A. O. Smith (AOS) Q3 Earnings & Revenues Surpass Estimates
A. O. Smith Corporation AOS has reported better-than-expected third-quarter 2021 results, wherein adjusted earnings of 82 cents per share beat the Zacks Consensus Estimate of 67 cents. The bottom line also increased 24.2% from the year-ago figure of 66 cents.
Top-Line Details
The company’s third-quarter net sales increased 20.3% year over year to $914.6 million. The increase was driven by higher sales in North America and China, supported by its pricing actions. The top line surpassed the Zacks Consensus Estimate of $838 million.
A.O. Smith’s quarterly sales in North America (comprising the U.S. and Canada water heaters and boilers) moved up 21% year over year to $658.2 million. The segment’s results were driven by higher sales of water heaters, boilers, and water treatment products, supported by its pricing actions.
Segmental operating earnings were up 14% to $151.8 million on a year-over-year basis. The increase was on account of higher sales volume and inflation-related price increases, partially offset by a rise in material and logistics costs.
Quarterly sales in the Rest of the World (including China, India, and Europe) grew 19% year over year to $263.1 million. The increase was primarily backed by higher consumer demand for all major product categories in China.
The segment’s operating earnings were $26.8 million, reflecting an increase of 60% year over year. Higher sales volume, partially offset by higher operating costs, boosted the segment’s income.
A. O. Smith Corporation Price, Consensus and EPS Surprise
A. O. Smith Corporation price-consensus-eps-surprise-chart | A. O. Smith Corporation Quote
Margin Details
In the quarter, A.O. Smith’s cost of sales was $574.3 million, up 24.1% on a year-over-year basis. Selling, general & administrative expenses were $177.6 million, up 11.4%.
Gross profit increased 14.5% year over year to $340.3 million with a margin of 37.2%, down 190 basis points. Interest expenses declined 37.5% to $1 million.
Liquidity & Cash Flow
On Sep 30, 2021, A.O. Smith’s cash and cash equivalents totaled $486.1 million compared with $444.8 million in the previous quarter.
At the end of the reported quarter, long-term debt was $99.6 million, stable on a sequential basis.
In the first nine months of 2021, cash provided by the operating activities totaled $376.8 million compared with $330.4 million in the year-ago period.
Share Repurchases
In the first nine months of 2021, the company repurchased shares worth $212 million compared with $56.7 million in the year-ago period. It paid dividends worth $125.4 million compared with $116.5 million a year ago.
Guidance
The company raised revenue and earnings guidance for 2021. For the year, it anticipates revenues to increase 20-21% from the previous year, higher than growth of 17-18% guided earlier.
It currently expects adjusted earnings of $2.86-$2.90 compared with $2.70-$2.76 guided previously.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the Zacks Industrial Products sector are Nordson Corporation NDSN, AZZ Inc. AZZ, and Franklin Electric Co., Inc. FELE. While Nordson currently sports a Zacks Rank #1 (Strong Buy), AZZ and Franklin Electric carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nordson delivered an earnings surprise of 17.77%, on average, in the trailing four quarters.
AZZ delivered an earnings surprise of 25.47%, on average, in the trailing four quarters.
Franklin Electric delivered an earnings surprise of 16.27%, on average, in the trailing four quarters.
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