AO Smith Corp. (AOS) recently announced that it is experiencing better-than-expected demand in the sales of China water heaters and commercial water heaters.
As a result, management boosted its full-year EPS guidance, and now analysts are raising their earnings estimates.
Growth and Income
The company is expected to grow its EPS 15.7% in 2010, 5.2% in 2011, and 10.0% over the long term. The stock also offers investors a dividend yield of 1.6%.
This Zacks #2 Rank stock trades at 12.9x 2010 consensus EPS estimates and 12.2x 2011 consensus EPS estimates.
Business
AO Smith Corp. engages in the manufacture and sale of water heating equipment and electric motors for the residential, commercial, and industrial end markets in the United States and internationally.
Updated Guidance
The company recently announced that production at its largest water heater facility in Ashland City, Tennessee is up and running faster than expected since the flooding of the Cumberland River in early May. That production, combined with the shifting of residential water heater production to the company’s other North American operations, will allow residential water heater backlogs to return to their normal lead times in early July.
As a result, the company also increased its outlook for fiscal year 2010. It now expects earnings per share of $3.70-$3.90, excluding the $0.60-$0.70 in one-time charges associated to flooding at its Ashland City facility. The midpoint of its new EPS guidance is 50 cents higher than its previous guidance.
Estimates
In the last week, the Zacks Consensus Estimate for 2010 increased 28 cents, or 7.9%, to $3.84. The 2011 Zacks Consensus Estimate rose 13 cents, or 3.3%, to $4.04.
The Chart
AOS shares are up over 50% in the last twelve months. The stock peaked in April at $56 and has sold-off with the rest of the market over the last two months. AOS did bounce off its 200-day moving average in May and June and now trades at about $7 or 13% below its 52-week high.
