A. O. Smith (NYSE: AOS) trims 2026 guidance as China weighs on Q1
Filing Impact
Filing Sentiment
Form Type
8-K
Rhea-AI Filing Summary
A. O. Smith Corporation reported first quarter 2026 net sales of $945.6 million, down 2% year over year, with net earnings of $118.0 million and diluted EPS of $0.85, an 11% decline. North America sales rose slightly to $753.4 million, helped by the Leonard Valve acquisition, but lower residential water heater volumes and weather-related disruptions pressured margins. Rest of World sales fell to $200.7 million as China sales declined 17% in local currency.
Operating cash flow increased to $129.4 million and free cash flow to $118.9 million, supported by working capital management. The company repurchased 0.7 million shares for $51.3 million and ended the quarter with $203.9 million in cash and marketable securities and $615.8 million of debt.
The company lowered its 2026 outlook, now expecting net sales of $3.9–$4.0 billion, diluted EPS of $3.60–$3.90 and adjusted EPS of $3.70–$4.00, primarily due to continued weakness in China and uncertainty around North American regulatory changes. It also plans approximately $20 million of North America water treatment restructuring and impairment expenses in the second quarter, excluded from adjusted EPS.
Positive
- None.
Negative
- Guidance cut: 2026 adjusted EPS outlook reduced to $3.70–$4.00 from $3.85–$4.15, and sales growth range narrowed due to China weakness and regulatory uncertainty.
- Earnings decline: Q1 2026 net sales fell 2% YoY, net earnings declined 14% to $118.0 million, and diluted EPS dropped 11% to $0.85.
- China pressure: Rest of World sales decreased 11%, with China sales down 17% in local currency, reducing segment margin to 6.2% from 8.7%.
Insights
Q1 earnings declined and 2026 guidance was cut, driven mainly by China weakness.
A. O. Smith posted Q1 2026 revenue of $945.6M, down 2%, with net earnings of $118.0M and EPS of $0.85, down 11%. North America grew modestly, aided by Leonard Valve, while Rest of World, especially China, saw double-digit declines.
The company now guides 2026 diluted EPS to $3.60–$3.90 and adjusted EPS to $3.70–$4.00, below the prior $3.85–$4.15 adjusted range, citing ongoing China softness and regulatory uncertainty in North America. It also expects about $20M of restructuring and impairment charges in North America water treatment in Q2 2026.
Despite earnings pressure, free cash flow improved to $118.9M in the quarter and leverage rose to 24.7% debt-to-capitalization after funding the Leonard Valve acquisition. Management highlighted flexibility to fund organic growth, dividends, buybacks, and additional acquisitions, while future filings may provide more detail on China actions and restructuring outcomes.
8-K Event Classification
2 items: 2.02, 9.01
2 items
Item 2.02
Results of Operations and Financial Condition
Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 9.01
Financial Statements and Exhibits
Exhibits
Financial statements, pro forma financial information, and exhibit attachments filed with this report.
Key Figures
Q1 2026 net sales: $945.6 million
Q1 2026 net earnings: $118.0 million
Q1 2026 diluted EPS: $0.85
+5 more
8 metrics
Q1 2026 net sales
$945.6 million
First quarter 2026, down 2% year over year
Q1 2026 net earnings
$118.0 million
First quarter 2026, down from $136.6 million in 2025
Q1 2026 diluted EPS
$0.85
First quarter 2026, down 11% from $0.95 in Q1 2025
2026 adjusted EPS guidance
$3.70–$4.00
Full-year 2026, reduced from $3.85–$4.15 prior range
Q1 2026 free cash flow
$118.9 million
First quarter 2026, up from $17.4 million in 2025
China sales decline
17% decrease
China sales in local currency, first quarter 2026 vs 2025
Share repurchases
$51.3 million
0.7 million shares repurchased in first three months of 2026
Debt-to-capitalization ratio
24.7%
Total debt-to-total capitalization as of March 31, 2026
Key Terms
free cash flow, adjusted EPS, restructuring and impairment expenses, leverage ratio, +1 more
5 terms
free cash flow financial
"Strong growth in operating cash flow and free cash flow to $129 million and $119 million"
Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.
adjusted EPS financial
"Adjusted EPS of between $3.70 and $4.00"
Adjusted earnings per share (adjusted eps) is a measure of a company's profit per share that has been modified to exclude certain one-time or unusual items, such as costs from restructuring or asset sales. It provides a clearer picture of the company’s core performance by removing events that may distort the usual earnings. Investors use adjusted eps to better understand a company's ongoing profitability and compare it more accurately over time.
