Last week, you might have seen that A. O. Smith Corporation (NYSE:AOS) released its second-quarter result to the market. The early response was not positive, with shares down 7.7% to US$82.18 in the past week. It was a workmanlike result, with revenues of US$1.0b coming in 2.5% ahead of expectations, and statutory earnings per share of US$1.06, in line with analyst appraisals. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on A. O. Smith after the latest results.

Taking into account the latest results, A. O. Smith's 14 analysts currently expect revenues in 2024 to be US$3.99b, approximately in line with the last 12 months. Per-share earnings are expected to accumulate 2.9% to US$4.07. Before this earnings report, the analysts had been forecasting revenues of US$3.99b and earnings per share (EPS) of US$4.10 in 2024. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

There were no changes to revenue or earnings estimates or the price target of US$88.23, suggesting that the company has met expectations in its recent result. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values A. O. Smith at US$98.00 per share, while the most bearish prices it at US$73.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting A. O. Smith is an easy business to forecast or the the analysts are all using similar assumptions.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that A. O. Smith's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 3.1% growth on an annualised basis. This is compared to a historical growth rate of 7.1% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.5% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than A. O. Smith.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for A. O. Smith going out to 2026, and you can see them free on our platform here..

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com