AO Smith Launches Promax 55-Gallon Water Heater, Stock Up

Shares of premium water heaters and boilers manufacturer AO Smith Corp. AOS gained about 1.6% on Jun 8, following the news of the latest water heater product launch. The Milwaukee-based company recently introduced a new range of residential water heaters – Promax 55-gallon Atmospheric Vent Gas Water Heater.

Resurgence of 55-gallon Heaters

Available in 6-year and 10-year limited warranty models, the 55-gallon Atmospheric Vent is NAECA III-compliant, designed to suit the needs of space heating applications and families with large volume of hot water needs. AO Smith asserts that its latest product will offer unprecedented storage capacity, input & output and recovery functions. These heaters have been engineered to offer 50% higher recovery than standard 50-gallon gas water heaters, thereby adding to its commercial appeal.

Meanwhile, there is a pressing market gap between the 50 and 75-gallon water heaters ever since the 65-gallon high recovery models were discontinued in 2015 after they failed to meet the compliance rules of NAECA III, an act that regulates energy conservation standards of appliances. This implies AO Smith, with its two available natural gas and propane powered heater models, has a first mover advantage over peers.

Prospects Bright

AO Smith accounts for approximately 85% of North American water heater and boilers, the demand for which is on the rise. Going forward, the company believes that U.S. residential water heater volumes will grow in the range of 100,000 to 150,000 units in 2016, primarily a result of new construction.

Furthermore, sales of Residential have significantly benefited from innovations undertaken by Lochinvar. In 2016, A.O. Smith anticipates sales of Lochinvar-branded products to continue to increase, benefitting from breakthrough innovation and customers' expected shift to high-efficiency condensing boilers from low-efficiency products.

AO Smith currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include ESCO Technologies Inc. ESE, Powell Industries, Inc. POWL and Eaton Corporation plc ETN. All these stocks hold a Zacks Rank #2 (Buy).

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