A. O. Smith Corp. (AOS) posted a 22.1% decline in 2010 second-quarter earnings to $16.6 million or 54 cents per share from $21.3 million or 84 cents per share in the year-ago period. The decline was primarily attributable to a one-time charge of 68 cents per share related to flood damage at the company’s facility in Ashland City, TN. Excluding the charge, adjusted earnings came in at $1.22 per share, which surpassed the Zacks Consensus Estimate of $1.00.
A. O. Smith’s sales in the quarter grew 14.8% to $572.5 million from $498.7 million in the year-ago period. The growth was primarily driven by robust electric motor sales in North America coupled with higher water heater sales.
Segment Details
Water Products
Sales from Water Products rose 11% year-over-year to $374.9 million on improved worldwide sales, especially in China and Canada. However, operating profit still slipped 78.6% year-over-year to $7.8 million mainly due to a $34.2 million charge associated with flood damage at A. O. Smith’s facility in Ashland City.
Electrical Products
Sales from the segment jumped 22% to $198.3 million from $162.4 million in the year-ago quarter. A. O. Smith’s operating income from the division more than tripled to $25.9 million from $7.6 million in the year-ago period on the back of increased volumes and management’s cost containment initiatives.
Balance Sheet and Cash Flow
A. O. Smith ended the quarter with cash and cash equivalents of $94.0 million, compared to $53.5 million in the year-ago period. The company’s long-term debt-to-capitalization ratio reduced to 12.7% at quarter-end from 29.4% in the prior year period. During the first half of 2010, A. O. Smith generated $50.0 million of cash from operations and deployed $21.9 million towards capital expenditure, $15.8 million towards debt repayment and $11.9 million towards dividends.
Outlook and Zacks Consensus
Looking ahead, A. O. Smith continues to expect earnings of $3.05 and $3.25 per share for 2010, including the 68 cents per share charge related to flood damage. The Zacks Consensus Estimate for 2010 is currently pegged at $3.79 per share, which jumped 22 cents over the past month as 3 of 8 covering analysts raised projections.
A. O. Smith is a manufacturer of water heating equipment and electric motors, serving a diverse mix of residential, commercial and industrial end markets principally in the U.S.
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