A. O. Smith (NYSE: AOS) and ABB (NYSE:ABB) are both large-cap industrial products companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, earnings, institutional ownership, profitability, risk and dividends.
Institutional & Insider Ownership
74.4% of A. O. Smith shares are owned by institutional investors. Comparatively, 5.4% of ABB shares are owned by institutional investors. 1.3% of A. O. Smith shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
This table compares A. O. Smith and ABB’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|A. O. Smith||$3.00 billion||3.57||$296.50 million||$1.70||36.74|
|ABB||$34.31 billion||1.44||$2.21 billion||$1.03||22.36|
ABB has higher revenue and earnings than A. O. Smith. ABB 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.
This table compares A. O. Smith and ABB’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|A. O. Smith||9.89%||23.30%||12.38%|
Risk and Volatility
A. O. Smith has a beta of 1.52, meaning that its share price is 52% more volatile than the S&P 500. Comparatively, ABB has a beta of 1.15, meaning that its share price is 15% more volatile than the S&P 500.
A. O. Smith pays an annual dividend of $0.72 per share and has a dividend yield of 1.2%. ABB pays an annual dividend of $0.73 per share and has a dividend yield of 3.2%. A. O. Smith pays out 42.4% of its earnings in the form of a dividend. ABB pays out 70.9% 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 6 consecutive years and ABB has increased its dividend for 12 consecutive years. ABB is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This is a breakdown of recent ratings and price targets for A. O. Smith and ABB, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|A. O. Smith||0||2||5||0||2.71|
A. O. Smith presently has a consensus target price of $66.40, indicating a potential upside of 6.33%. ABB has a consensus target price of $23.50, indicating a potential upside of 2.04%. Given A. O. Smith’s stronger consensus rating and higher possible upside, research analysts plainly believe A. O. Smith is more favorable than ABB.
A. O. Smith beats ABB on 13 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.
ABB Ltd (ABB) is a holding company. The Company’s segments include Electrification Products, Robotics and Motion, Industrial Automation, Power Grids, and Corporate and Other. It operates through four divisions: Electrification Products, Robotics and Motion, Industrial Automation and Power Grids. It is engaged in serving customers in utilities, industry and transport and infrastructure. The Electrification Products segment manufactures and sells products and services including low and medium-voltage switchgear, breakers, switches and control products. The Robotics and Motion segment manufactures and sells motors, generators, variable speed drives and robots and robotics. The Industrial Automation segment develops and sells control and plant optimization systems, and automation products and solutions. The Power Grids segment supplies power and automation products, systems, and service and software solutions.
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