A. O. Smith(US:AOS) Zacks Investment Researchยท2024-04-25 17:00Core Viewpoint - A. O. Smith Corporation reported strong adjusted earnings for Q1 2024, exceeding estimates, while net sales slightly missed expectations but showed year-over-year growth driven by demand for commercial water heaters in North America [1]. Financial Performance - Adjusted earnings per share for Q1 2024 were $1.00, surpassing the Zacks Consensus Estimate of 99 cents, marking a 6% increase year-over-year [1]. - Net sales totaled $978.8 million, missing the consensus estimate of $995 million, but reflecting a 1% year-over-year increase [1]. Segmental Details - North America sales rose 2% year-over-year to $766.3 million, supported by higher volumes of commercial water heaters and a shift towards high-efficiency models [2]. - Earnings from the North American segment increased 5.4% year-over-year to $198.7 million due to higher sales volumes [2]. - Sales in the Rest of the World segment grew 4% year-over-year to $226.9 million, driven by increased sales of tankless water heaters and kitchen appliances in China, with India sales up 16% in local currency [2][3]. Margin and Cost Analysis - Cost of sales was $594.1 million, up 0.3% year-over-year, while selling, general, and administrative expenses rose 2.7% to $192.2 million [4]. - Gross profit increased 2.8% year-over-year to $384.7 million, resulting in a gross margin of 39.3%, up from 38.7% in the previous year [4]. - Interest expenses decreased to $1 million from $4 million in the year-ago quarter [4]. Liquidity and Cash Flow - As of March 31, 2024, cash and cash equivalents were $251.6 million, down from $339.9 million at the end of December 2023 [5]. - Long-term debt decreased to $109.7 million from $117.3 million at the end of December 2023 [5]. - Cash provided by operating activities in Q1 2024 totaled $106.6 million, compared to $119.9 million in the same period last year [5]. Share Repurchases - In Q1 2024, A. O. Smith repurchased 0.9 million shares for $74.5 million, with 4.6 million shares remaining under the current repurchase authorization [6]. - The board authorized an additional 2 million shares for repurchase in January 2024, with a total expected repurchase of $300 million in 2024 [6]. 2024 Outlook - A. O. Smith reaffirmed its sales outlook, expecting net sales between $3,970 million and $4,050 million, an increase from $3,853 million in 2023 [7]. - The company projects adjusted earnings per share in the range of $3.90 to $4.15, indicating a 5.6% increase at the mid-point from 2023 [8].