A.O. Smith Q3 Adj Profit Tops View, But Sales Miss; Boosts 2014 Outlook

(RTTNews) - Water heating equipments and electric motor manufacturer A.O. Smith Corp. (AOS) reported Tuesday a profit for the third quarter that increased from last year, reflecting improved sales across regions. Adjusted earnings per share topped analysts' expectations by two cents, while quarter net sales missed their estimates by a whisker. The company also raised its earnings forecast for the full-year 2014.

"A. O. Smith continued to benefit from improvement in several key sectors of the economy in the U. S. A growing home construction market created higher demand for residential water heaters, and continued strength in high efficiency, condensing boilers, favorably impacted demand for commercial boilers," Chairman and CEO Ajita Rajendra said in a statement.

The Milwaukee, Wisconsin-based company posted net earnings of $50.6 million or $0.56 per share for the third quarter, higher than $46.2 million or $0.50 per share in the prior-year quarter.

Excluding items, adjusted earnings for the quarter was $53.5 million or $0.59 per share, compared to $50.4 million or $0.54 per share in the year-ago quarter.

On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.57 per share for the quarter. Analysts' estimates typically exclude one-time special items.

Net sales for the quarter grew 8.5 percent to $581.6 million from $536.20 million in the same quarter last year, but missed ten Wall Street analysts' consensus estimate of $584.30 million by a whisker.

North America net sales grew 6 percent to $392.4 million, and rest of world net sales increased 13 percent to $198.5 million from the prior-year quarter, with sales in China growing 16 percent.

"Our team in China continued to do an excellent job of growing the business and serving our customers in that important region of the world. Increased consumer demand for water heaters and water treatment products had a favorable impact. Overall, China sales increased approximately 16 percent in the quarter," Rajendra stated.

Looking ahead to fiscal 2014, the company raised its earnings guidance to a range of $2.23 to $2.27 per share and adjusted earnings to a range of $2.37 to $2.41 per share from the prior forecast for earnings of $2.20 to $2.26 per share and adjusted earnings of $2.34 and $2.40 per share. Street is currently looking for full-year 2014 earnings of $2.40 per share.

"With improved market conditions in our major markets, and continued customer acceptance of our products in China, we feel confident about our company's prospects for the remainder of this year," Rajendra added.

The company noted that it will continue to be disciplined in evaluating acquisition opportunities that fit its stated corporate strategy. Its team is continuing to actively pursue acquisition candidates that meet its financial criteria and create shareholder value.

In Tuesday's regular trading session, AOS is currently trading at $48.88, down $3.79 or 7.21% on a volume of 0.83 million shares.