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Investing.com - UBS has reiterated its Neutral rating on water heater manufacturer AO Smith (NYSE:AOS) with a price target of $76.00, citing the company’s proactive business management amid industry challenges. According to InvestingPro data, the company currently trades at a P/E ratio of 20.6x and maintains a robust financial health score of "GOOD."
The firm noted that AO Smith faces significant headwinds in the second half of the year, including tariffs, cost inflation, and minimal volume growth across its markets.
Despite these challenges, UBS expressed optimism about AO Smith’s second-half earnings per share outlook, suggesting the company could exceed margin expectations as the year progresses.
The analysis also indicated that AO Smith’s China business may be approaching a trough, with comparisons expected to improve in the second half of the year. UBS further identified potential upside from a possible divestiture of the company’s China operations.
UBS cautioned, however, that investors will likely want to see evidence of an improved North American demand environment where AO Smith is maintaining its market share before becoming more positive on the stock.
In other recent news, A. O. Smith Corporation announced changes to its executive leadership team effective October 1. James F. Stern will transition to Executive Vice President, Corporate Development, Strategy and Secretary, while Paul J. Jones will become Senior Vice President, General Counsel, and Chief Compliance Officer. Stifel has reiterated its Buy rating on A. O. Smith with a price target of $89, maintaining a positive outlook on the stock. UBS raised its price target to $76, citing conservative guidance and expected margin expansion despite incremental costs from steel and tariffs. DA Davidson also maintained its Neutral rating with a $75 price target, noting stable demand in North America and the Rest of World segments. A. O. Smith’s recent financial performance showed $20 million higher revenue and $13 million stronger operating profit than DA Davidson’s estimates, driven by strong North American boiler volume. These developments reflect ongoing strategic adjustments and market evaluations by A. O. Smith.
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