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A. O. Smith (AOS) Q2 Earnings and Revenues Miss, Down Y/Y

Zacks Equity Research

A. O. Smith Corporation AOS reported disappointing second-quarter 2019 results wherein both earnings and revenues lagged estimates.

The company’s adjusted earnings were 61 cents per share, missing the Zacks Consensus Estimate of 64 cents. Also, the bottom line declined from the year-ago figure of 66 cents.

Inside the Headlines

The company’s sales decreased 8.1% year over year to $765.4 million. The decline was primarily attributable to fall of sales in China and in North America. Also, the figure missed the Zacks Consensus Estimate of $814 million.

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

A.O. Smith’s sales in North America (comprising U.S. and Canadian water heaters and boilers) decreased 2% year over year to $524 million. Lower sales volumes of residential water heater products proved detrimental for the segment.

Segmental operating earnings fell 2% year over year to $122.9 million. The decline was primarily attributable to lower sales and higher steel and other costs, partially offset by the company’s pricing actions.

Quarterly sales in Rest of the World (including China, India and Europe) were down 19% year over year to $249.1 million. The decline was primarily attributable to fall in sales of water heaters and air purifiers, particularly in China.

Operating earnings at the segment declined 35% year over year to $22.4 million in the quarter. Lower sales in China and increase in currency translation proved detrimental to the segment’s income.

Share Repurchases

In first six months of 2019, A.O. Smith repurchased around 2.8 million shares for $132.6 million. At the end of the quarter, the company had approximately 6.3 million shares remaining under the existing discretionary repurchase authority.

Liquidity & Cash Flow

On Jun 30, 2019, A.O. Smith’s cash and cash equivalents totaled $281.6 million compared with $259.7 million as of Dec 31, 2018.

At the end of the reported quarter, long-term debt was $351.8 million compared with $221.8 million as of Dec 31, 2018.

Guidance

Concurrent with second-quarter results, the company revised guidance for 2019. It expects adjusted earnings to lie in the range of $2.35-$2.41 per share compared with the previous estimation of $2.69-$2.75.

Zacks Rank & Key Picks

A.O. Smith currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the Zacks Industrial Products sector are DXP Enterprises, Inc. DXPE, Dover Corporation DOV and Roper Technologies, Inc. ROP. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DXP Enterprises delivered average earnings surprise of 48.47% in the trailing four quarters.

Dover pulled off average positive earnings surprise of 6.91% in the trailing four quarters.

Roper delivered average earnings surprise of 6.92% in the trailing four quarters.

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