restructuring and impairment expenses financial
"North America water treatment pre-tax restructuring and impairment expenses of approximately $20 million"
Restructuring and impairment expenses are charges a company records when it reorganizes its operations (layoffs, closing facilities, or other one-time costs) and when assets lose value and must be written down. Think of it like cleaning out a garage: you pay to reorganize the space and throw away items that no longer work; those costs reduce reported profit now and can signal either short-term pain or long-term efficiency gains, so investors watch them to judge future cash flow and true earning power.
leverage ratio financial
"resulting in a leverage ratio of 24.7% as measured by total debt-to-total capitalization"
Leverage ratio measures how much a company relies on borrowed money compared with its own funds or assets, typically expressed as debt relative to equity or total assets. Like a homeowner with a mortgage, higher leverage can amplify returns when business is strong but also raises the chance of big losses or default if revenue falls, so investors use it to judge financial risk and resilience.
forward-looking statements regulatory
"This release contains statements that the Company believes are “forward-looking statements”"
Forward-looking statements are predictions or plans that companies share about what they expect to happen in the future, like estimating sales or profits. They matter because they help investors understand a company's outlook, but since they are based on guesses and assumptions, they can sometimes be wrong.
Earnings Snapshot
Net sales: $945.6 million · Guidance included
Q1 2026
Net sales
$945.6 million
-2% YoY
Net earnings
$118.0 million
-14% YoY
Diluted EPS
$0.85
-11% YoY
Guidance
For full-year 2026, the company expects net sales of $3.9–$4.0 billion, diluted EPS of $3.60–$3.90, and adjusted EPS of $3.70–$4.00, excluding approximately $20 million of North America water treatment restructuring and impairment expenses.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
——————————————
FORM 8-K
——————————————
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 30, 2026
——————————————
(Exact name of registrant as specified in its charter)
——————————————
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices, including zip code)
(414 ) 359-4000
(Registrant’s telephone number)
——————————————
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On April 30, 2026, A. O. Smith Corporation (“the Company”) issued a news release announcing the Company’s results for the quarter ended March 31, 2026. A copy of the Company’s news release is attached as Exhibit 99.1 to this Current Report on Form 8-K (this “Current Report”) and is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits
The following exhibit is being filed herewith:
(99.1) News Release of A. O. Smith Corporation, dated April 30, 2026
104 Cover Page Interactive Data File (embedded with the Inline XBRL document)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| A. O. SMITH CORPORATION | ||||||||||||||||||||
Date: April 30, 2026 | By: | /s/James F. Stern | ||||||||||||||||||
| James F. Stern | ||||||||||||||||||||
| Executive Vice President, Corporate Development, Strategy and Secretary | ||||||||||||||||||||
Exhibit 99.1
Media Relations: Curt Selby 414-359-4191 curt.selby@aosmith.com | Investor Relations: Helen Gurholt 414-359-4157 hgurholt@aosmith.com | |||||||||||||
FOR IMMEDIATE RELEASE
April 30, 2026
A. O. Smith Reports First Quarter 2026 Results and Lowers Full Year 2026 Outlook
First Quarter 2026 Highlights
(Comparisons are year-over-year (“YoY”), unless otherwise noted)
•Sales of $946 million; net earnings of $118 million and diluted earnings per share (EPS) of $0.85
•North America segment sales of $753.4 million increased 1% with the addition of Leonard Valve and pricing benefits offsetting softer water heater industry volumes and weather-related production and shipping constraints
•Rest of World segment sales of $200.7 million decreased 11% due to continued challenges in the consumer appliance market in China
•Net earnings decreased primarily as a result of lower volumes and transaction-related expenses recognized in the quarter for the Leonard Valve acquisition
•Strong growth in operating cash flow and free cash flow to $129 million and $119 million, respectively
•Primarily due to continued challenging conditions in China, 2026 full year EPS guidance lowered to:
◦Diluted EPS of between $3.60 and $3.90
◦Adjusted EPS of between $3.70 and $4.00
Milwaukee, Wis.— Global water technology company A. O. Smith Corporation (“the Company”) (NYSE: AOS) today announced its first quarter 2026 results.
