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A. O. Smith Corporation (NYSE:AOS) just released its latest yearly results and things are looking bullish. Results were good overall, with revenues beating analyst predictions by 2.3% to hit US$2.9b. Statutory earnings per share (EPS) came in at US$2.12, some 8.0% above whatthe analysts had expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following the latest results, A. O. Smith's nine analysts are now forecasting revenues of US$3.04b in 2021. This would be a satisfactory 4.8% improvement in sales compared to the last 12 months. Per-share earnings are expected to swell 14% to US$2.43. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.01b and earnings per share (EPS) of US$2.42 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$60.00. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic A. O. Smith analyst has a price target of US$65.00 per share, while the most pessimistic values it at US$35.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the A. O. Smith's past performance and to peers in the same industry. The analysts are definitely expecting A. O. Smith's growth to accelerate, with the forecast 4.8% growth ranking favourably alongside historical growth of 2.6% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 5.6% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that A. O. Smith is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for A. O. Smith going out to 2024, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 1 warning sign for A. O. Smith you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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