Credit: Image source: A.O. Smith.While China's economic growth has been slowing, the world's most populous country is still experiencing much stronger growth relative to more developed countries. China's gross domestic product, or GDP, reportedly grew 6.9% in 2015.
Waves of consumers from China's population of 1.4 billion continue to pour into the middle class, including the upper-middle class, which is largely considered the "consuming class" that's responsible for much of any country's economic growth. Two companies poised to significantly grow their empires thanks to this long-term trend are Walt Disney Co .(NYSE: DIS) and A.O. Smith (NYSE: AOS) .
Shanghai Disney as a "gateway experience"
Image source: A.O. Smith.
In the second quarter, A.O. Smith's sales in China continued to power its revenue growth, rising 10%, or nearly 16% in local currency, whereas total revenue grew 3% in constant currency. Earnings per share jumped 24%, in part due to the company's pricing power. A.O. Smith expects 2016 EPS to grow between 13.3% and 15.2% year over year. This is great growth considering the company continues to invest heavily in its China business -- it's been expanding into tier 2 and tier 3 cities -- and is in the early stages of establishing a business in India, the world's second most populous country.
Wall Street analysts project that A.O. Smith will grow EPS at an average annual rate of 11.5% over the next five years. However, there's reason to believe that this estimate will prove too conservative. A.O. Smith continues to beat analysts' expectations, cruising by both first- and second-quarter estimates by about 9%.
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Beth McKenna has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
