A. O. Smith Exhibits Strong Prospects Despite Persisting Headwinds

Acquisitions and Portfolio Expansion - A O Smith Corporation engaged in bolt-on acquisitions to expand its business geographically and enhance its portfolio [1] - In November 2024, the company acquired Pureit from Unilever, leveraging its expertise in water treatment solutions and strong brand recognition to strengthen its position in India [1] - In March 2024, the company acquired Impact Water Products, expanding its water treatment footprint in North America [1] - The company spent $21 3 million on acquisitions in the first nine months of 2024 [1] Shareholder Rewards - The company paid dividends worth$140 9 million in the first nine months of 2024, a 3 8% year-over-year increase [2] - In October 2024, the company increased its dividend by 6% to 34 cents per share, marking over 30 consecutive years of dividend growth [2] - The company repurchased 2 9 million shares for $237 1 million in the first nine months of 2024, with 2 7 million shares remaining under the existing authorization [2] - The board increased the buyback program by 2 million shares in Q1 2024, with an expected$300 million in share repurchases for the year [2] Financial Position - At the end of Q3 2024, the company had $219 3 million in cash and cash equivalents, significantly higher than its current debt of$10 million [3] - The company had long-term debt of $109 7 million, indicating sufficient liquidity to meet debt obligations [3] Segment Challenges - The Rest of World segment faced a 10$1 8 billion in the first nine months of 2024, driven by higher material costs [5] - SG&A expenses rose by 2 8% year-over-year due to increased employee costs, including wages and management incentives [5] - Raw material costs, particularly steel prices, are subject to fluctuations, which could impact margins and profitability if sales growth does not offset cost increases [5] Stock Performance and Industry Comparison - A O Smith currently holds a Zacks Rank 3 (Hold) and has seen its stock decline by 13 5% over the past year, underperforming the industry's 14 8% growth [6] Alternative Investment Opportunities - Graham Corporation (GHM) holds a Zacks Rank 1 (Strong Buy) and delivered a trailing four-quarter average earnings surprise of 101 9% [8] - Powell Industries (POWL) also holds a Zacks Rank 1, with a trailing four-quarter average earnings surprise of 57 5% [9] - Generac Holdings Inc (GNRC) carries a Zacks Rank 2 (Buy) and has a trailing four-quarter average earnings surprise of 10 8% [9]