Friday, Stifel analysts reiterated a Buy rating on AO Smith (NYSE:AOS) shares with a consistent price target of $90.00. According to InvestingPro data, the stock is currently trading near its 52-week low of $67.17, suggesting potential upside based on the company's Fair Value assessment and strong financial health, with more cash than debt on its balance sheet.
The firm's assessment follows the release of the U.S. heating and cooling equipment shipment data for November by the Air-Conditioning, Heating, and Refrigeration Institute (AHRI), which indicated a decline in both residential and commercial water heater shipments.
According to the data, total shipments of residential water heaters, which include both gas and electric varieties, saw a month-over-month decrease of 11.3% and a year-over-year decrease of 8.1%. Similarly, commercial water heater shipments, encompassing gas and electric units, dropped by 8.6% month-over-month and 9.6% year-over-year.
The combined total shipments of residential and commercial water heaters reflected a decrease of 11.2% month-over-month and 8.2% year-over-year in November on a unit basis. Stifel's analysis estimates that, when adjusted for inflation, the total revenue basis saw a decrease of 10.7% month-over-month and 8.1% year-over-year.
The analyst's commentary highlighted these shipment trends, providing a detailed view of the industry's performance in the month of November. Despite the observed declines in the heating and cooling equipment sector, Stifel's position on AO Smith's stock remains unchanged, with a positive outlook reflected in the maintained Buy rating and price target. The company maintains strong fundamentals with $3.89 billion in revenue and healthy profit margins of 38.2%.
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In other recent news, AO Smith reported mixed results in its third-quarter earnings call, primarily due to a decrease in sales and earnings. This was attributed to weakened consumer demand in China and a decline in water heater demand in North America. However, the company saw growth in North American boiler and water treatment sectors, and in India. In addition, AO Smith announced plans to acquire Pureit from Unilever (LON:ULVR) for $120 million to bolster its South Asia water treatment portfolio.
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