With the recovery in the housing market picking up steam,
homebuilding stocks are not the only way to participate.
Investors can look at other housing-related names such as A.O.
), which makes commercial and residential water heaters under a
variety of labels.
Earlier this week, the company reported Q3 earnings that beat
expectations and raised its full-year profit outlook.
The company said it earned 79 cents a share in the latest
reported quarter. But excluding a one-time gain, earnings
amounted to 71 cents a share, or up 22% from a year ago. It beat
views by 3 cents.
Helped by a buyout and strong Chinese demand, sales grew 12%
to $462.2 million. Last year's acquisition of Lochinvar, a maker
of water heaters and solar systems, added $63 million to its
quarterly sales. Still, revenue came in below views of $472.06
Sales in China jumped 22%. A.O. Smith attributed some of its
strong Chinese performance to its growing distribution
"Q3 is historically the slowest quarter for AOS, especially
true this year following the strong Q212 sales ahead of the June
2012 price increase," wrote Maxim Group analyst William
"However, new housing starts have picked up significantly over
the past few months and we expect this to translate into
increasing new orders for the residential business over the next
two to three months," he added.
A.O. Smith hiked its own full-year profit forecast to $2.85 to
$2.95 a share, up from $2.80 to $2.90 a share. The new outlook
represents growth of 25% to 29%.
The Milwaukee-based firm has a long history of paying
shareholders cash dividends. It has paid them each quarter since
In July, A.O. Smith increased its quarterly payout by 25% to
20 cents a share, its biggest increase in 25 years. On an
annualized basis, the company pays 80 cents a share for a yield
of about 1.4%.
Despite recent market volatility, A.O. Smith is holding near
an all-time high after finding support at its 10-week moving
The stock broke out from a flat base in June.