Trade of the Day: AOS Stock Could Jump 20% by Year End

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A.O. Smith Corp (AOS) — This building products company manufactures residential and commercial water heaters, as well as water purification systems. Its growth is therefore tied to improving U.S. housing starts and commercial construction applications.

This, along with rising volumes and a higher priced product mix in China, are expected to result in revenue growth of 11% in 2015 and 9.2% in 2016, according to Capital IQ. Its analysts also note the company’s plan to launch air purifiers, the fastest growing appliance in China.

They believe A.O. Smith should benefit from increased market share, price increases and lower costs for materials, and also note its strong share buyback program.

Capital IQ recently upped its rating on AOS stock to a “strong buy” from “buy.” The 2015 EPS estimate was raised by $0.26 to $3.08, and 2016 was increased by $0.20 to $3.44. The 12-month target price was raised from $72 to $86.

AOS stock has had a strong run this year, breaking from a double-top in January at $55. It jumped to over $77 in July before succumbing to profit-taking. But shares appear to have bottomed at $68.

Closing at $71.09 on Tuesday, AOS stock finished above the 50-day moving average at $70.94 and above the support line of a triangle at $68. The stock is in a consolidation that will most likely be resolved to the upside.

Buy AOS stock at $70 with a four-month target of $84, which would result in a 20% gain by year end. Major support rests at the July low near $65, and a stop-loss order should be placed below that support line.

AOS Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/a-o-smith-corp-aos-stock-trade-of-the-day/.

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