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A. O. Smith Corporation (NYSE:AOS) defied analyst predictions to release its quarterly results, which were ahead of market expectations. It was overall a positive result, with revenues beating expectations by 5.8% to hit US$760m. A. O. Smith also reported a statutory profit of US$0.65, which was an impressive 24% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from A. O. Smith's twelve analysts is for revenues of US$2.96b in 2021, which would reflect an okay 5.1% increase on its sales over the past 12 months. Statutory earnings per share are predicted to swell 19% to US$2.32. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.94b and earnings per share (EPS) of US$2.31 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.
The analysts reconfirmed their price target of US$55.89, showing that the business is executing well and in line with expectations. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values A. O. Smith at US$65.00 per share, while the most bearish prices it at US$35.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that A. O. Smith's rate of growth is expected to accelerate meaningfully, with the forecast 5.1% revenue growth noticeably faster than its historical growth of 3.3%p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 4.6% 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. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider 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.
With that in mind, we wouldn't be too quick to come to a conclusion on A. O. Smith. Long-term earnings power is much more important than next year's profits. 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..
Plus, you should also learn about the 1 warning sign we've spotted with A. O. Smith .
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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