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A. O. Smith (AOS) Earnings and Sales Miss Estimates in Q1

Zacks Equity Research

A. O. Smith Corporation AOS has reported disappointing first-quarter 2020 results, wherein both earnings and sales missed estimates.

The company’s adjusted earnings were 32 cents per share, missing the Zacks Consensus Estimate of 34 cents. Also, the bottom line declined from the year-ago figure of 53 cents.

A. O. Smith Corporation Price, Consensus and EPS Surprise

 

A. O. Smith Corporation Price, Consensus and EPS Surprise

A. O. Smith Corporation price-consensus-eps-surprise-chart | A. O. Smith Corporation Quote

Top-Line Details

The company’s first-quarter net sales decreased 14.9% year over year to $636.9 million. The decline was primarily attributable to lower sales in China and weakness in other global end markets amid the coronavirus pandemic. Also, the figure missed the Zacks Consensus Estimate of $655 million.

A.O. Smith’s sales in North America (comprising the U.S. and Canadian water heaters and boilers) moved up 2% year over year to $532.9 million. The segment’s results benefited from higher sales volume of water treatment and water heater products, and contribution from its Water-Right acquisition.

Segmental operating earnings were up about 10% to $127.1 million on a year over year basis. The improvement was driven by benefits of higher sales volume of water treatment products and lower steel costs.

Quarterly sales in Rest of World (including China, India and Europe) fell about 53% year over year to $110.2 million. The decline was primarily attributable to a significant decline in consumer demand, owing to the coronavirus-led market downturn.

Operating loss at the segment came in at $42.2 million against operating earnings of $12.3 million recorded in the year-ago quarter. Lower sales in China proved detrimental to the segment’s income.

Liquidity & Cash Flow

On Mar 31, 2020, A.O. Smith’s cash and cash equivalents totaled $416.1 million compared with $374 million as of Dec 31, 2019.

At the end of the reported quarter, long-term debt was $335.6 million compared with $277.2 million as of Dec 31, 2019.

In the first three months of 2020, cash provided by the operating activities totaled $54.1 million compared with $21.6 million in the year-ago comparable period.

Share Repurchases

In the first quarter of 2020, A.O. Smith repurchased 1.3 million shares for $57 million.

Guidance

On uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, the company has suspended its guidance for 2020.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are Intellicheck, Inc. IDN, iRobot Corporation IRBT and Berry Global Group, Inc. BERY. All the companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intellicheck delivered a positive earnings surprise of 36.91%, on average, in the trailing four quarters.

iRobot delivered a positive earnings surprise of 233.53%, on average, in the trailing four quarters.

Berry Global delivered a positive earnings surprise of 6.63%, on average, in the trailing four quarters.

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