Water heater manufacturer A.O. Smith(NYSE: AOS) had a solid first quarter, but warned some of those sales were likely pulled forward from future quarters.
Investors are focused on what is to come, sending A.O. Smith shares down 7% as of 11:30 a.m. ET.
A lukewarm quarter
A.O. Smith is one of the world's largest manufacturers of commercial and residential water heaters and water treatment products. The company earned $1 per share in the first quarter on sales of $978.8 million, a mixed result relative to Wall Street's consensus estimate of a $0.98-per-share profit on $996 million in sales.
Lower steel costs helped fuel profitability, and A.O. Smith said it saw strong commercial demand in the U.S. China is also producing sales growth despite ongoing macroeconomic issues in the country.
The company reaffirmed its previous guidance for earnings of between $3.90 and $4.15 per share in the quarter on sales of between $3.97 billion and $4.05 billion. That's within range of Wall Street's expectations of $4.08 per share on $4.01 billion in sales. But A.O. Smith said first-quarter shipments did include some pull-forward of demand ahead of a March 1 price increase.
Is A.O. Smith a buy following its earnings report?
A.O. Smith's global reach is allowing it to benefit both from a energy efficiency-driven replacement cycle in the U.S. and growth in emerging markets including India and China. But China remains a wild card due to geopolitical tensions and concerns about the sustainability of growth, and residential demand remains caught up in the broader housing industry story.
All in, it appears likely to be a solid, though not spectacular, year for the company. With the shares up 24% over the last year heading into earnings season, investors appear to be taking a wait-and-see approach to how the year develops.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends A. O. Smith. The Motley Fool has a disclosure policy.
