As industries modernize, there is a growing need for machinery that supports automation and precision manufacturing, enhancing productivity and consistency. Additionally, the push for digitalization in manufacturing is driving demand for machinery with IoT connectivity and real-time monitoring capabilities, enabling companies to optimize production processes.
Additionally, the demand for cost-effective machines, with regulatory pressures for lower emissions, is pressurizing construction equipment manufacturers to opt for electric and hybrid vehicles over traditional hydraulic and mechanical ones. Therefore, the construction equipment market is expected to register a CAGR greater than 6% by 2030.
Against this backdrop, let’s compare two established industrial equipment stocks to analyze which one should consider: A. O. Smith Corporation (AOS) and Franklin Electric Co., Inc. (FELE).
The Case for A. O. Smith Corporation stock
Valued at $9.52 billion by market cap, A. O. Smith Corporation (AOS) manufactures and markets residential and commercial gas and electric water heaters, boilers, heat pumps, tanks, and water treatment products in North America, China, Europe, and India.
AOS has declined 6.3% over the past month to close the last trading session at $66.16.
In terms of the trailing-12-month gross profit margin, AOS’ 38.14% is 21% higher than the 31.52% industry average. However, its 2.83% trailing-12-month CAPEX/Sales is marginally lower than the industry average of 2.86%.
AOS’ net sales for the fourth quarter that ended December 31, 2024, were reported at $912.40 million. The company’s adjusted net income and adjusted EPS declined 85.9% and 81.5% year-over-year to $124.10 million and $0.75, respectively.
Street expects AOS’ revenue for the quarter ending March 2025 to decline 2.9% year-over-year to $950.55 million. The company’s EPS for the same quarter is expected to decline 9.7% year-over-year to $0.90.
AOS’ POWR Ratings reflect mixed prospects. It has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AOS is ranked #46 out of 77 stocks in the Industrial - Machinery industry. It has a C grade for Value, Momentum, and Stability. To see AOS’ Growth, Sentiment, and Quality ratings, click here.
The Case for Franklin Electric Co., Inc. Stock
Valued at $4.68 billion by market cap, Franklin Electric Co., Inc. (FELE) designs, manufactures, and distributes water and fuel pumping systems worldwide. The company operates through Water Systems, Fueling Systems, and Distribution segments.
FELE’s stock has gained 3.8% over the past month to close the last trading session at $102.35.
In terms of the trailing-12-month EBIT margin, FELE’s 12.40% is 20.3% higher than the 10.31% industry average. Likewise, its 15.18% trailing-12-month EBITDA margin is 5.2% higher than the industry average of 14.43%.
FELE’s net sales for the fourth quarter that ended December 31, 2024, came in at $485.75 million, up 2.7% year-over-year. Its net income came in at $34.29 million, and income per share came in at $0.73.
Analysts expect FELE’s revenue for the first quarter ending March 2025 to increase 2.2% year-over-year to $471.21 million. Its EPS is expected to grow 4.9% year-over-year to $0.73 for the same quarter.
FELE’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
FELE has a B grade in Quality and Stability. It is ranked #7 in the same industry.
Click here for the additional POWR Ratings for FELE (Growth, Momentum, Sentiment, and Value).
Franklin Electric (FELE) vs. A. O. Smith Corporation (AOS): Which Industrial Equipment Stock Should You Consider?
The increasing focus on infrastructure and the development of automation in the construction and manufacturing processes are expected to have a significant impact on the growth of the industrial equipment market.
Leading industrial equipment companies, such as AOS and FELE, stand to capitalize on the optimistic industry outlook. However, FELE’s higher profitability and promising near-term outlook favor it as the better stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Industrial - Manufacturing industry here.
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AOS shares were trading at $66.19 per share on Thursday afternoon, up $0.03 (+0.05%). Year-to-date, AOS has declined -2.47%, versus a 0.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
Franklin Electric (FELE) vs. A. O. Smith Corporation (AOS): Which Industrial Equipment Stock Should You Consider? StockNews.com
