A. O. Smith Corporation AOS stands to benefit from strength across its businesses, acquisitions and focus on operational excellence. The company remains focused on investing in growth opportunities and strengthening its long-term market position.
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It has a market capitalization of $12.9 billion. Over the past six months, it has gained 27.6% compared with the industry’s growth of 35.4%. AOS currently carries a Zacks Rank #2 (Buy).
Let’s delve into the factors that have been aiding the firm for a while now.
Business Strength: A. O. Smith has been witnessing strong demand for water heaters in North America and higher kitchen product sales in China. For 2024, the company expects North American boiler sales and water treatment sales to increase 8-10% and 10-12% from the year-ago levels, respectively. The introduction of kitchen appliances in China is expected to continue boosting revenues for the Rest of the World segment.
Driven by strong demand for its products, management has issued a bullish guidance. A. O. Smith forecasts sales to increase approximately 3-5% from the prior-year actuals in 2024. It estimates adjusted earnings of $3.90-$4.15 per share in the year, implying growth of 5.6% at the mid-point from the year-earlier figure.
Acquisition Benefits: AOS believes in adding complementary businesses to its portfolio via acquisitions. Its acquisition of Atlantic Filter in June 2022 boosted its position in the water treatment industry, and strengthened its customer base in Florida and adjacent regions. Also, the buyout of Canada-based Giant Factories in October 2021 expanded its commercial and water heater offerings.
Shareholder-Friendly Policies: The company remains committed to rewarding its shareholders through dividend payouts and share buybacks. For instance, in 2023, the firm rewarded shareholders with dividends of $183.5 million, reflecting an increase of 3.6% year over year. In the same year, AOS repurchased 4.4 million shares for approximately $306.5 million. Also, it hiked its quarterly dividend rate by 7% in October 2023.
Strong Liquidity Position; The company’s sound liquidity position adds to its strength. It exited 2023 with cash and cash equivalents of $339.9 million, significantly higher than the current debt of $10 million. This implies that AOS has sufficient cash to meet its current debt obligations.
3 Other Promising Stocks
Some other top-ranked companies from the same space are discussed below.
Powell Industries, Inc. POWL presently carries a Zacks Rank #2 and has a trailing four-quarter earnings surprise of 77.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for POWL’s fiscal 2024 (ending September 2024) earnings has been stable in the past 60 days. Shares of Powell Industries have soared 61.1% in the past six months.
Zurn Elkay Water Solutions Corporation ZWS presently carries a Zacks Rank #2. ZWS delivered a trailing four-quarter average earnings surprise of 12.4%. In the past 60 days, the Zacks Consensus Estimate for its 2024 earnings has increased 3.6%. Shares of the company have risen 22.5% in the past six months.
Eaton Corporation plc ETN presently carries a Zacks Rank #2. ETN delivered a trailing four-quarter average earnings surprise of 4.8%. In the past 60 days, the Zacks Consensus Estimate for Eaton’s 2024 earnings has increased 0.4%. The stock has risen 55% in the past six months.
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Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
Powell Industries, Inc. (POWL) : Free Stock Analysis Report
Zurn Elkay Water Solutions Cor (ZWS) : Free Stock Analysis Report