Key Financial Metrics
First Quarter
(in millions, except per share amounts)
| Q1 2026 | Q1 2025 | % Change YoY | |||||||||
| Net sales | $945.6 | $963.9 | -2% | ||||||||
| Net earnings | $118.0 | $136.6 | -14% | ||||||||
| Diluted earnings per share | $0.85 | $0.95 | -11% | ||||||||
Chief Executive Officer Steve Shafer commented, “Our team executed with focus and agility in the first quarter, continuing to support our customers well in the face of a continued soft macro environment. As we anticipated, softer demand in China impacted results. In North America, results were impacted by residential water heater industry demand that was modestly below our expectations, compounded by temporary weather-related disruptions at our Ashland City, Tennessee facility. Separately, in April, we took another step in our business simplification and margin enhancement efforts within our North America water treatment business by announcing a targeted restructuring plan that will be recognized in the second quarter. We believe these actions are an important step in advancing a stronger business model to achieve a higher level of profitable growth.”
Segment-level Performance
North America
First quarter sales of $753.4 million increased 1% relative to a difficult 2025 comparison as the benefits of carryover pricing actions and the $16 million sales contribution from the newly acquired Leonard Valve business were largely offset by lower residential water heater volumes. The first quarter of 2026 was negatively impacted by weather-related production and shipping constraints, particularly as a direct result of storm damage at the Company’s Ashland City, Tennessee plant. The first quarter of 2025 benefited from incremental volume from the pull forward of water heater and boiler sales ahead of tariff and other cost-related price increases.
Segment earnings were $175.4 million and segment margin was 23.3% in first quarter of 2026 compared to first quarter of 2025 segment earnings of $185.2 million and segment margin of 24.7%. The year-over-year decrease in segment earnings and segment margin was primarily due to lower residential water heater volumes which more than offset the earnings contribution from Leonard Valve. The first quarter of 2025 benefited from a stronger mix toward higher efficiency products as certain customers bought ahead of an announced price increase.
Rest of World
Rest of World sales of $200.7 million decreased 11% compared to the prior year period and included a favorable currency translation impact of $8 million primarily related to sales in China. China sales decreased 17% in local currency due to continued weak consumer demand.
Segment earnings were $12.4 million and segment margin was 6.2% in the first quarter of 2026, compared to segment earnings of $19.7 million and segment margin of 8.7% in the same period of 2025. The lower segment earnings and segment margin compared to the prior year were primarily due to lower sales volumes that were partially offset by continued cost management in China.
Balance Sheet, Liquidity and Capital Allocation
As of March 31, 2026, cash and marketable securities balances totaled $203.9 million and debt totaled $615.8 million, resulting in a leverage ratio of 24.7% as measured by total debt-to-total capitalization. The increased leverage ratio compared to 2025 was due to cash borrowed under a new term loan used to acquire Leonard Valve in January 2026.
Cash provided by operations was $129.4 million and free cash flow was $118.9 million in the first three months of 2026, both higher than the same period in 2025, primarily driven by diligent working capital management and the timing of customer payments that more than offset lower earnings.
As part of its commitment to return capital to shareholders, the Company repurchased 0.7 million shares at a cost of $51.3 million in the first three months of 2026. As of March 31, 2026, authority remained to repurchase approximately 5.1 million additional shares. The Company projects that it will spend $200 million to repurchase shares in 2026.
On April 13, 2026, the Company’s board of directors approved a $0.36 per share dividend for shareholders of record on April 30, payable on May 15.
Outlook
2026 Outlook
(in millions, except per share amounts)
| 2025 | 2026 Outlook | |||||||||||||
| Actual | Low End | High End | ||||||||||||
| Net sales | $3,830 | $3,900 | $4,000 | |||||||||||
| Diluted earnings per share | $3.85 | $3.60 | $3.90 | |||||||||||
| Adjusted earnings per share | $3.85 | $3.701 | $4.001 | |||||||||||
1Excludes announced North America water treatment pre-tax restructuring and impairment expenses of approximately $20 million to be recognized in the second quarter. See accompanying GAAP to Non-GAAP reconciliations
The Company revised its full-year 2026 sales growth outlook to a range of 2% to 4%, lowering the high end compared to the previous range of 2% to 5%. The Company also lowered its full-year 2026 adjusted EPS outlook to be between $3.70 and $4.00, down from $3.85 to $4.15.
Shafer concluded, “Primarily based on our latest view of our China business and partially due to increased uncertainty around regulatory changes scheduled to take effect later this year in North America, we have updated our full-year expectations. In China, we expect market conditions to remain challenging through the year and have identified several actions to improve performance. These actions are pending the conclusion of our assessment of the business. In North America, we remain confident in our competitive positioning and the underlying strength of the business despite a slower-than-expected start to the year driven by softer macro conditions.”
