U.S. Markets closed

A.O. Smith (AOS) to Report Q1 Earnings: What's in the Cards?

Zacks Equity Research

A.O. Smith Corporation AOS is scheduled to report first-quarter 2019 results on Apr 30, before market open.

The company pulled off average positive earnings surprise of 2.74% in the trailing four quarters, beating estimates thrice. Notably, in the last reported quarter, it posted earnings of 74 cents, which surpassed the Zacks Consensus Estimate of 71 cents by 4.23%.

In the past three months, the company’s shares have gained 17% against the industry’s growth of 8.7%.

Let’s see how things are shaping up for this announcement.

Factors to Influence Q1 Results

A.O. Smith's strong position in the replacement market for U.S. water heaters and boilers is a growth driver. The company is witnessing steady growth in the demand for water heater volumes in the U.S. residential industry on the back of new construction activities and continued growth in tankless units. All these factors bode well for its first quarter top-line results.

Moreover, the company’s defensive replacement market, which accounts for approximately 85% of the North American water heater and boiler volumes, has been witnessing an uptrend, thus stoking growth. In addition, strong momentum of its boiler business coupled with strength in the water treatment products business will boost its upcoming results.

Amid this backdrop, the Zacks Consensus Estimate for revenues from A.O. Smith's North America geographic segment for the to-be-reported quarter is currently pegged at $544 million, indicating growth of 8.4% from the year-ago reported figure. Revenues from Rest of the World are also anticipated to be $229 million. It generated revenues of $294 million in the year-ago quarter.

However, the company expects higher steel prices, high freight and other costs to adversely impact its results. Also, persistent weakness in the Chinese economy, coupled with relatively flat consumer demand is likely to adversely impact sales, particularly in the Rest of World segment.

In addition, it expects unfavorable movement in Chinese currency to have an adversely impact of 7% on revenues in the first quarter. Furthermore, high corporate expenses might negatively impact the company’s earnings.

Earnings Whispers

Our proven model provides some idea on the stocks that are about to release earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with A.O. Smith is given below.

Earnings ESP: It has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 58 cents.

A. O. Smith Corporation Price and EPS Surprise

A. O. Smith Corporation Price and EPS Surprise | A. O. Smith Corporation Quote

Zacks Rank: The company carries a Zacks Rank #3, which increases the predictive power of the ESP. However, its ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Key Picks

Here are some companies in the Zacks Industrial Products sector that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

DXP Enterprises, Inc. DXPE has an Earnings ESP of +2.50% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dover Corporation DOV has an Earnings ESP of +0.29% and a Zacks Rank #2.

Century Aluminum Company CENX has an Earnings ESP of +1.06% and a Zacks Rank #2.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
 
DXP Enterprises, Inc. (DXPE) : Free Stock Analysis Report
 
Dover Corporation (DOV) : Free Stock Analysis Report
 
Century Aluminum Company (CENX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research