Here's Why We Think A. O. Smith Corporation's (NYSE:AOS) CEO Compensation Looks Fair for the time being
Key Insights
- A. O. Smith's Annual General Meeting to take place on 8th of April
- Salary of US$1.12m is part of CEO Kevin Wheeler's total remuneration
- Total compensation is similar to the industry average
- Over the past three years, A. O. Smith's EPS grew by 6.9% and over the past three years, the total shareholder return was 5.9%
Performance at A. O. Smith Corporation (NYSE:AOS) has been reasonably good and CEO Kevin Wheeler has done a decent job of steering the company in the right direction. As shareholders go into the upcoming AGM on 8th of April, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. We present our case of why we think CEO compensation looks fair.
View our latest analysis for A. O. Smith
How Does Total Compensation For Kevin Wheeler Compare With Other Companies In The Industry?
At the time of writing, our data shows that A. O. Smith Corporation has a market capitalization of US$9.4b, and reported total annual CEO compensation of US$7.7m for the year to December 2024. That's a notable decrease of 8.2% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.1m.
In comparison with other companies in the American Building industry with market capitalizations ranging from US$4.0b to US$12b, the reported median CEO total compensation was US$7.0m. So it looks like A. O. Smith compensates Kevin Wheeler in line with the median for the industry. What's more, Kevin Wheeler holds US$6.6m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
| Component | 2024 | 2023 | Proportion (2024) |
| Salary | US$1.1m | US$1.1m | 15% |
| Other | US$6.5m | US$7.3m | 85% |
| Total Compensation | US$7.7m | US$8.3m | 100% |
On an industry level, around 16% of total compensation represents salary and 84% is other remuneration. A. O. Smith sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at A. O. Smith Corporation's Growth Numbers
A. O. Smith Corporation's earnings per share (EPS) grew 6.9% per year over the last three years. The trailing twelve months of revenue was pretty much the same as the prior period.
We would prefer it if there was revenue growth, but it is good to see a modest EPS growth at least. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has A. O. Smith Corporation Been A Good Investment?
A. O. Smith Corporation has not done too badly by shareholders, with a total return of 5.9%, over three years. It would be nice to see that metric improve in the future. Accordingly, a proposal to increase CEO remuneration without seeing an improvement in shareholder returns might not be met favorably by most shareholders.
In Summary...
Seeing that the company has put up a decent performance, only a few shareholders, if any at all, might have questions about the CEO pay in the upcoming AGM. Despite the pleasing results, we still think that any proposed increases to CEO compensation will be examined based on a case by case basis and linked to performance outcomes.
Whatever your view on compensation, you might want to check if insiders are buying or selling A. O. Smith shares (free trial).
Switching gears from A. O. Smith, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.