“We believe our strong balance sheet and free cash flow give us the flexibility to support organic growth, dividends and share repurchases while continuing to pursue strategic acquisitions to support our focus on portfolio management.”
The Company’s guidance excludes the potential impacts from future acquisitions, any potential outcomes of the assessment of its China business and changes to tariffs after the date of this release.
A. O. Smith will host a webcasted conference call at 10:00 a.m. (Eastern Daylight Time) today. The call can be heard live on the Company’s website. An audio replay of the call will be available on the Company’s website after the live event. To access the archived audio replay, go to the “Investors” page and select the First Quarter 2026 Earnings Call link.
To provide improved transparency into the operating results of its business, the Company is providing non-GAAP measures. Free cash flow is defined as cash provided by operations less capital expenditures. Adjusted EPS excludes the impact of restructuring and impairment charges. Reconciliations from GAAP measures to non-GAAP measures are provided in the financial information included in this news release.
Forward-looking Statements
This release contains statements that the Company believes are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “continue,” “guidance,” “outlook”, “confident” or words of similar meaning. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this release. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: further weakening in North American residential or commercial construction or instability in the Company’s replacement markets; failure to realize the expected benefits of acquisitions or expected synergies; difficulties in predicting results of operations of an acquired business; negative impact to the Company’s businesses from international tariffs, including any new or increased tariffs that could also trigger retaliatory responses from other countries, as well as trade disputes and geopolitical differences, including the conflicts in Ukraine and the Middle East; further softening in U.S. residential and commercial water heater demand; negative impacts to the Company, particularly the demand for its products, resulting from global inflationary pressures or a potential recession in one or more of the markets in which the Company participates; the Company’s ability to continue to obtain commodities, components, parts and accessories on a timely basis through its supply chain and at expected costs, including the recent volatility in fuel and other material prices; inability of the Company to implement or maintain pricing actions; inconsistent recovery of the Chinese economy or a further decline in the growth rate of consumer spending or housing sales in China; the availability, timing or effects of China stimulus programs; uncertain outcomes and costs and other potential impacts of the Company’s assessment relating to the Company’s China business; the failure to realize the expected benefits of restructuring actions; further weakening in the high-efficiency gas boiler segment in the U.S.; substantial defaults in payment by, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer; foreign currency fluctuations; failure to realize the expected benefits, timing and extent of regulatory changes; competitive pressures on the Company’s businesses, including new technologies and new competitors; the impact of potential information technology or data security breaches; negative impact of changes in government regulations or regulatory requirements; the inability to respond to secular trends toward decarbonization and energy efficiency; and adverse developments in general economic, political and business conditions in key regions of the world. Additional factors are discussed in the Company’s filings with Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, quarterly reports on Form 10-Q and current reports on Form 8-K. Forward-looking statements included in this news release are made only as of the date of this release, and the Company is under no obligation to update these statements to reflect subsequent events or circumstances. All subsequent written and oral forward-looking statements attributed to the Company, or persons acting on its behalf, are qualified entirely by these cautionary statements.
About A. O. Smith
A. O. Smith Corporation, with headquarters in Milwaukee, Wisconsin, is a global leader applying innovative technology and energy-efficient solutions to products manufactured and marketed worldwide. Listed on the New York Stock Exchange (NYSE: AOS), the Company is one of the world’s leading manufacturers of residential and commercial water heating equipment and boilers, as well as a manufacturer of water treatment products. For more information, visit www.aosmith.com.
