The Compensation For A. O. Smith Corporation's (NYSE:AOS) CEO Looks Deserved And Here's Why

Key Insights

• A. O. Smith's Annual General Meeting to take place on 9th of April
• CEO Kevin Wheeler's total compensation includes salary of US$1.08m
• The overall pay is comparable to the industry average
• A. O. Smith's EPS grew by 21% over the past three years while total shareholder return over the past three years was 39%

The performance at A. O. Smith Corporation (NYSE:AOS) has been quite strong recently and CEO Kevin Wheeler has played a role in it. Coming up to the next AGM on 9th of April, shareholders would be keeping this in mind. It is likely that the focus will be on company strategy going forward as shareholders hear from the board and cast their votes on resolutions such as executive remuneration and other matters. We think the CEO has done a pretty decent job and we discuss why the CEO compensation is appropriate.

See 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$13b, and reported total annual CEO compensation of US$8.8m for the year to December 2023. We note that's an increase of 32% above 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 over US$8.0b, the reported median total CEO compensation was US$10m. This suggests that A. O. Smith remunerates its CEO largely in line with the industry average. Moreover, Kevin Wheeler also holds US$7.4m worth of A. O. Smith stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	US$1.1m	US$1.0m	12%
Other	US$7.7m	US$5.6m	88%
Total Compensation	US$8.8m	US$6.6m	100%

Talking in terms of the industry, salary represented approximately 16% of total compensation out of all the companies we analyzed, while other remuneration made up 84% of the pie. In A. O. Smith's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader 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. O. Smith Corporation's Growth

Over the past three years, A. O. Smith Corporation has seen its earnings per share (EPS) grow by 21% per year. Its revenue is up 2.6% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has A. O. Smith Corporation Been A Good Investment?

Boasting a total shareholder return of 39% over three years, A. O. Smith Corporation has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Seeing that the company has put in a relatively good performance, the CEO remuneration policy may not be the focus at the AGM. However, investors will get the chance to engage on key strategic initiatives and future growth opportunities for the company and set their longer-term expectations.

If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at A. O. Smith.

Important note: A. O. Smith is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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.