Wedbush Cuts Price Target on AO Smith (AOS) Due to Lower Group Multiples

Wedbush is reiterating its Outperform rating on shares of AO Smith (NYSE: AOS) and is lowering its price target from $49 to $46.

AHRI's release of July's water heater shipment showed less of a decline than experienced in August, and September even looks to be stronger. To go inline with the overall market trend, the firm is reducing its Q3 and 2011 EPS estimates from $0.48 and $2.15 to $0.46 and $2.13. For 2012 Wedbush now estimates EPS of $2.98.

While growth is typically slowing in developed markets, growth in emerging markets such as China and India looks to continue to grow with no signs of slowing. Emerging markets will continue to be key growth drivers for the company in the long-term.

If the U.S. experiences a housing recovery in 2013 or 2014 the company should also see as increase in demand with 90 percent of residential water heater sales being replacements currently. The firm estimates that a housing recovery could generate $0.27-$0.36 per share in additional earnings for the company.

For more ratings news on AO Smith click here and for the rating history of AO Smith click here.

Shares of AO Smith closed at $34.23 yesterday.

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