Zacks Investment Research upgraded
AO Smith Corp.
) to a Zacks Rank #1 (Strong Buy) on May 21, 2013.
Why the Upgrade?
ABB LTD-ADR (ABB): Free Stock Analysis Report
SMITH (AO) CORP (AOS): Free Stock Analysis
CAPSTONE TURBIN (CPST): Free Stock Analysis
EMERSON ELEC CO (EMR): Free Stock Analysis
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A series of events taking place in quick succession in Apr 2013
helped the shares of AO Smith rise 11.5% since the beginning of
the month till date. Upward revision in earnings estimates has
been witnessed subsequent to the company's release of its first
quarter 2013 financial results on Apr 23, 2013.
AO Smith posted adjusted earnings per share of 96 cents that far
exceeded the Zacks Consensus Estimate of 38 cents. Revenue in the
first quarter grew 8.7% year over year as sales from North
American operations rose 7.2% while from Rest of the World
increased by 11.4%.
Talking of expenses and margins, cost of sales as a percentage of
revenue fell 342 basis points while gross margin went up by the
same magnitude in the quarter. Operating margin came in at 15.2%
as against 12.2% in the year-ago quarter.
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. Housing market
recovery is likely to boost sales in the U.S. while expansion in
global markets is expected to add to the growth momentum.
Adjusted earnings per share would be within the $3.40-$3.56 range
as against $3.25-$3.45 expected earlier.
Prior to the earnings release, AO Smith in April declared a 20%
increase in its quarterly dividend rate that settled at 24 cents
per share and a two-for-one stock split. Also, the company
announced the closure of manufacturing operations at its Fergus,
Ontario, residential water heater facility. This measure was
undertaken to bring residential and light commercial water
heating operations under one roof and to increase the
competitiveness of the operation.
Solid upbeat results posted by AO Smith in its trailing four
quarters have a positive average of 13.3%. Outlook remains bright
for the company as the Zacks Consensus Estimate for AO Smith went
up in the last 30 days. For 2013, the estimate has increased by
4.7% to $1.80 and by 2.0% to $2.06 for 2014.
Other Stocks to Consider
AO Smith Corp. is a $3.7 billion industrial electrical equipment
maker. Other stocks that are worth a look in the industry are
Capstone Turbine Corp.
Emerson Electric Co.