Earnings Beat: A. O. Smith Corporation Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

A. O. Smith Corporation (NYSE:AOS) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat both earnings and revenue forecasts, with revenue of US$760m, some 5.8% above estimates, and statutory earnings per share (EPS) coming in at US$0.65, 24% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for A. O. Smith

After the latest results, the twelve analysts covering A. O. Smith are now predicting revenues of US$2.96b in 2021. If met, this would reflect a modest 5.1% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to expand 19% to US$2.32. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.94b and earnings per share (EPS) of US$2.31 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

The analysts reconfirmed their price target of US$55.89, showing that the business is executing well and in line with expectations. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on A. O. Smith, with the most bullish analyst valuing it at US$65.00 and the most bearish at US$35.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await A. O. Smith shareholders.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that A. O. Smith's rate of growth is expected to accelerate meaningfully, with the forecast 5.1% revenue growth noticeably faster than its historical growth of 3.3%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.6% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that A. O. Smith is expected to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for A. O. Smith going out to 2024, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for A. O. Smith that you should be aware of.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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