Water heating equipment maker A. O. Smith Corporation (AOS) reported Tuesday a profit for the fourth quarter that surpassed analysts' estimate by a wide margin, helped mainly by aggressive cost management and lower raw material costs at its water products division. The company also provided an earnings outlook for full year 2010.
Net earnings for the quarter attributable to the company rose to $22.7 million or $0.74 per share, from a break-even level in the comparable quarter last year. Net income after adjusting for expenses related to the merging of its wholly owned subsidiary Smith Investment Company had been $6.7 million or $0.22 per share in the prior-year quarter.
On an average, six analysts polled by Thomson Reuters expected the company to report earnings of $0.57 per share. Analysts' estimates typically exclude special items.
Net revenue rose marginally to $509.6 million from $508.6 million in the period. Three analysts were expecting the company to report a revenue of $483.80 million. Gross profit improved significantly to $138.3 million from $99.7 million.
Segment-wise, sales of water products increased to $362.2 million from $346.2 million, which the company attributed to a 32% growth in China sales. Operating profit in this division increased 11% to $148.9 million, helped by China sales growth, aggressive cost management, and lower raw material costs. Meanwhile, revenue from electrical products division declined to $148.4 million from $163.2 million.
For the year ended December 31, 2009, A. O. Smith reported a rise in net earnings to $81.3 million or $3.39 per share, from $21.7 million or $2.29 per share for the previous year. Three analysts expected earnings to be $2.69 per share. Adjusted net income for the previous year had been $81.9 million or $2.70 per share. Net sales dropped to $1.99 billion from $2.30 billion last year, but was bettern than $1.96 billion projected by four analysts.
"The expense reduction and cash conservation programs we put in place had the desired effect, helping us maintain our profitability and generate significant cash flow throughout the year," said Paul Jones, Chairman and Chief Executive Officer.
Looking ahead, the company said it remains cautious because of continued weakness in new commercial construction activity and rising commodity costs, and consequently, it expects earnings per share to range between $2.95 and $3.25 in 2010. Analysts currently expect earnings of $3.05 for the year.
AOS is currently trading trading at $43.12, up 0.63% on the NYSE.
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