SOURCE: A. O. Smith Corporation
###
A. O. SMITH CORPORATION
Condensed Consolidated Statement of Earnings
(dollars in millions, except share data)
(unaudited)
| Three Months Ended March 31, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Net sales | $ | 945.6 | $ | 963.9 | |||||||||||||
| Cost of products sold | 579.9 | 588.5 | |||||||||||||||
| Gross profit | 365.7 | 375.4 | |||||||||||||||
| Selling, general and administrative expenses | 203.9 | 192.6 | |||||||||||||||
| Interest expense | 7.1 | 2.9 | |||||||||||||||
| Other income, net | — | (1.2) | |||||||||||||||
| Earnings before provision for income taxes | 154.7 | 181.1 | |||||||||||||||
| Provision for income taxes | 36.7 | 44.5 | |||||||||||||||
| Net earnings | $ | 118.0 | $ | 136.6 | |||||||||||||
| Diluted earnings per share of common stock | $ | 0.85 | $ | 0.95 | |||||||||||||
| Average common shares outstanding (000’s omitted) | 139,167 | 144,408 | |||||||||||||||
A. O. SMITH CORPORATION
Condensed Consolidated Balance Sheet
(dollars in millions)
| (Unaudited) March 31, 2026 | December 31, 2025 | ||||||||||||||||
| ASSETS: | |||||||||||||||||
| Cash and cash equivalents | $ | 185.2 | $ | 174.5 | |||||||||||||
| Marketable securities | 18.7 | 18.7 | |||||||||||||||
| Receivables | 634.1 | 582.3 | |||||||||||||||
| Inventories | 488.5 | 479.3 | |||||||||||||||
| Other current assets | 41.9 | 36.7 | |||||||||||||||
| Total Current Assets | 1,368.4 | 1,291.5 | |||||||||||||||
| Net property, plant and equipment | 632.2 | 635.1 | |||||||||||||||
| Goodwill and other intangibles | 1,518.6 | 1,072.9 | |||||||||||||||
| Operating lease assets | 51.8 | 46.3 | |||||||||||||||
| Other assets | 79.3 | 97.0 | |||||||||||||||
| Total Assets | $ | 3,650.3 | $ | 3,142.8 | |||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY: | |||||||||||||||||
| Trade payables | $ | 543.0 | $ | 504.1 | |||||||||||||
| Accrued payroll and benefits | 60.7 | 93.6 | |||||||||||||||
| Accrued liabilities | 159.4 | 147.5 | |||||||||||||||
| Product warranties | 73.4 | 75.0 | |||||||||||||||
| Debt due within one year | 41.6 | 42.3 | |||||||||||||||
| Total Current Liabilities | 878.1 | 862.5 | |||||||||||||||
| Long-term debt | 574.2 | 112.7 | |||||||||||||||
| Pension liabilities | 7.4 | 7.4 | |||||||||||||||
| Operating lease liabilities | 40.7 | 37.1 | |||||||||||||||
| Other liabilities | 272.0 | 265.1 | |||||||||||||||
| Stockholders’ equity | 1,877.9 | 1,858.0 | |||||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 3,650.3 | $ | 3,142.8 | |||||||||||||
A. O. SMITH CORPORATION
Condensed Consolidated Statement of Cash Flows
(dollars in millions)
(unaudited)
| Three Months Ended March 31, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Operating Activities | |||||||||||||||||
| Net earnings | $ | 118.0 | $ | 136.6 | |||||||||||||
| Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | |||||||||||||||||
| Depreciation & amortization | 23.9 | 20.7 | |||||||||||||||
| Share based compensation expense | 6.6 | 6.1 | |||||||||||||||
| Deferred income taxes | 18.3 | (5.0) | |||||||||||||||
| Net changes in operating assets and liabilities: | |||||||||||||||||
| Current assets and liabilities | (43.2) | (125.3) | |||||||||||||||
| Noncurrent assets and liabilities | 5.8 | 5.6 | |||||||||||||||
| Cash Provided by Operating Activities | 129.4 | 38.7 | |||||||||||||||
| Investing Activities | |||||||||||||||||
| Capital expenditures | (10.5) | (21.3) | |||||||||||||||
| Acquisitions | (470.0) | — | |||||||||||||||
| Investment in marketable securities | — | (22.6) | |||||||||||||||
| Net proceeds from sale of marketable securities | — | 33.1 | |||||||||||||||
| Cash Used in Investing Activities | (480.5) | (10.8) | |||||||||||||||
| Financing Activities | |||||||||||||||||
| Proceeds from debt | 564.4 | 240.5 | |||||||||||||||
| Repayments of debt | (101.1) | (164.0) | |||||||||||||||
| Common stock repurchases | (51.3) | (120.6) | |||||||||||||||
| Net payments from stock option activity | (0.5) | (1.8) | |||||||||||||||
| Dividends paid | (50.2) | (49.2) | |||||||||||||||
| Cash Provided by (Used in) Financing Activities | 361.3 | (95.1) | |||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 0.5 | 0.6 | |||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 10.7 | (66.6) | |||||||||||||||
