A.O. Smith heats up with record sales

After six months of gyrations both upward and downward, the S&P 500 and the Dow Jones Industrial Average ended the first half of the year within about three percentage points of where they started.

The U.S. market was evenly divided between winners and losers in the first half of the year. That divide also is reflected in the BizTimes Stock Index.

The index of stocks from 42 publicly held companies based in southeastern Wisconsin was evenly divided, with 21 gainers and 21 losers in the first six months of 2015.

Of the 21 companies that gained ground, 10 were manufacturers. Measured by percentage gained per share price, six of the top 10 gainers were manufacturers, reflecting that sector’s historical and ongoing strength in Wisconsin’s economy. The top manufacturers on the list of gainers were ZBB Energy Corp., Koss Corp., A.O. Smith Corp., Snap-on Inc., Sensient Technologies Corp. and Rockwell Automation Inc.

Most notable on that list is A.O. Smith, which has grown to become the largest manufacturer of hot water heaters in North America, and the company’s sales in China continue to grow exponentially.

A.O. Smith reported record first quarter net earnings of $46.7 million, or 51 cents per share, on record quarterly sales of $618.5 million.

The company has had to deal with new government regulations under the National Appliance Energy Conservation Act that mandate increasing the minimum energy efficiency standards for residential water heaters in the U. S., commonly referred to as NAECA III, which went into effect on April 16.  

“NAECA III has been a significant challenge for the water heater industry in the U. S., as we were required to redesign nearly 80 percent of our residential product offering. Our team has done a tremendous job of maintaining its focus on our customers during this project,” said Ajita Rajendra, chairman and chief executive officer, in the company’s first quarter earnings release. “Thanks to all of our employees, we are on track to complete this complex transition.”    

First quarter sales for the North America segment, which includes U.S. and Canadian water heaters and boilers, increased 10 percent to $429.2 million, compared with first quarter 2014 sales of $388.5 million.

During the first quarter of 2015, the company repurchased approximately 333,000 shares of common stock at a total cost of $20.7 million. Approximately 2.2 million shares remained on the existing discretionary authority at the end of the quarter.

A.O. Smith’s stock shares have been trading near their 52-week high of $74.27.
Looking ahead, Rajendra says the company is poised to grow its sales of water heaters and air and water purifiers in India.

“We remain optimistic about the long-term opportunity in India, and we’re committed to the country with the second largest population and the second fastest growing economy in the world and its developing middle class, who desire quality of life products. India is an investment for the future, and the $7.5 million loss that we expect in India this year is similar to 2014 and includes higher product development and advertising costs related to the launch of water treatment products. We expect overall sales in India to be between $20 million and $25 million in 2015,” Rajendra said.

BizTimes Stock Index – 2015 Mid-year Performance  
Stock NameSymbolPrice 12/31/2014Price 6/19/2015% Change
Zbb Energy Corp.ZBB0.510.9076.5%
Koss Corp.KOSS1.752.4238.3%
Manpower Inc.MAN68.1790.3032.5%
A.O. Smith Corp.AOS56.4173.6530.6%
MGIC Investment Corp.MTG9.3211.3922.2%
Fiserv inc.FISV70.9785.2720.1%
Snap-on Inc.SNA136.74159.9817.0%
Roadrunner Transportation Systems Inc.RRTS23.3526.8515.0%
Sensient Technologies Corp.SXT60.3469.2614.8%
Rockwell Automation Inc.ROK111.20124.3711.8%
Westbury Bancorp Inc.WBB16.4017.879.0%
Bank Mutual Corp.BKMU6.867.468.7%
Associated Banc-Corp.ASB18.6320.168.2%
Badger Meter Inc.BMI59.3563.066.3%
Johnson Controls Inc.JCI48.3451.366.2%
Marcus Corp.MCS18.5119.605.9%
Connecture Inc.CNXR9.019.505.4%
Kohl’s Corp.KSS61.0463.814.5%
Weyco Group, Inc.WEYS29.6730.954.3%
Douglas Dynamics Inc.PLOW21.4321.731.4%
Waterstone Financial Inc.WSBF13.1513.250.8%
Physicians Realty TrustDOC16.6015.89-4.3%
Briggs & Stratton Corp.BGG20.4219.39-5.0%
Artisan Partners Asset Management Inc.APAM50.5347.66-5.7%
Twin Disc Inc.TWIN19.8618.55-6.6%
Rexnord Corp.RXN28.2125.99-7.9%
Brady Corp.BRC27.3424.97-8.7%
Harley-Davidson Inc.HOG65.9158.30-11.5%
Wisconsin Energy Corp.WEC52.7446.58-11.7%
Generac Holdings Inc.GNRC46.7639.77-14.9%
Actuant Corp.ATU27.2423.10-15.2%
ARI Network Services Inc.ARIS3.783.20-15.3%
MangneTek Inc.MAG40.6533.96-16.5%
Joy Global Inc.JOY46.5238.57-17.1%
Quad/Graphics Inc.QUAD22.9618.99-17.3%
Strattec Security Corp.STRT82.5867.06-18.8%
Modine Manufacturing Co.MOD13.6010.79-20.7%
Johnson Outdoors Inc.JOUT31.2024.01-23.0%
All data taken on 6/22/15 from Factset Research Systems and compiled by Robert W. Baird & Co. Inc.  

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