Zacks Investment Research upgraded
AO Smith Corp.
) to a Zacks Rank #1 (Strong Buy) on Jun 22, 2013.
Why the Upgrade?
Things seem to be working in favor of AO Smith since this
industrial electrical equipment maker reported its first quarter
2013 financial results on Apr 23, 2013. Adjusted earnings per
share came in at 96 cents, way above the Zacks Consensus Estimate
of 38 cents. Revenue grew 8.7% year over year on the back of a
healthy performance in North America and Rest of the World.
Talking of margins, an increase of 342 basis points was seen in
gross margin while operating margin grew 300 basis points year
over year to 15.2%.
Management of AO Smith provided an encouraging outlook for 2013.
The company's businesses, especially its replacement water heater
business in North America is expected to flourish. Adjusted
earnings per share are expected to be within the $1.70-$1.78
range while GAAP earnings will fall within the $1.50-$1.58 per
Further, at its Investor Meet on Jun 10, AO Smith provided its
projections for 2015. Organic revenue is likely to approximate
$2,425 million, suggesting annual organic revenue growth in
excess of 7%. North American operations are expected to benefit
from the U.S. housing market recovery and contribution from
Lochinvar operations while sales from China/India are projected
to grow from 25% in 2012 to 32% in 2015.
AO Smith further communicated that it has directed its capital
spending towards organic growth, acquisition, dividend payments
and share buybacks. For 2015, adjusted earnings per share are
expected to range within the $2.15-$2.50 range, including a
contribution of 35 cents from acquisitions and share buybacks.
Solid quarter results as well as impressive future outlook
triggered a positive revision in earnings estimate for AO Smith.
The Zacks Consensus Estimate for 2013 and 2014 are at $1.80 and
$2.06, representing growth of 4.7% and 2.0%, respectively. Also,
the company had a positive earnings surprise in the trailing four
quarters, with the average being 13.3%.
Other Stocks to Consider
AO Smith Corp. currently has $3.4 billion market capitalization.
Other stocks that are worth a look in the industry are
Plug Power Inc.
Capstone Turbine Corp.
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PLUG POWER INC (PLUG): Free Stock Analysis
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