A O Smith Q1 Earnings Beats On Resilient Water Heater Demand, Raises FY23 EPS Guidance

A.O. Smith Corp AOS first-quarter FY23 sales inched down by 1% year-over-year to $966.4 million, beating the consensus of $922.26 million.
Adjusted EPS was $0.94 (+22% Y/Y), beating the consensus of $0.78.
"A. O. Smith delivered strong performance in the first quarter driven by resilient water heater demand and lower year-over-year steel costs. China sales aligned with our expectations and improved sequentially throughout the quarter," noted Kevin J. Wheeler, chairman and CEO.
Segment Details: North America sales rose 3% Y/Y to $752.7 million. Rest of World sales of $219.1 million decreased 14% Y/Y.
Gross margin expanded 380 bps to 38.7%.
As of March 31, 2023, cash and marketable securities balances totaled $496.0 million and debt totaled $340.8 million, resulting in a leverage ratio of 16%.
"We have recently seen a meaningful rise in the steel index prices which will translate into higher input costs and put pressure on water heater margins in the second half of the year", noted Kevin J. Wheeler.
FY23 Outlook: A O Smith expects sales of $3.68 billion - $3.83 billion, as sales are expected to be flat year-over-year at the mid-point (+/- 2%). This is compared to previous view of sales flat at the mid-point +/- 3%.
The company expects adjusted EPS of $3.30 - $3.50, compared to prior guidance of $3.15-$ 3.45. This represents an 8% year-over-year increase at the mid-point.
Price Action: AOS shares are trading higher by 1.93% at $68.50 on the last check Thursday.

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