| 2019-05-16 09:57:14|
AOS 09:57 05/16 05/16/19
Spruce Point follows J Capital's caution on A.O. Smith, sees up to 65% downside
Spruce Point Capital Management is commenting on A.O. Smith following this morning's research report from J Capital, which it says "shows a material undisclosed partner that functionally acts like AOS in close regards, and allows it to stuff distributors and inflate gross margins." Spruce Point notes that it has always had concerns that A.O. Smith's gross margins, which it believes "dwarf competitors' margins by 10% for seemingly commodity-like products." The company's margins "are either being inflated by management with aggressive accounting, or could not be sustained as local competitors" catch up, Spruce Points writes in an email. The firm has a price target of $17.70 to $27.30 for the stock, which represents approximately 45% to 65% downside. A.O. Smith in early trading is down 6%, or $3.03, to $45.11.
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