
| Cash Flow | Free Cash Flow | |||
| 473.80M | 597.70M | 321.10M | 566.00M | 505.30M | Operating Cash Flow |
| 581.80M | 670.30M | 391.40M | 641.10M | 562.10M | Investing Cash Flow |
| -267.10M | -24.10M | 8.10M | -349.90M | 11.80M | Financing Cash Flow |
| -408.40M | -684.70M | -430.80M | -421.00M | -374.80M |
A. O. Smith Corporation Technical Analysis
Negative
65.61
Price Trends
67.78
Negative
71.54
Negative
76.89
Negative
Market Momentum
-0.59
Negative
41.94
Neutral
39.98
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AOS, the sentiment is Negative. The current price of 65.61 is below the 20-day moving average (MA) of 66.04, below the 50-day MA of 67.78, and below the 200-day MA of 76.89, indicating a bearish trend. The MACD of -0.59 indicates Negative momentum. The RSI at 41.94 is Neutral, neither overbought nor oversold. The STOCH value of 39.98 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AOS.
A. O. Smith Corporation Risk Analysis
A. O. Smith Corporation disclosed 19 risk factors in its most recent earnings report. A. O. Smith Corporation reported the most risks in the “Ability to Sell” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
A. O. Smith Corporation Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $6.82B | 23.54 | 17.05% | 0.82% | 9.53% | 10.98% | |
74 Outperform | $31.80B | 35.86 | 0.00% | 1.14% | 16.23% | 34.42% | |
73 Outperform | $11.79B | 26.37 | 15.73% | 1.41% | 0.78% | -8.42% | |
73 Outperform | $15.53B | 25.17 | 17.55% | 1.02% | -0.53% | 0.13% | |
67 Neutral | $14.73B | 29.21 | 13.31% | 1.46% | -0.16% | -15.42% | |
63 Neutral | $9.54B | 18.32 | 28.33% | 1.99% | -0.90% | -1.69% | |
62 Neutral | $8.11B | 13.34 | 1.17% | 3.02% | 4.16% | -15.14% |
* Industrials Sector Average
Performance Comparison
AOS
A. O. Smith Corporation
65.61
-17.45
-21.01%
IEX
IDEX
185.88
-48.15
-20.57%
NDSN
Nordson
206.55
-56.18
-21.38%
PNR
Pentair
89.67
11.33
14.46%
WTS
Watts Water Technologies
204.60
1.96
0.97%
XYL
Xylem
127.32
2.37
1.90%
A. O. Smith Corporation Earnings Call Summary
Earnings Call Date: Jan 30, 2025 | % Change Since: -4.73% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a challenging year for A. O. Smith with declines in overall sales and earnings driven by lower water heater volumes and weakness in the China market. However, there are positive signs, including growth in the North America boiler segment, the Indian market, and substantial capital returned to shareholders. The company's sustainability goals and free cash flow generation are also positive. Despite these achievements, significant challenges remain, particularly in China and the North American water heater market.Highlights
Capital Return to Shareholders
A. O. Smith returned $496 million to shareholders through dividends and share repurchases in 2024.
North America Boiler Business Growth
Sales in the North America boiler segment increased by 8% in 2024, driven by products like the CREST commercial boiler with Hellcat technology.
India Business Growth
Legacy Indian business sales grew 13% in local currency in 2024, approximately twice the market growth rate.
New Sustainability Goal
Announced a new sustainability goal to reduce water usage by 40 million gallons by 2030.
Free Cash Flow Generation
Generated free cash flow of $474 million in 2024, with a conversion rate of 89%.
Lowlights
Overall Sales Decline
Sales decreased by 1% in 2024 to $3.8 billion, driven by lower water heater volumes and lower sales in China.
China Market Weakness
Full year sales in China decreased by 6% in local currency due to a weak economy and soft consumer demand.
North America Water Heater Sales Decline
North America water heater sales decreased 1% in 2024, as pricing benefits were offset by lower volumes.
Fourth Quarter Earnings Decline
Adjusted earnings in the fourth quarter were $0.85 per share, down from $0.97 per share in the fourth quarter of 2023.
Rest of the World Segment Margin Decline
Adjusted segment margin for the Rest of the World decreased by 210 basis points to 8.3% in 2024.
Company Guidance
During the A. O. Smith Corporation Fourth Quarter 2024 Earnings Conference Call, the company outlined several key financial metrics and strategic initiatives for the fiscal year 2025. The company reported a 1% year-over-year decrease in sales, totaling $3.8 billion in 2024, with adjusted earnings per share at $3.73. They returned $496 million to shareholders through dividends and share repurchases. Looking forward, A. O. Smith provided guidance for 2025, projecting an EPS range of $3.60 to $3.90 per share, with expected top-line growth of flat to up 2%. The company highlighted its continued investment in innovation, such as the launch of new tankless water heaters and the expansion of its R&D facilities. Additionally, A. O. Smith plans to repurchase approximately $400 million in shares, with a projected free cash flow of $500 million to $550 million. The company also aims to improve margins in the North American water treatment business by 250 basis points following a strategic realignment.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.