A. O. Smith Gears Up for Q3 Earnings: What Lies Ahead for the Stock?

Core Viewpoint - A. O. Smith Corporation (AOS) is expected to report a decline in both revenue and earnings for the third quarter of 2024, with significant challenges in its North America and Rest of the World segments [2][3][4]. Financial Performance - The Zacks Consensus Estimate for revenues is $901.1 million, reflecting a 4% decline year-over-year [2] - The consensus estimate for earnings is 86 cents per share, indicating an 8.5% decrease over the past 60 days and a 4.4% decline from the previous year's quarter [2] - The company's bottom line missed the Zacks Consensus Estimate by one cent in the last quarter, with an average earnings surprise of 3.8% over the trailing four quarters [2] Segment Performance - The North America segment is projected to report revenues of $703 million, down 1% year-over-year, primarily due to reduced orders for residential and commercial water heater products [3] - The Rest of the World segment is expected to show revenues of $210 million, a 10% decline year-over-year, impacted by decreasing demand for residential water treatment and lower volumes of water heating products in China [3] Cost and Expenses - The company is facing rising costs, with the cost of sales anticipated to increase by 1.5% to $589.8 million and SG&A expenses expected to rise by 3.6% to $181.1 million compared to the previous year [4] - Foreign currency headwinds are likely to negatively affect profitability due to the company's significant international operations [4] Strategic Acquisitions - Recent acquisitions, such as Impact Water Products in March 2024 and Atlantic Filter in June 2022, are expected to positively influence AOS's top line by expanding its water treatment footprint in North America [5] Earnings Prediction - The current model does not predict an earnings beat for AOS, as the Earnings ESP is 0.00% with both the Most Accurate Estimate and Zacks Consensus Estimate at 82 cents [6] - AOS holds a Zacks Rank of 5 (Strong Sell), indicating a challenging outlook for the upcoming earnings report [6]