MILWAUKEE - A. O. Smith Corporation (NYSE:AOS), a global water technology company, announced a downward revision of its full-year 2024 earnings guidance on Friday, following a 4% decline in third-quarter sales. The company, which is observing its 150th year of business, cited lower sales in China and North America as the primary reasons for the adjustment.
The preliminary third-quarter sales totaled $903 million, a decrease from the $937.5 million reported in the same period last year. The earnings per share (EPS) also fell by 9% to $0.82. For the first nine months of 2024, the company generated $360 million in cash from operations and $283 million in free cash flow.
The revised full-year EPS guidance is now set between $3.70 and $3.85, compared to the previously stated range of $3.95 to $4.10. This adjustment reflects the company's expectations of continuing challenges in the Chinese market and cautious optimism about North American demand.
North American sales saw a slight decline in the third quarter of 2024, with $703 million compared to $710 million in the previous year. This was due to lower volumes of residential and commercial water heaters, despite higher sales in boilers and water treatment products.
In contrast, sales in the rest of the world decreased by 10%, with a notable 17% drop in local currency sales in China. However, sales in India saw a 12% increase, driven by strong demand.
Chairman and CEO Kevin J. Wheeler expressed disappointment in the third-quarter volumes but remained positive about the company's customer relationships and responsiveness to market conditions. The company anticipates a quarter-over-quarter improvement in North American water heater volumes in the fourth quarter but remains cautious due to the persistent softness in the Chinese market.
In a move reflecting confidence in its financial strength, the company's board of directors approved a 6% increase in the dividend rate on October 7, marking over 30 years of consecutive annual dividend increases.
Investors can expect the final financial results for the third quarter to be released on October 22, 2024. This announcement is based on a press release statement, and the final results may differ due to the completion of financial closing procedures and other developments.
In other recent news, A.O. Smith Corporation announced a 6% increase in its quarterly cash dividend rate to $0.34 per share. This decision aligns with the company's capital allocation strategy that emphasizes returning capital to shareholders. The company recently reported record-breaking second-quarter sales of $1 billion with earnings per share of $1.06. The North American water heater and boiler segments experienced a significant sales surge, while the China market saw modest growth.
The acquisition of Pureit is expected to significantly enhance A.O. Smith's market presence in South Asia, specifically India. Despite weak consumer demand in China, the company projects 8% to 10% growth in its boiler sales and North America water treatment sales. However, a negative currency translation impact of around 2% for the year is anticipated. These are among the recent developments for A.O. Smith Corporation.
InvestingPro Insights
Despite A. O. Smith Corporation's recent downward revision of its full-year 2024 earnings guidance, InvestingPro data reveals some encouraging financial metrics that investors should consider. The company's revenue for the last twelve months as of Q2 2024 stood at $3.93 billion, with a 5.12% growth rate. This growth, albeit modest, indicates that A. O. Smith is still expanding its business despite challenging market conditions.
Moreover, the company's profitability remains solid, with a gross profit margin of 38.35% and an operating income margin of 19.08% for the same period. These figures suggest that A. O. Smith is maintaining efficient operations and cost management, which could help weather the current headwinds in China and North America.
InvestingPro Tips highlight additional strengths of A. O. Smith. The company has raised its dividend for 16 consecutive years, demonstrating a commitment to shareholder returns even in challenging times. This aligns with the recent 6% dividend increase mentioned in the article. Additionally, A. O. Smith holds more cash than debt on its balance sheet, which provides financial flexibility and stability during uncertain market conditions.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide valuable insights into A. O. Smith's financial health and future prospects.
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