| Cash and cash equivalents - beginning of period | 174.5 | 239.6 | |||||||||||||||
| Cash and Cash Equivalents - End of Period | $ | 185.2 | $ | 173.0 | |||||||||||||
A. O. SMITH CORPORATION
Business Segments
(dollars in millions)
(unaudited)
| Three Months Ended March 31, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Net sales | |||||||||||||||||
| North America | $ | 753.4 | $ | 748.7 | |||||||||||||
| Rest of World | 200.7 | 226.7 | |||||||||||||||
| Inter-segment sales | (8.5) | (11.5) | |||||||||||||||
| $ | 945.6 | $ | 963.9 | ||||||||||||||
| Earnings | |||||||||||||||||
North America | $ | 175.4 | $ | 185.2 | |||||||||||||
Rest of World | 12.4 | 19.7 | |||||||||||||||
| Inter-segment earnings elimination | — | — | |||||||||||||||
| 187.8 | 204.9 | ||||||||||||||||
| Corporate expense | (26.0) | (20.9) | |||||||||||||||
| Interest expense | (7.1) | (2.9) | |||||||||||||||
| Earnings before income taxes | 154.7 | 181.1 | |||||||||||||||
| Provision for incomes taxes | 36.7 | 44.5 | |||||||||||||||
| Net earnings | $ | 118.0 | $ | 136.6 | |||||||||||||
A. O. SMITH CORPORATION
Free Cash Flow
(dollars in millions)
(unaudited)
The following is a reconciliation of reported cash flow from operating activities to free cash flow (non-GAAP):
| Three Months Ended March 31, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Cash provided by operating activities (GAAP) | $ | 129.4 | $ | 38.7 | |||||||||||||
| Less: Capital expenditures | (10.5) | (21.3) | |||||||||||||||
| Free cash flow (non-GAAP) | $ | 118.9 | $ | 17.4 | |||||||||||||
A. O. SMITH CORPORATION
2026 Adjusted EPS Guidance and 2025 EPS
(unaudited)
The following is a reconciliation of diluted EPS to adjusted EPS (non-GAAP) (all items are net of tax):
| 2026 Guidance | 2025 | |||||||||||||||||||
| Diluted EPS (GAAP) | $ | 3.60-3.90 | $ | 3.85 | ||||||||||||||||
| Restructuring and impairment expenses | 0.10 | (1) | — | |||||||||||||||||
| Adjusted EPS (non-GAAP) | $ | 3.70-4.00 | $ | 3.85 | ||||||||||||||||
(1)Includes announced North America water treatment pre-tax restructuring and impairment expenses of approximately $20 million to be recognized in the second quarter.
FAQ
How did A. O. Smith (AOS) perform financially in Q1 2026?
A. O. Smith reported Q1 2026 net sales of $945.6 million, down 2% year over year, and net earnings of $118.0 million. Diluted EPS was $0.85, down from $0.95 in Q1 2025, reflecting lower volumes and higher transaction-related expenses.
What changes did A. O. Smith (AOS) make to its 2026 earnings outlook?
The company lowered its 2026 diluted EPS guidance to $3.60–$3.90 and adjusted EPS to $3.70–$4.00. This compares to prior adjusted EPS guidance of $3.85–$4.15, mainly due to continued challenging conditions in China and regulatory uncertainty in North America.
How did A. O. Smith’s North America and Rest of World segments perform in Q1 2026?
North America sales rose to $753.4 million, up 1%, supported by Leonard Valve and pricing, though earnings and margins declined. Rest of World sales fell to $200.7 million, down 11%, with China sales down 17% in local currency and lower segment margin at 6.2%.
What was A. O. Smith’s cash flow and leverage position in Q1 2026?
Cash provided by operating activities reached $129.4 million and free cash flow was $118.9 million, both above the prior year. As of March 31, 2026, cash and marketable securities totaled $203.9 million, debt was $615.8 million, and the debt-to-capitalization ratio was 24.7%.
How much stock did A. O. Smith (AOS) repurchase in early 2026?
In the first three months of 2026, A. O. Smith repurchased 0.7 million shares for $51.3 million. As of March 31, 2026, authorization remained to repurchase approximately 5.1 million additional shares, and the company projects $200 million of repurchases for 2026.
What restructuring is A. O. Smith planning for its North America water treatment business?
The company announced a targeted restructuring plan in its North America water treatment business, to be recognized in Q2 2026. It expects approximately $20 million of pre-tax restructuring and impairment expenses, which are excluded from its 2026 adjusted EPS guidance range of $3.70–$4.00.