Water technology company A. O. Smith Corporation (AOS) recently revealed that it has acquired Canadian residential and commercial water heaters manufacturer Giant Factories, Inc. for $192 million.
A. O. Smith expects the acquisition to have no effect on its fourth quarter 2021 earnings per share (EPS) due to normal purchase accounting adjustments. However, the company expects the buyout to be accretive to its EPS in the first full year after the closing of the deal.
With this buyout, the company expects to enhance its presence in the Canadian market. Further, the acquisition is in line with the company’s strategy to have an increasing number of products that are supplied by a renewable energy grid, as Giant’s end markets are primarily served by a grid that is mostly hydro-sourced and non-carbon intensive.
The CEO of A. O. Smith, Kevin J. Wheeler, said, “The addition of Giant strengthens our leadership position as a global supplier of residential and commercial water heaters. The acquisition also supports our corporate strategy by increasing our North America market penetration, creating additional capacity and enhancing our distribution capabilities.” (See A. O. Smith stock chart on TipRanks)
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Recently, Stifel Nicolaus analyst Nathan Jones reiterated a Hold rating on the stock. The analyst, however, lowered the price target from $72 to $69, which implies upside potential of 5.3% from current levels.
Consensus among analysts is a Hold based on 1 Buy and 3 Holds. The average A. O. Smith price target of $75.67 implies upside potential of 15.5% from current levels.
A. O. Smith scores an 8 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. Shares have gained about 18.8% over the past year.
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