A. O. Smith (AOS) Set To Launch ProLine XE Combi Boiler

A. O. Smith Corporation (NYSE:AOS) is set to roll out a ProLine XE Combination (Combi) Boiler in early 2018 that would deliver instant hot water as well as comfortable space heating for residential customers. Further, the service-friendly compact design of the latest product will offer easy installation, set-up as well as maintenance besides a host of other benefits to professional contractors.

The combi boiler’s critical components like the built-in circulator can easily be moved to an easily accessible location within the unit that simplifies service and maintenance. The user-friendly interface of the product features a backlit LCD display, offering text-based diagnostic information. Other notable features of the latest product include its set-up wizard, best-in-class energy efficiency, as well as reliability and space saving capabilities.

The product is capable of delivering up to 4.8 gallons of hot water per minute, making it the highest capacity in the combination boiler category. It also comes with an excellent energy-saving performance with 95% Annual Fuel Utilization Efficiency (“AFUE”) and a 10:1 turndown ratio. The company believes that the product is well-equipped to address hot water demands of residential customers in any season or climate.

Existing Business Scenario

A.O. Smith has been witnessing robust top-line momentum, driven by stellar demand for its products in China and boilers and commercial water heaters in the United States. Further, U.S. commercial water heater industry volumes are likely to go up by 10% this year, primarily backed by strong demand for electric units. Moreover, its Lochinvar-branded products have benefited from the transition from lower-efficiency to higher-efficiency boilers, new product introduction and market share gain.

The company is also taking up multiple capital expenditure initiatives to fortify business. The acquisition of the residential water treatment company, Aquasana, last year has been adding to its strength. The buyout will help the company to bring Asia-based reverse osmosis water treatment platform into the United Staes. Aquasana's carbon-based products will also provide the company a chance to cross-sell water treatment products in China.

Notably, the Zacks Rank #3 (Hold) company’s shares delivered a return of 8.6% in the past six months, outperforming the industry’s average growth of 6.9%.

However, the company’s SG&A expenses in China have been quite high over the past few quarters, adding to the company’s overall operating expenses. Also, continuous rise in steel prices adds to the company’s woes.

Stocks to Consider

Some better-ranked stocks from the same space include Alamo Group, Inc. (NYSE:ALG) , Applied Industrial Technologies, Inc. (NYSE:AIT) and Avery Dennison Corporation (NYSE:AVY) . While Alamo Group sports a Zacks Rank #1 (Strong Buy), Applied Industrial Technologies and Avery Dennison carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alamo Group has outpaced estimates twice in the preceding four quarters, with an average earnings surprise of 6.1%.

Applied Industrial Technologies has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 9.7%.

Avery Dennison has surpassed estimates in the preceding four quarters, with an average positive earnings surprise of 6.9%.

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