Why A. O. Smith (AOS) Stock Is Nosediving
What Happened?
Shares of water heating and treatment solutions company A.O. Smith (NYSE:AOS) fell 10.4% in the pre-market session after the company reported underwhelming preliminary third-quarter results, which reflected lower sales in China and the North America water heating segment. Third-quarter net sales are expected to clock in at $902.6m, down 4% year on year and below consensus estimates. Similarly, the company expects to report earnings of 82 cents, falling below expectations. In addition, full-year adjusted EPS guidance was lowered.
Management added, "As discussed on our second-quarter earnings call, we saw increasing consumer demand headwinds in July, which led us to be cautious about the back half of the year in China. Those headwinds were more challenging than we expected through the third quarter and, as a result, our constant currency sales to third parties declined 17% compared to last year. In North America, residential and commercial water heater orders were lower than expected in the third quarter and while we anticipated a quarter-over-quarter decline, order demand was weaker than expected in both the wholesale and retail channels."
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What The Market Is Telling Us
A. O. Smith’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. Moves this big are rare for A. O. Smith and indicate this news significantly impacted the market’s perception of the business.
A. O. Smith is up 0.1% since the beginning of the year, but at $81.58 per share, it is still trading 11.3% below its 52-week high of $91.98 from July 2024. Investors who bought $1,000 worth of A. O. Smith’s shares 5 years ago would now be looking at an investment worth $1,700.
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