Why A O Smith Shares Are Sliding Today

  • A O Smith Corp AOS reported first-quarter FY22 sales growth of 27% year-over-year to $978 million, beating the consensus of $967.05 million.
  • Adjusted EPS improved 31% Y/Y to $0.77, beating the consensus of $0.75.
  • Gross margin contracted 260 bps to 35%.
  • North America segment sales rose 32% to $730.1 million, driven by pricing actions taken in 2021, mainly on water heaters.
  • Rest of World segment sales totaled $256 million (+15% Y/Y), driven by a positive mix in water heaters and water treatment products in China and higher sales of commercial water treatment products and replacement filters.
  • A O Smith generated cash from operating activities of $16.5 million in Q1, compared to $104.4 million a year ago. Free cash flow of $3.6 million.
  • The company held cash and marketable securities of $579.4 million with total debt of $295.4 million, resulting in a leverage ratio of 14% as of March 31, 2022.
  • FY22 Outlook: A O Smith expects sales of $4.030 billion -$4.105 billion (consensus $4.14 billion), down from the prior view of $4.105 billion - $4.175 billion.
  • It continues to expect EPS of $1.56 - $1.76 and adjusted EPS of $3.35 and $3.55 (consensus $3.41).
  • Price Action: AOS shares are trading lower by 6.21% at $58.99 on the last check Thursday.
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