AZZ (NYSE: AZZ) and Smith (A.O.) Corporation (NYSE:AOS) are both industrial products companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, earnings, analyst recommendations, institutional ownership, risk, profitability and valuation.

Dividends

AZZ pays an annual dividend of $0.68 per share and has a dividend yield of 1.4%. Smith (A.O.) Corporation pays an annual dividend of $0.56 per share and has a dividend yield of 1.0%. AZZ pays out 33.5% of its earnings in the form of a dividend. Smith (A.O.) Corporation pays out 28.4% 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. AZZ has increased its dividend for 11 consecutive years and Smith (A.O.) Corporation has increased its dividend for 3 consecutive years. AZZ is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

85.8% of AZZ shares are held by institutional investors. Comparatively, 74.1% of Smith (A.O.) Corporation shares are held by institutional investors. 0.0% of AZZ shares are held by insiders. Comparatively, 1.3% of Smith (A.O.) Corporation shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares AZZ and Smith (A.O.) Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AZZ 6.44% 10.98% 5.77%
Smith (A.O.) Corporation 12.10% 22.25% 11.89%

Volatility and Risk

AZZ has a beta of 1.58, indicating that its share price is 58% more volatile than the S&P 500. Comparatively, Smith (A.O.) Corporation has a beta of 1.49, indicating that its share price is 49% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for AZZ and Smith (A.O.) Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AZZ 0 1 0 0 2.00
Smith (A.O.) Corporation 0 1 4 0 2.80

AZZ presently has a consensus price target of $56.00, indicating a potential upside of 15.35%. Smith (A.O.) Corporation has a consensus price target of $68.80, indicating a potential upside of 23.32%. Given Smith (A.O.) Corporation’s stronger consensus rating and higher possible upside, analysts plainly believe Smith (A.O.) Corporation is more favorable than AZZ.

Valuation and Earnings

This table compares AZZ and Smith (A.O.) Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
AZZ $824.81 million 1.53 $143.90 million $2.03 23.92
Smith (A.O.) Corporation $2.86 billion 3.37 $549.50 million $1.97 28.32

Smith (A.O.) Corporation has higher revenue and earnings than AZZ. AZZ is trading at a lower price-to-earnings ratio than Smith (A.O.) Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

Smith (A.O.) Corporation beats AZZ on 12 of the 17 factors compared between the two stocks.

AZZ Company Profile

AZZ Inc. is a provider of galvanizing services, welding solutions, specialty electrical equipment and engineered services to the power generation, transmission, distribution, refining and industrial markets. The Company operates through two segments: Energy segment and Galvanizing segment. Its Energy segment provides products and services designed to support industrial, nuclear and electrical applications. Its product offerings include custom switchgear, electrical enclosures, medium and high voltage bus ducts, explosion proof and hazardous duty lighting, nuclear safety-related equipment and tubular products. Its Galvanizing segment provides hot dip galvanizing to the steel fabrication industry through facilities located throughout the United States and Canada. It serves fabricators or manufacturers that provide services to the electrical and telecommunications, bridge and highway, petrochemical and general industrial markets and various original equipment manufacturers.

Smith (A.O.) Corporation Company Profile

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.

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