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Stifel has reiterated its Buy rating on AO Smith (NYSE: NYSE:AOS) with a price target of $78.00, according to a research note released Monday. The firm maintained its positive outlook despite recent industry data showing mixed performance in water heater shipments. According to InvestingPro analysis, AO Smith appears undervalued based on its Fair Value estimate, with the company maintaining strong financial health and a 16-year streak of dividend increases.
April data from the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) revealed that total residential water heater shipments decreased 10.8% month-over-month and 3.4% year-over-year. The residential segment, which includes both gas and electric units, represents a significant portion of AO Smith’s $3.8 billion annual revenue business. Despite market challenges, the company maintains healthy profit margins of 38% and operates with moderate debt levels.
Commercial water heater shipments showed more stability, with a modest 0.7% month-over-month decrease but a slight 0.3% year-over-year increase in April. This segment has demonstrated more resilience than the residential market.
Combined residential and commercial water heater shipments fell 10.6% month-over-month and 3.3% year-over-year on a unit basis in April. When adjusted for inflation, Stifel estimates the total revenue decline was 10.0% month-over-month and 6.2% year-over-year.
AO Smith, which currently trades at $64.16, has maintained its position as a leading manufacturer of residential and commercial water heating equipment despite the recent industry shipment declines. Stifel’s maintained Buy rating suggests confidence in the company’s ability to navigate current market conditions. For deeper insights into AO Smith’s valuation and financial health metrics, including exclusive ProTips and comprehensive analysis, visit InvestingPro, where you’ll find detailed research reports covering 1,400+ top US stocks.
In other recent news, AO Smith Corporation reported first-quarter 2025 earnings that exceeded expectations, with an earnings per share (EPS) of $0.95 compared to the forecasted $0.91, and revenue of $963.9 million against an anticipated $953.2 million. Despite a 2% year-over-year decline in North American sales, AO Smith’s performance reflected resilience in a challenging macroeconomic environment. Stifel analysts maintained their Buy rating for AO Smith, reiterating a price target of $78, following meetings with the company’s CFO and VP of Investor Relations. The analysts expressed confidence in AO Smith’s long-term value, despite acknowledging near-term challenges. Additionally, AO Smith has been proactive in addressing increased costs due to tariffs through a mix of repricing and strategic sourcing. The company’s management has restricted customer orders to balance North American production and prevent excessive pre-buying. Recent data from the Air-Conditioning, Heating, and Refrigeration Institute indicated a significant increase in U.S. heating and cooling equipment shipments, reflecting robust demand for AO Smith’s products.
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