UPDATE: Stifel Initiates Coverage on A.O. Smith with Hold Rating on Strong Growth Story

In a report published Friday, Stifel analyst Robert McCarthy initiated coverage on

with a Hold rating. In the report, Stifel noted, “We are initiating coverage of A.O. Smith (AOS) with a Hold rating and assign $60 as fair value on the shares. Despite our view that A.O. Smith has (1) managed its portfolio exceedingly well; (2) pioneered a strong international growth strategy and (3) maintained balance sheet optionality, we are neutral on the shares, given concerns around international exposure and execution (China growth sustainability), M&A redeployment execution due to high multiples paid in riskier growth regions throughout the world, and the stock's relatively full valuation at nearly 20x our FY15E EPS estimate. That said, we remain impressed with company and management execution and the strong secular tailwinds, so we would readily revisit our rating on pullbacks. Our fair value is $60, or 19x 2016E EPS of $3.15, the higher end of the company's historical range, given recognition of AOS' fundamentally strong growth story.” A.O. Smith Corp. closed on Thursday at $53.45.