Investors never know what to expect for A.O. Smith (NYSE: AOS), as it has wavered between topping and missing analysts estimates during the past fiscal year. The company will unveil its latest earnings on Wednesday, Jan. 25. 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 eight of 10 rating it a buy and the remainder rating it a hold. Analysts like A.O. Smith better than competitor Babcock & Wilcox Company overall. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared to three months ago.
  • Revenue Forecasts: On average, analysts predict $460.4 million in revenue this quarter. That would represent a decline of 14.2% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.64 per share. Estimates range from $0.58 to $0.67.

What our community says:
CAPS All-Stars are solidly backing the stock with 96% awarding it an "outperform" rating. The community at large agrees with the All-Stars with 97.3% granting it a rating of "outperform." Fools are gung-ho about A.O. Smith, though the message boards have been quiet lately with only 53 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 more than twofold over the past five quarters. Revenue has fallen for the past three 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 Q3 Q2 Q1 Q4
Gross Margin 28.8% 27.6% 30.4% 3.6%
Operating Margin 10.3% 9.4% 9.0% 19.7%
Net Margin 44.2% 12.4% 9.8% (19.4%)

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