A. O. Smith Corporation (AOS) AI Stock Analysis

• Market Cap: $10.20B
• Dividend Yield: 1.89%
• Average Volume (3M): 1.49M
• Price to Earnings (P/E): 20.3
• Beta (1Y): 0.81
• Revenue Growth: -3.53%
• EPS Growth: -7.46%
• Country: US
• Employees: 12,700
• Sector: Industrials
• Sector Strength: 79
• Industry: Industrial - Machinery
• EPS (TTM): 1.07
• Shares Outstanding: 114,259,520
• 10 Day Avg. Volume: 1,052,742
• 30 Day Avg. Volume: 1,486,160
• PEG Ratio: N/A
• Price to Book (P/B): 0.00
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 0.93
• Enterprise Value/Revenue: 2.51
• Enterprise Value/Gross Profit: 6.56
• Enterprise Value/Ebitda: 12.37
• 1Y Price Target: $79.00
• Price Target Upside: 9.95% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 10

• Rating: 76 Outperform
• Price Target: $81.00 ▲(12.73% Upside)

A. O. Smith Corporation maintains a strong financial foundation with commendable profitability and a robust balance sheet, which is the most significant factor contributing to its stock score. Technical indicators also show a positive outlook, supporting the stock's potential for growth. However, mixed signals from the recent earnings call and a fair valuation suggest a balanced view with moderate upside potential.

Positive Factors

Commercial Water Heater Shipments

Total shipments of commercial water heaters increased 22.3% month over month and increased 0.8% year over year.

Strategic Shift

A broader strategic shift could be emerging following the CEO succession.

Negative Factors

Residential Water Heater Shipments

Total shipments of residential water heaters decreased 5.1% year over year.

Steel Costs

The company guided to a 15-20% increase in steel costs in the second half, which implies greater North America operating margin pressure.

A. O. Smith Corporation Business Overview & Revenue Model

Company Description

A. O. Smith Corporation manufactures and markets residential and commercial gas, heat pump and electric water heaters, boilers, tanks, and water treatment products in North America, China, Europe, and India. It operates through two segments, North America and Rest of World. The company offers water heaters for residences, restaurants, hotels and motels, office buildings, laundries, car washes, and small businesses; commercial boilers for hospitals, schools, hotels, and other large commercial buildings, as well as residential boilers for homes, apartments, and condominiums; and water treatment products comprising point-of-entry water softeners, well water solutions, and whole-home water filtration products, on-the-go filtration bottles, point-of-use carbon, and reverse osmosis products for residences, restaurants, hotels, and offices. It also provides food and beverage filtration products; expansion tanks, commercial solar water heating systems, swimming pool and spa heaters, and related products and parts; and heat pumps, electric wall-hung, gas tankless, combi-boiler, heat pump and solar water heaters. The company offers its products primarily under the A. O. Smith, State, Lochinvar, and water softener brands. It distributes its products through independent wholesale plumbing distributors, as well as through retail channels consisting of hardware and home center chains, and manufacturer representative firms; and offers Aquasana branded products directly to consumers through e-commerce, as well as other online retailers. A. O. Smith Corporation was founded in 1874 and is headquartered in Milwaukee, Wisconsin.

How the Company Makes Money

A. O. Smith generates revenue through the sale of its core products, which include residential and commercial water heaters, boilers, and water treatment systems. The company operates in two main segments: the North America segment and the Rest of the World segment, with a significant portion of its revenue coming from North America due to the strong demand for energy-efficient water heating solutions. Key revenue streams include direct sales to retailers, wholesalers, and distributors, as well as sales through online platforms. Additionally, A. O. Smith benefits from partnerships with major retailers and plumbing professionals, enhancing its market reach. The company's focus on innovation, particularly in developing advanced technologies and sustainable products, further contributes to its revenue growth by attracting environmentally conscious consumers and businesses.

A. O. Smith Corporation Financial Statement Overview

Summary

A. O. Smith Corporation displays a commendable financial performance with solid profitability and a strong balance sheet, characterized by low leverage and high equity. The company effectively generates cash, although recent trends in revenue and free cash flow growth suggest a need for monitoring. Overall, the financial health is strong, providing a stable foundation for future growth.

