A.O. Smith Earnings Preview

A.O. Smith (NYSE: AOS  ) beat estimates by 5 cents last quarter and investors are hoping it can beat them again. The company will unveil its latest earnings on Tuesday. A.O. Smith is a manufacturer of water heating equipment and electric motors, serving a diverse mix of residential, commercial, and industrial end markets mainly in the United States with a growing international presence.

What analysts say:

• Buy, sell, or hold? Analysts strongly back A.O. Smith, with five of eight rating it a buy and the remainder rating it a hold. Analysts don't like A.O. Smith as much as competitor Regal-Beloit overall.
• Revenue forecasts: On average, analysts predict $397.4 million in revenue this quarter. That would represent a decline of 30.6% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is earnings of 50 cents per share. Estimates range from 47 cents to 54 cents.

What our community says:
CAPS All Stars are solidly backing the stock with 96.2% assigning it an "outperform" rating. The community at large agrees with the All Stars with 97.1% awarding it a rating of "outperform." Fools have embraced A.O. Smith, though the message boards have been quiet lately with only 51 posts in the past 30 days. A.O. Smith has a bullish CAPS rating of five out of five stars that is about on par with the Fool community assessment.

Management:
A.O. Smith's profit has risen year over year by an average of 11.2%. Revenue has fallen in the past two quarters.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter	Q1	Q4	Q3	Q2
Gross Margin	30.4%	3.6%	26.7%	27.7%
Operating Margin	9%	19.7%	8.5%	3.6%
Net Margin	9.8%	-19.4%	5.7%	2.9%

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