The 10-second takeaway
For the quarter ended June 30 (Q2), AO Smith beat expectations on revenues and crushed expectations on earnings per share.
Compared to the prior-year quarter, revenue grew. Non-GAAP earnings per share grew significantly. GAAP earnings per share grew significantly.
Margins increased across the board.
AO Smith logged revenue of $549.1 million. The 11 analysts polled by S&P Capital IQ predicted revenue of $518.0 million on the same basis. GAAP reported sales were 13% higher than the prior-year quarter's $484.2 million.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
EPS came in at $0.52. The 13 earnings estimates compiled by S&P Capital IQ forecast $0.43 per share. Non-GAAP EPS of $0.52 for Q2 were 37% higher than the prior-year quarter's $0.38 per share. GAAP EPS of $0.45 for Q2 were 18% higher than the prior-year quarter's $0.38 per share.
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
For the quarter, gross margin was 36.1%, 300 basis points better than the prior-year quarter. Operating margin was 12.1%, 140 basis points better than the prior-year quarter. Net margin was 7.7%, 50 basis points better than the prior-year quarter. (Margins calculated in GAAP terms.)
Next quarter's average estimate for revenue is $503.2 million. On the bottom line, the average EPS estimate is $0.42.
Next year's average estimate for revenue is $2.09 billion. The average EPS estimate is $1.81.
The stock has a five-star rating (out of five) at Motley Fool CAPS, with 177 members out of 182 rating the stock outperform, and five members rating it underperform. Among 58 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 57 give AO Smith a green thumbs-up, and one give it a red thumbs-down.
Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on AO Smith is hold, with an average price target of $40.11.
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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.