A.O. Smith shares rise on analyst's price target

HARTFORD, Conn. (AP) — Shares of A.O. Smith Corp. rose Monday as an analyst increased his price target and profit estimates for the manufacturer of water heaters and electric motors on its strong third-quarter results.

But Baird analyst Michael A. Schneider maintained his "Neutral" rating, cautioning that the Milwaukee company faces rising raw materials costs next year and continuing problems in commercial demand.

He increased his price target to $45 from $41.

The company's third-quarter results were impressive and demonstrate "the significant structural improvements made to the cost structure," Schneider said in a client note.

A.O. Smith said Friday it earned $34.6 million, or $1.14 per share, up from $5.8 million, or 61 cents per share, a year earlier. Excluding one-time gains, the company earned 99 cents per share.

The company also said it expects per-share earnings this year between $2.60 and $2.75, excluding one-time charges and gains. Analysts polled by Thomson Reuters expect, on average, $2.33 per share. Such expectations typically exclude one-time items.

Schneider said he expects rising costs in raw materials, further erosion in high-margin commercial business and possible share losses in Smith's motors business.

He raised his 2010 estimate to $2.63 per share from $2.40 per share and raised his 2011 estimate to $3.12 from $2.85 per share.

Analysts surveyed by Thomson Reuters expect earnings next year to be $2.81 per share and $3.09 per share for 2011.

Shares rose $1.15, or 2.7 percent, to $43.60 in morning trading.