A. O. Smith (AOS) vs. Regal Beloit (RBC) Financial Review

A. O. Smith (NYSE: AOS) and Regal Beloit (NYSE:RBC) are both mid-cap industrials companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, earnings, dividends, analyst recommendations and valuation.

Profitability

This table compares A. O. Smith and Regal Beloit’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
A. O. Smith 12.18% 22.42% 11.96%
Regal Beloit 6.28% 9.76% 4.84%

Earnings and Valuation

This table compares A. O. Smith and Regal Beloit’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
A. O. Smith $2.69 billion 4.17 $326.50 million $2.04 31.90
Regal Beloit $3.22 billion 1.08 $203.40 million $4.60 17.05

A. O. Smith has higher earnings, but lower revenue than Regal Beloit. Regal Beloit is trading at a lower price-to-earnings ratio than A. O. Smith, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

74.9% of A. O. Smith shares are held by institutional investors. Comparatively, 93.8% of Regal Beloit shares are held by institutional investors. 1.3% of A. O. Smith shares are held by insiders. Comparatively, 2.2% of Regal Beloit shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

A. O. Smith pays an annual dividend of $0.56 per share and has a dividend yield of 0.9%. Regal Beloit pays an annual dividend of $1.04 per share and has a dividend yield of 1.3%. A. O. Smith pays out 27.5% of its earnings in the form of a dividend. Regal Beloit pays out 22.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. A. O. Smith has increased its dividend for 8 consecutive years and Regal Beloit has increased its dividend for 12 consecutive years. Regal Beloit is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current recommendations and price targets for A. O. Smith and Regal Beloit, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
A. O. Smith 0 3 4 0 2.57
Regal Beloit 0 5 5 0 2.50

A. O. Smith currently has a consensus target price of $62.40, suggesting a potential downside of 4.10%. Regal Beloit has a consensus target price of $86.63, suggesting a potential upside of 10.42%. Given Regal Beloit’s higher possible upside, analysts clearly believe Regal Beloit is more favorable than A. O. Smith.

Volatility and Risk

A. O. Smith has a beta of 1.57, meaning that its share price is 57% more volatile than the S&P 500. Comparatively, Regal Beloit has a beta of 1.48, meaning that its share price is 48% more volatile than the S&P 500.

Summary

Regal Beloit beats A. O. Smith on 9 of the 17 factors compared between the two stocks.

About A. O. Smith

A. O. Smith Corporation operates through two segments: North America and Rest of World. The Company’s Rest of World segment primarily consists of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas, gas tankless and electric water heaters, as well as water treatment products. Both segments primarily manufacture and market in their respective regions of the world. Its North America segment manufactures and globally markets specialty commercial water heating equipment, condensing and non-condensing boilers and water systems tanks. It also manufactures and markets in-home air purification products in China. It serves residential and commercial end markets in North America with a range of products, which include water heaters, boilers and other. It supplies water heaters to the residential market in China with a broad product offering, including electric, gas, gas tankless, heat pump and solar units, as well as combi boilers.

About Regal Beloit

Regal Beloit Corporation is a manufacturer of electric motors, electrical motion controls, power generation and power transmission products. The Company operates through three segments: the Commercial and Industrial Systems segment, with its principal line of business in medium and large electric motors, power generation products, high-performance drives and controls and capacitors; the Climate Solutions segment, with its principal line of business in small motors, controls and air moving products, and the Power Transmission Solutions segment, with its principal line of business in power transmission gearing, hydraulic pump drives, open gearing and specialty mechanical products which control motion and torque. It sells its products directly to original equipment manufacturers (OEMs), distributors and end users. It operates distribution facilities in Plainfield, Indiana; McAllen, Texas; LaVergne, Tennessee, and Florence, Kentucky.

Receive News & Ratings for A. O. Smith Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for A. O. Smith and related companies with MarketBeat.com's FREE daily email newsletter.

Leave a Reply