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A. O. Smith Corporation (AOS)
NYSE:AOS

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

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A. O. Smith Corporation

(NYSE:AOS)

Rating:69Neutral
Price Target:
$74.00
▲(5.01%Upside)
A. O. Smith's overall stock score reflects strong financial health, with effective cost management and low leverage being key strengths. However, technical indicators suggest caution, and valuation metrics point to a fairly valued stock. Mixed earnings call sentiments, including challenges in some market segments and tariff uncertainties, weigh on the score.
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.
North American Sales Performance
A.O. Smith's North American sales are predicted to be up 1.8% year over year, which is above consensus for the North American Segment.
Negative Factors
Heating and Cooling Equipment Shipments
Recent U.S. heating and cooling equipment shipment data showed that total shipments of residential water heaters decreased 11.3% month over month and decreased 8.1% year over year.
Residential Water Heater Shipments
Total shipments of residential water heaters decreased 5.1% year over year.

A. O. Smith Corporation (AOS) vs. SPDR S&P 500 ETF (SPY)

A. O. Smith Corporation Business Overview & Revenue Model

Company DescriptionA. 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 MoneyA. O. Smith Corporation generates revenue primarily through the sale of water heating and water treatment products. The company's key revenue streams include the manufacture and distribution of residential and commercial water heaters, boilers, and water treatment systems. A. O. Smith sells its products through a network of wholesale distributors, retailers, and directly to consumers, catering to both new construction and replacement markets. The company also capitalizes on its international presence, particularly in high-growth regions like China, where rising urbanization and increased demand for clean water contribute significantly to its earnings. Strategic partnerships with retailers and investments in research and development further enhance A. O. Smith's ability to deliver innovative and efficient products, thus driving sales and profitability.

A. O. Smith Corporation Earnings Call Summary

Earnings Call Date:Apr 29, 2025
(Q1-2025)
|
% Change Since: 9.34%|
Next Earnings Date:Jul 24, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mix of positive and negative aspects. While there were notable achievements such as leadership transition, growth in North America boiler sales, and successful cost management efforts, challenges included declines in water heater sales and the Chinese market, overall sales decrease, and tariff-related cost uncertainties.
Q1-2025 Updates
Positive Updates
Leadership Transition
Steve Shafer will assume the role of President and Chief Executive Officer effective July 1st, with Kevin Wheeler remaining engaged as Executive Chairman of the Board.
North America Boiler Sales Growth
North America boiler sales increased by 10% compared to the first quarter of 2024, continuing to outperform the market.
Share Repurchase Program
Repurchased $121 million of shares in the first quarter of 2025, front-loading a portion of the full-year repurchase outlook of $400 million.
Profitability Tracking
First quarter profitability is tracking in line with the full-year 250 basis point improvement goal in North American water treatment business.
SG&A Cost Management
Cost containment actions resulted in nearly flat SG&A spend compared to the first quarter last year, despite inflation and acquisition expenses.
Negative Updates
Decline in North America Water Heater Sales
North America water heater sales declined 4% in the first quarter, primarily driven by lower volumes and a challenging year-over-year comparison.
China Market Weakness
China third-party sales decreased 4% due to ongoing economic weakness and soft consumer demand, with residential water treatment products and gas water heaters seeing lower volumes.
Overall Sales Decline
Sales of $964 million in the first quarter of 2025 decreased by 2% year-over-year, with earnings per share decreasing by 5% compared to the prior period.
Tariff-Related Cost Uncertainty
Tariff-related impacts could increase total cost of goods sold by approximately 6% to 8%, with ongoing uncertainty around tariffs affecting pricing and supply chain strategies.
Company Guidance
In the A. O. Smith Corporation's first-quarter 2025 earnings call, the company maintained its EPS guidance range of $3.60 to $3.90 per share, with an expected midpoint slightly higher than the 2024 adjusted EPS. The company reported first-quarter sales of $964 million, a 2% year-over-year decrease, and earnings of $0.95 per share, a 5% decrease from the previous year. North American segment sales were $749 million, reflecting a 2% decrease, while the rest of the world segment recorded sales of $227 million, remaining flat year-over-year. The company's guidance considered potential impacts from announced tariffs, estimating a 6% to 8% increase in the total cost of goods sold, exclusive of mitigation efforts. A. O. Smith also projects a capital expenditure of $90 to $100 million for 2025, with free cash flow expected to be between $500 and $550 million. The company emphasized its focus on strategic sourcing, cost containment measures, and accelerating the production shift of tankless water heaters from China to Mexico to mitigate tariff impacts.

