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Investing.com - Stifel has reiterated its Buy rating and $78.00 price target on AO Smith (NYSE:AOS), maintaining its positive outlook on the water heater manufacturer. The company maintains strong financial health with a current ratio of 1.61 and has raised its dividend for 16 consecutive years, currently yielding 2%.
The reiteration comes as recent Air-Conditioning, Heating, and Refrigeration Institute (AHRI) data showed mixed performance in the U.S. heating and cooling equipment market for May. Total (EPA:TTEF) shipments of residential water heaters decreased 2.2% month-over-month but increased 2.0% year-over-year. According to InvestingPro, AO Smith maintains moderate debt levels and strong cash flows, with a healthy 38% gross profit margin.
Commercial water heater shipments followed a similar pattern, declining 2.5% month-over-month while showing a stronger 7.7% year-over-year increase. The combined residential and commercial water heater shipments decreased 2.2% month-over-month but grew 2.2% year-over-year on a unit basis.
When adjusted for inflation, Stifel estimates that total revenue from water heater shipments decreased 2.4% month-over-month and fell 0.5% year-over-year in May.
AO Smith’s stock was trading at $69.08 at the time of Stifel’s analysis, representing potential upside of approximately 13% to the firm’s $78.00 price target. InvestingPro analysis suggests the stock is currently undervalued, with the company scheduled to report earnings on July 24. Subscribers can access 7 additional ProTips and comprehensive financial analysis in the Pro Research Report.
In other recent news, A.O. Smith Corporation has announced that Ming Cheng will become its new senior vice president and chief technology officer, effective July 7. Cheng, who brings extensive experience from 3M Company (NYSE:MMM), will replace Bob Heideman, who is retiring after a long tenure. Meanwhile, UBS has maintained its Neutral rating on A.O. Smith, citing mixed data from China’s water heater market, where domestic shipments saw a modest increase despite challenges in the housing sector. Stifel has reiterated its Buy rating on A.O. Smith, setting a price target of $78, reflecting confidence in the company’s long-term prospects despite mixed shipment data. Recent industry data showed a decline in residential water heater shipments, though commercial segments remained relatively stable. The Air-Conditioning, Heating, and Refrigeration Institute reported a decrease in April shipments, but March data showed significant growth, indicating robust demand. Stifel analysts, following meetings with A.O. Smith executives, expressed continued confidence in the company’s strategic direction and market position. The company continues to navigate varying global market conditions, with its China business representing a significant portion of its international operations.
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