Insider Buying

Insider Buying Report: A.O. Smith Corporation (AOS:US)

A.O. Smith Corporation
(AOS:US)
12 months:
+10%
Activity:
Bullish
Pattern:
Large purchase from board member
News:
Good Q4 results
A.O. Smith Corporation
(AOS:US)
12 months:
+10%
Activity:
Bullish
Pattern:
Large purchase from board member
News:
Good Q4 results

It is no secret that Insiders know the ins and outs of their companies better than anyone else. So when the same Insiders purchase the company's stock, there is a chance that the company's fortunes are set to rise. 

In this report, we are going to highlight an interesting insider purchase at A.O. Smith Corporation (AOS: US). A.O. Smith is one of the world's leading manufacturers of residential and commercial water heaters and boilers. Offering a comprehensive product line featuring well-known brands, it has sales and distribution in more than 60 countries around the world. The company is listed on the New York Stock Exchange and currently has a market capitalization of $10.7 billion.

A.O. Smith Corp: Insider Buying

Our data shows that on February 22, board member Michael Larsen bought 3,925 shares at a price of $69.87 per share. This trade cost the insider $274,240 and increased his holding to 7,425 shares.

High-Conviction Purchase

This insider transaction is worth highlighting for a couple of reasons.

Firstly, insider purchases at A.O. Smith are not common. This trade represents the first buy from an insider in several years. This suggests that Mr. Larsen – who is Chief Financial Officer of Illinois Tool Works – sees a lot of value in the stock right now.

Secondly, the trade has increased the size of Mr. Larsen’s holding by 112%. The fact that the insider has boosted his position by such a large percentage indicates that he is very confident the stock is set to move higher.

Record Q4 Results

A.O. Smith recently posted a strong set of Q4 results.

For the period, the group generated record sales of $3.5 billion, up 22% year on year, on the back of inflation-related pricing actions and strong worldwide demand. Meanwhile, earnings per share came in at a record $3.02, up 42% year on year, despite higher material and logistics costs. Free cash flow amounted to $566.0 million, an increase of 12%.

During the period, the group returned $537 million of capital to shareholders through dividends and share repurchases.

"Our record sales are a result of robust demand across all geographies and effective execution and tremendous effort by our procurement and operations teams who overcame component shortages, logistical bottlenecks and rapidly rising costs,” commented Chairman and CEO Kevin J. Wheeler.

Looking ahead, the group said that it expects sales growth of between 16% and 18% for 2022. It also expects adjusted earnings per share of between $3.35 and $3.55, which would represent year-on-year growth of 11% and 18%.

After these results, analysts at D.A. Davidson raised their price target to $87 from $85.

In light of these developments, we see the insider buying here as a bullish indicator. 

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