Income Statement

A. O. Smith Corporation demonstrates stable profitability with a consistent gross profit margin of around 38%. While the TTM revenue shows a slight decrease compared to the previous year, the net profit margin remains strong at approximately 13.7%. The EBIT and EBITDA margins are healthy, indicating efficient operational performance. However, recent revenue growth has slightly declined, which could be a potential area of concern if the trend continues.

Balance Sheet

The balance sheet is robust with a strong equity base, as evidenced by a high equity ratio of approximately 64.4%. The debt-to-equity ratio is low at around 0.16, demonstrating prudent financial leverage. The return on equity is impressive, reflecting efficient utilization of shareholder funds. Overall, the company maintains a stable financial position with low leverage and substantial equity.

Cash Flow

The cash flow statement reveals a solid operating cash flow to net income ratio, indicating strong cash generation capabilities. The free cash flow has decreased slightly over the TTM period, but the free cash flow to net income ratio remains healthy. While the company effectively converts its earnings into cash, the decline in free cash flow growth may warrant attention if it persists.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	3.82B	3.85B	3.75B	3.54B	2.90B
Gross Profit	1.46B	1.48B	1.33B	1.31B	1.11B
EBITDA	786.50M	823.80M	310.00M	707.80M	531.20M
Net Income	533.60M	556.60M	235.70M	487.10M	344.90M
Balance Sheet
Total Assets	3.24B	3.21B	3.33B	3.47B	3.16B
Cash, Cash Equivalents and Short-Term Investments	276.10M	363.40M	481.80M	631.40M	689.60M
Total Debt	216.70M	155.20M	366.90M	219.00M	147.60M
Total Liabilities	1.36B	1.37B	1.58B	1.64B	1.31B
Stockholders Equity	1.88B	1.84B	1.75B	1.83B	1.85B
Cash Flow
Free Cash Flow	473.80M	597.70M	321.10M	566.00M	505.30M
Operating Cash Flow	581.80M	670.30M	391.40M	641.10M	562.10M
Investing Cash Flow	-267.10M	-24.10M	8.10M	-349.90M	11.80M
Financing Cash Flow	-408.40M	-684.70M	-430.80M	-421.00M	-374.80M

A. O. Smith Corporation Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 71.85
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AOS, the sentiment is Positive. The current price of 71.85 is above the 20-day moving average (MA) of 71.43, above the 50-day MA of 68.55, and above the 200-day MA of 67.85, indicating a bullish trend. The MACD of 0.96 indicates Positive momentum. The RSI at 55.74 is Neutral, neither overbought nor oversold. The STOCH value of 64.10 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AOS.

A. O. Smith Corporation Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
WTS	79 Outperform	$9.15B	29.51	17.75%	0.66%	2.96%	12.62%
SPXC	78 Outperform	$8.79B	41.63	15.02%	―	8.90%	29.18%
PNR	76 Outperform	$17.55B	29.25	17.15%	0.93%	-0.25%	-7.32%
AOS	76 Outperform	$10.20B	20.31	27.60%	1.89%	-3.53%	-7.46%
CR	72 Outperform	$11.05B	36.22	18.23%	0.46%	3.01%	27.13%
IEX	70 Outperform	$12.49B	26.78	12.25%	1.70%	4.73%	-19.15%
Sector *	63 Neutral	$10.76B	16.24	6.80%	2.07%	2.60%	-16.34%

A. O. Smith Corporation Corporate Events

A. O. Smith Announces Leadership Transition Effective July 2025

On April 25, 2025, A. O. Smith Corporation announced a leadership transition effective July 1, 2025, with Kevin J. Wheeler moving from Chairman and CEO to Executive Chairman, and Stephen M. Shafer, the current President and COO, being appointed as the new CEO. This change marks a significant shift in the company’s leadership as Shafer, who joined A. O. Smith in March 2024, will be responsible for global operations and strategy development. Under Wheeler’s leadership, the company experienced substantial growth, including key acquisitions and navigating challenges during the COVID-19 pandemic.