AOS – Market expectations are for Uniform ROA expansion, but management may have concerns about input costs, China, and supply chain disruptions

December 6, 2021

  • A. O. Smith (AOS) currently trades near corporate and historical averages relative to Uniform earnings, with a 23.0x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to expand to 35% in 2025, accompanied by 3% Uniform asset growth going forward.
  • Similarly, analysts expect Uniform ROA to rise to 32% in 2022, accompanied by 3% Uniform asset growth.
  • If sustained going forward, these levels would imply a stock price closer to $74, representing approximately 8% equity downside for the firm.
  • Moreover, the firm’s most recent earnings call suggests management may have concerns about input costs, China, and supply chain disruptions.

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