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A. O. Smith (AOS) to Report Q1 Earnings: What's in Store?

A. O. Smith Corporation AOS is scheduled to report first-quarter results on Apr 27 before market open.

The Zacks Consensus Estimate for the company’s first-quarter earnings has been revised upward by 1.3% in the past 60 days. The company has a stellar earnings surprise history, having outperformed the Zacks Consensus Estimate in three of the trailing four quarters while matching in one, the average beat being 3.2%.

Let’s see how A.O. Smith has shaped up this earnings season.

Factors to Note

A. O. Smith’s June 2022 acquisition of Atlantic Filter boosted its position in the water treatment industry and strengthened its customer base in Florida and the adjacent regions. This is expected to have improved its top line in the first quarter.

However, the company’s North America segment’s performance is likely to have been impacted by the lower residential water heater volumes. The Zacks Consensus Estimate for North American segment revenues shows a 5.2% decrease from the year-ago reported number. For the first quarter, we expect the same to decrease 7.5% year over year.

Lower consumer demand in China due to coronavirus-related lockdowns is expected to have affected the Rest of the World segment’s performance in the first quarter. The Zacks Consensus Estimate for first-quarter Rest of the World segment’s revenues suggests a decline of 9% from the year-ago period. We expect the same to decline 9.5% from the year-ago reported number.

Also, high raw material and transportation costs and cost increases from production inefficiencies are expected to have dented AOS’ margin performance in the first quarter. Given the company’s substantial international presence, foreign currency headwinds are expected to have impacted the top line in the to-be-reported quarter.

A. O. Smith Corporation Price and EPS Surprise

A. O. Smith Corporation price-eps-surprise | A. O. Smith Corporation Quote

Earnings Whispers

Our proven model suggests an earnings beat for AOS this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here, as elaborated below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: AOS has an Earnings ESP of +10.19% as the Most Accurate Estimate is pegged at 85 cents, higher than the Zacks Consensus Estimate of 77 cents.

Zacks Rank: AOS presently carries a Zacks Rank of 3.

Highlights of Q4 Earnings

A. O. Smith’s fourth-quarter 2022 adjusted earnings (excluding $1.64 from non-recurring items) of 86 cents per share surpassed the Zacks Consensus Estimate of 79 cents. Net sales of $936.1 million outperformed the Zacks Consensus Estimate of $912.3 million. However, the top line declined 6% year over year due to the U.S. residential water heater de-stocking activity.

Other Stocks to Consider

Here are some other companies within the broader Industrial Products sector, according to our model, have the right combination of elements to beat on earnings this reporting cycle.

Caterpillar CAT, which has an Earnings ESP of +2.54% and a Zacks Rank of 3, is scheduled to release first-quarter 2023 earnings numbers on Apr 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar’s earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 9%.

Illinois Tool Works ITW has an Earnings ESP of +1.37% and a Zacks Rank of 3. The company is slated to release first-quarter 2023 results on May 2.

Illinois Tool’s earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 0.9%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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