A.O. Smith Corp. AOS continued with its earnings streak in first-quarter 2016, with earnings per share of 83 cents surpassing the Zacks Consensus Estimate of 77 cents by 7.8%.The earnings figure also compared favorably with the year-ago tally of 65 cents, up 27.8% year over year. Manufacturing cost productivity coupled with a fall in interest expenses drove the bottom-line growth.Inside the HeadlinesNet sales in the quarter were up 3% year over year to $636.9 million but failed to beat the Zacks Consensus Estimate of $647 million.Impressive sales across the company’s “Rest of the World” segment acted as the chief revenue driver in the quarter. However, strengthening of the U.S. dollar against Canadian and Chinese currencies continued to act as a headwind, impacting sales.Talking about the segments, A.O. Smith’s sales in the North America segment (comprises U.S. and Canada) declined 1.2% year over year to $423.9 million. Higher prices as well as sales of water heaters in the U.S. were more than offset by lower volumes of residential and commercial water heaters. Despite the tepid top-line growth, segmental operating earnings rose 29.1% year over year to $91.9 million. Improvement in operating margin at the segment was largely attributable to higher pricing of heaters in the U.S. and Canada and lower material costs.Quarterly sales at the Rest of the World segment (China, India & Europe) rose about 11% year over year to $217.4 million. This improvement came largely on the back of continued strong customer demand for A.O. Smith’s premium water heating and water treatment products, particularly in China (up 12% in terms of U.S. dollar). Moreover, favorable seasonal demand for air purifier products compounded sales growth at the segment.Operating earnings at the segment also improved by 2.7% year over year to $26.9 million in the quarter. While higher sales in China drove operating income, this was offset by a host of other factors including adverse currency translation, higher selling, general and administrative expenses and wider losses in India.Share RepurchasesDuring first-quarter 2016, A.O. Smith bought back around 430,000 common shares for $30.5 million. Also, the company announced an increase in its estimated 2016 share repurchase spending from $150 million to $175 million on account of an anticipated decline in capital spending in 2016.Exiting the first quarter, the company has a remaining balance of roughly 2.15 million shares under its discretionary authorization program.Liquidity & Cash FlowA.O. Smith’s cash and cash equivalents at the end of the quarter were $305.5 million compared with $323.6 million at the end of Dec 31, 2015.At the end of Mar 31, 2016, long-term debt stood at $274.1 million compared with $236.1 million at the end of Dec 31, 2015.GuidanceConcurrent with the earnings release, A.O. Smith raised the midpoint of its 2016 guidance range, banking on the robust prospects in the U.S. and China. The company now projects full-year 2016 earnings per share between $3.47 and $3.55 (up from the previously guided range of $3.40–$3.55 per share).For 2016, the company projects 10% growth in the sales of Lochinvar-branded products in the U.S.. Also, surging demand for water heating, water treatment and air purifier products in China is adding to the company’s strength, with sales in the country likely to rise 15% in local currency in 2016.Our TakeGoing forward, we believe A.O. Smith stands to benefit significantly from the impending shift to high-efficiency condensing boilers from low-efficiency products. Also, the company’s strong top-line growth in China, which grew at a CAGR of 28% in the 2003-2014 period, signals bright days ahead.Despite these positives, intensifying competition from renowned global brands and foreign currency exchange rate fluctuations are likely to weigh on the company’s financials in the near term. Additionally, escalating selling, general and administrative expenses is adding to the woes of this Zacks Rank #4 (Sell) company.Better-ranked stocks in the same space include Emerson Electric Co. EMR, Regal Beloit Corporation RBC and Rexnord Corporation RXN, each carrying a Zacks Rank #2 (Buy).Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report EMERSON ELEC CO (EMR): Free Stock Analysis Report SMITH (AO) CORP (AOS): Free Stock Analysis Report REGAL BELOIT (RBC): Free Stock Analysis Report REXNORD CORP (RXN): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research