A. O. Smith Corporation Struggles Amid Market Gains
Valued at a market cap of $10.6 billion, A. O. Smith Corporation (AOS) manufactures and markets commercial and residential water heating equipment and water treatment products. Based in Milwaukee, Wisconsin, the company specializes in innovative and energy-efficient solutions. Their offerings include water heaters, boilers, commercial solar water heating systems, expansion tanks, as well as swimming pool and spa heaters.
Over the last 52 weeks, AOS shares have significantly underperformed compared to the broader market. AOS has seen a decline of 3.2%, whereas the S&P 500 Index ($SPX) has gained an impressive 31%. Year-to-date, AOS stock is down approximately 18%, in stark contrast to the SPX’s nearly 25.2% increase.
Further scrutiny reveals AOS’ struggles against the Industrial Select Sector SPDR Fund (XLI), which has reported a notable 34.5% gain over the past year and a 25.1% rise year-to-date.
Q3 Earnings Release Reflects Challenges
On October 22, AOS saw a slight decline in share price following its Q3 earnings report. The adjusted earnings per share (EPS) fell 8.9% from the previous year to $0.82, meeting analysts’ expectations. Revenue for the quarter was recorded at $902.6 million, marking a 4% decrease year over year, though it exceeded Wall Street’s estimate of $901.6 million. This revenue drop was primarily attributed to lower sales in China and decreased water heater volumes in North America. Additionally, the company revised its full-year 2024 revenue and EPS guidance downward, which may have further shaken investor confidence.
For the fiscal year ending in December, analysts predict that AOS’ EPS will marginally decline to $3.78 compared to the previous year. The company’s history of earnings surprises has been mixed; they have either met or beaten estimates in three out of the last four quarters.
Analyst Ratings and Future Outlook
The consensus among the 11 analysts covering AOS is a “Hold” rating, indicating cautious sentiment. This consensus includes two “Strong Buy,” eight “Hold,” and one “Strong Sell” rating.
This rating is somewhat less optimistic compared to three months ago when three analysts had suggested a “Strong Buy.”
On October 23, Baird maintained a “Neutral” rating for AOS and adjusted its price target to $81, suggesting a potential upside of 10.3% from current price levels. The average price target of $82.88 reflects a modest potential increase of 12.8%, while the highest target of $91 represents an upside of 23.9%.
On the date of publication, Neharika Jain did not hold (either directly or indirectly) any positions in the securities mentioned in this article. All data and information in this article are provided solely for informational purposes. For further details, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
