New York, January 29, 2026, 15:25 EST — Regular session
- A.O. Smith shares jumped roughly 6% following better-than-expected Q4 earnings and the release of its 2026 outlook
- The water heater maker projects net sales between $3.90 billion and $4.02 billion for 2026, with EPS expected in the range of $3.85 to $4.15
- Management signaled flat to declining U.S. residential unit volumes and warned of continued pressure in China for another year
A. O. Smith shares climbed 6.1% to $73.73 in Thursday afternoon trading, following a strong quarterly profit report and the company’s 2026 outlook. The stock had ended Wednesday at $69.49.
This update is key as investors seek clear signs on demand in the U.S. replacement market and commercial projects—segments that could counteract weaker overseas trends. China continues to swing the needle for many industrial firms, with A. O. Smith trimming costs there while monitoring volumes closely.
Guidance sets up the next battleground: balancing pricing against input costs like tariffs, and figuring out how much cash the company can return while still investing in adjacent plumbing and water-management sectors.
A. O. Smith reported fourth-quarter net earnings of $125.4 million, or 90 cents per diluted share, up from $109.7 million, or 75 cents, the previous year. Sales held steady at $912.5 million. Looking ahead to 2026, the company projects net sales between $3.90 billion and $4.02 billion, with diluted EPS expected in the range of $3.85 to $4.15.
Chief Executive Steve Shafer credited strong sales in commercial water heaters and boilers for boosting 2025 results. He added that “the assessment of our China business is ongoing.” Shafer also highlighted the Leonard Valve and Heat-Timer brands as moves toward building a wider water management platform.
In North America, the company reported 2025 sales around $3.0 billion, inching up as stronger pricing and increased boiler and commercial water heater volumes made up for a drop in wholesale residential water heater sales. However, gains were partly eroded by higher input costs, including tariffs.
Outside North America, sales slipped 4% to $880.4 million, dragged down by China’s 12% drop in third-party sales for the year. India, however, showed double-digit organic growth in local currency. The company also noted that recent cost-cutting measures boosted margins, even as volumes in China weakened.
A. O. Smith closed 2025 holding $193.2 million in cash and marketable securities, alongside $155.0 million in debt, the company reported. It also posted $546.0 million in free cash flow, defined as cash from operations less capital expenditures.
A. O. Smith reported buying back 5.9 million shares in 2025, costing $400.8 million. The company plans to invest roughly $200 million in buybacks next year. In January, the board boosted the share repurchase authorization by an additional 5 million shares, the company added.
Management’s outlook factors in roughly $70 million in sales from Leonard Valve and projects consolidated sales growth between 2% and 5% for the year. Shafer noted the company anticipates U.S. residential water heater unit volumes will remain flat or decline compared to last year. China, meanwhile, is forecasted to see a mid-single-digit drop in sales, despite an expected improvement in conditions later this year.
But the range includes many variables. The company warned its guidance doesn’t factor in possible effects from future acquisitions, results from its China business review, or tariff shifts — underscoring how a sluggish China rebound or new cost hikes might derail forecasts.
Investors are closely monitoring for clearer signals on China demand and pricing, alongside initial impacts of the Leonard Valve integration on growth and margins. A. O. Smith announced its quarterly dividend of $0.36 per share will be paid on February 17 to shareholders recorded by January 30.
