AOS Stock Forecast & Price Target

A.O. Smith has demonstrated robust growth potential, with anticipated revenue increases in legacy markets like India, particularly a projected mid-teens growth in the region. The company's return on invested capital (ROIC) has significantly improved from 3.7% in 2010 to 21.7% in 2024, indicating strong efficiency and profitability in generating returns above its long-term cost of capital, estimated between 9% and 10%. Furthermore, A.O. Smith’s historical performance shows that its shares have consistently outperformed the S&P 500 over the past 8-10 years, reflecting a strong track record of value creation for shareholders.

A.O. Smith reported a 6.5% year-over-year decline in sales for 4Q23, driven primarily by reduced water heater volumes, which is significant given that water heaters constitute the majority of its North American sales. The company's international segment also underperformed, with sales in China dropping 9.1% year-over-year, reflecting weak consumer demand in that key market, despite positive growth in other regions like India. Adjusted earnings per share estimates for 2025 and 2026 have been lowered, indicating decreasing sales momentum and continued challenges ahead, culminating in a generally negative outlook for the stock.