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A. O. Smith Acquires Water-Right for $107M, to Pay Dividend

Zacks Equity Research

A. O. Smith Corporation AOS announced that it acquired Appleton, WI-based Water-Right, Inc. The transaction was valued at $107 million, paid entirely in cash by A. O. Smith. In a separate release, the company declared that it will pay a quarterly dividend to shareholders on May 15.

It is worth mentioning here that A. O. Smith’s stock price increased roughly 0.1% at the close of the trading session on Apr 8, 2019. The closing price on that day was $55.22.

Details on Water-Right Buyout

Water-Right specializes in providing water treatment solutions. Its products are meant for use in residential and commercial end markets. Main product brands are WaterCare, Impression Series, Evolve, Sanitizer Series and CustomCare. The firm’s retail facility is known as Water-Right Services while its state-certified lab is popularly known as Clean Water Testing LLC. Annual revenues of this firm are roughly $60 million.

As noted, the Water-Right buyout includes Water-Right’s company, Mineral-Right, Inc., all of its subsidiaries and real estates. The acquisition is anticipated to strengthen A. O. Smith’s growth opportunities in the water treatment industry, especially in the wholesale and independent dealer array. Also, the transaction added skilled workforce of 90 people to A. O. Smith.

The minimal financial impact is predicted from this buyout.

Shareholder-Friendly Policy

As noted, A. O. Smith received the approval of the board of directors to pay a quarterly cash dividend of 22 cents per share to shareholders of record as of Apr 30. So far this year, this is going to be the second payout that the company will make.

It is worth noting here that A. O. Smith hiked the quarterly dividend rate by 22% from 18 cents to 22 cents in October 2018.
 
Zacks Rank & Stocks to Consider

With a market capitalization of nearly $9.4 billion, the company currently carries a Zacks Rank #3 (Hold). Strength in the defensive replacement business, stronger demand for popular brands and shareholder-friendly policies are boon for A. O. Smith. However, forex woes, rising steel prices and challenges in China business are concerns.

In the past three months, shares of the company have increased 18.6% versus the industry’s growth of 9.8%.




In the past 60 days, the Zacks Consensus Estimate for earnings has remained unchanged at $2.72 for 2019 and $2.98 for 2020. These estimates represent year-over-year growth of 4.2% for 2019 and 9.4% for 2020.

A. O. Smith Corporation Price and Consensus

 

A. O. Smith Corporation Price and Consensus | A. O. Smith Corporation Quote

Some better-ranked stocks in the Zacks Industrial Products sector are DXP Enterprises, Inc. DXPE, Sun Hydraulics Corporation SNHY and Roper Technologies, Inc. ROP. All these stocks sport a Zacks Rank #1 (Strong Buy), Roper carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for all these three stocks have improved for the current year. Further, average earnings surprise for the last four quarters was positive 46.55% for DXP Enterprises, 2.27% for Sun Hydraulics and 4.96% for Roper.

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