A. O. Smith Corporation Financial Statement Overview

Summary
A. O. Smith Corporation exhibits strong financial health with stable profitability, efficient operations, and low leverage. Despite challenges in revenue growth, the company maintains solid margins and cash flow metrics, ensuring resilience in the industrial machinery sector. The balance sheet's low debt levels and strong equity position further reinforce financial stability.
Income Statement
75
Positive
A. O. Smith Corporation demonstrates strong profitability with consistent gross and net profit margins over the years. The TTM (Trailing-Twelve-Months) gross profit margin stands at approximately 38.0%, and the net profit margin is 13.7%. Despite a slight decline in revenue from the previous year, the company maintains solid EBIT and EBITDA margins of 18.6% and 19.6% respectively, reflecting efficient cost control and operational performance.
Balance Sheet
80
Positive
The company maintains a healthy balance sheet with a low debt-to-equity ratio of 0.14, highlighting low leverage and financial stability. The equity ratio stands at about 64.3%, indicating a solid equity base. Return on equity (ROE) is robust at 24.9%, showcasing efficient use of shareholder funds to generate profits.
Cash Flow
70
Positive
Cash flow management is strong with a positive free cash flow and a free cash flow to net income ratio of approximately 0.78. However, there is a decline in free cash flow growth compared to previous years. The operating cash flow to net income ratio is healthy at 0.98, indicating effective cash conversion from earnings.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue3.80B3.82B3.85B3.75B3.54B2.90B
Gross Profit1.45B1.46B1.48B1.33B1.31B1.11B
EBITDA768.80M786.50M823.80M310.00M707.80M531.20M
Net Income522.60M533.60M556.60M235.70M487.10M344.90M
Balance Sheet
Total Assets3.27B3.24B3.21B3.33B3.47B3.16B
Cash, Cash Equivalents and Short-Term Investments200.20M276.10M363.40M481.80M631.40M689.60M
Total Debt295.00M216.70M155.20M366.90M219.00M147.60M
Total Liabilities1.41B1.36B1.37B1.58B1.64B1.31B
Stockholders Equity1.86B1.88B1.84B1.75B1.83B1.85B
Cash Flow
Free Cash Flow406.60M473.80M597.70M321.10M566.00M505.30M
Operating Cash Flow513.90M581.80M670.30M391.40M641.10M562.10M
Investing Cash Flow-206.70M-267.10M-24.10M8.10M-349.90M11.80M
Financing Cash Flow-382.90M-408.40M-684.70M-430.80M-421.00M-374.80M

A. O. Smith Corporation Technical Analysis

Technical Analysis Sentiment
Positive
Last Price70.47
Price Trends
50DMA
66.58
Positive
100DMA
65.88
Positive
200DMA
69.73
Positive
Market Momentum
MACD
1.05
Negative
RSI
70.97
Negative
STOCH
89.47
Negative
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 70.47 is above the 20-day moving average (MA) of 65.86, above the 50-day MA of 66.58, and above the 200-day MA of 69.73, indicating a bullish trend. The MACD of 1.05 indicates Negative momentum. The RSI at 70.97 is Negative, neither overbought nor oversold. The STOCH value of 89.47 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AOS.

A. O. Smith Corporation Risk Analysis

A. O. Smith Corporation disclosed 20 risk factors in its most recent earnings report. A. O. Smith Corporation reported the most risks in the "Ability to Sell" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

A. O. Smith Corporation Peers Comparison

Overall Rating
UnderperformOutperform
Sector (65)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
WTWTS
79
Outperform
$8.49B29.1317.61%0.82%3.89%8.17%
PNPNR
78
Outperform
$17.40B27.2818.59%0.95%-0.42%3.23%
78
Outperform
$7.96B39.9515.24%10.78%30.05%
IEIEX
76
Outperform
$13.93B29.3712.73%1.54%1.66%-17.18%
CRCR
72
Outperform
$10.99B36.2018.82%0.48%6.65%39.13%
AOAOS
69
Neutral
$9.73B19.1527.97%1.99%-1.60%-7.12%
65
Neutral
$10.75B15.725.20%1.90%3.09%-27.42%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
AOS
A. O. Smith Corporation
70.47
-14.04
-16.61%
IEX
IDEX
185.42
-15.31
-7.63%
PNR
Pentair
107.68
30.04
38.69%
SPXC
SPX
173.08
20.56
13.48%
WTS
Watts Water Technologies
258.16
73.98
40.17%
CR
Crane Company
186.84
41.29
28.37%

A. O. Smith Corporation Corporate Events

Executive/Board ChangesBusiness Operations and Strategy
A. O. Smith Announces Leadership Transition Effective July 2025
Neutral
Apr 25, 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.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 02, 2025