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A. O. Smith Corporation
(NYSE:AOS)
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Rating:72Outperform
Price Target:
$68.00
â–²(8.83% Upside)
Action:Reiterated
Date:10/29/26
The score is driven primarily by solid underlying profitability and strong cash generation, tempered by a recent revenue/FCF slowdown and a meaningful uptick in leverage. Technicals are moderately supportive (above key shorter moving averages with positive MACD) but still below the 200-day trend and near-term momentum looks somewhat stretched. Valuation is reasonable (mid-teens P/E plus a ~2.4% yield), while earnings-call updates are net positive due to portfolio actions and shareholder returns but constrained by near-term cost and demand headwinds.
Positive Factors
Strong profitability and cash generation
A. O. Smith combines solid industrial profitability with substantial operating and free cash flow. This provides internal funding for product investment, acquisitions, dividends, and repurchases while strengthening resilience through the next several quarters.
Negative Factors
Soft demand and slower revenue
Recent revenue contraction and muted residential demand indicate that the core business is not currently converting its market position into broad volume growth. Prolonged softness could limit operating leverage, delay earnings recovery, and reduce flexibility for investment.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong profitability and cash generation
A. O. Smith combines solid industrial profitability with substantial operating and free cash flow. This provides internal funding for product investment, acquisitions, dividends, and repurchases while strengthening resilience through the next several quarters.
Read all positive factors
A. O. Smith Corporation Key Performance Indicators (KPIs)
Any
Net Sales by Geography
Shows how revenue is split across regions, revealing where growth is coming from and where the company is exposed to local demand cycles, currency swings, or regulatory changes. For A. O. Smith, it highlights dependence on North American water-heating markets versus faster-growing operations in China and other international markets, helping investors judge diversification and top-line risk.
Shows how revenue is split across regions, revealing where growth is coming from and where the company is exposed to local demand cycles, currency swings, or regulatory changes. For A. O. Smith, it highlights dependence on North American water-heating markets versus faster-growing operations in China and other international markets, helping investors judge diversification and top-line risk.
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The Fly
The FlyA. O. Smith Corporation (AOS) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$8.57B
Dividend Yield2.31%
Average Volume (3M)1.59M
Price to Earnings (P/E)17.6
Beta (1Y)0.56
Revenue Growth-0.71%
EPS Growth-3.46%
CountryUS
Employees11,500
SectorIndustrials
Sector Strength72
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)3.58
Shares Outstanding110,047,210
10 Day Avg. Volume1,601,105
30 Day Avg. Volume1,593,128
Financial Highlights & Ratios
PEG Ratio3.01
Price to Book (P/B)5.04
Price to Sales (P/S)2.44
P/FCF Ratio17.14
Enterprise Value/Market Cap0.95
Enterprise Value/Revenue2.14
Enterprise Value/Gross Profit5.55
Enterprise Value/Ebitda10.73
Forecast
1Y Price Target
$64.88Price Target Upside3.83% Upside
Rating ConsensusHold
Number of Analyst Covering9
EPS Forecast (FY)3.62
Revenue Forecast (FY)$3.77B
A. O. Smith Corporation Business Overview & Revenue Model
Company Description
A. O. Smith Corporation (AOS) is a global manufacturer and marketer specializing in a comprehensive array of water heating and treatment solutions. Its operations span North America, China, Europe, and India, organized into two primary geographic ...
How the Company Makes Money
A. O. Smith makes money primarily by selling water heating and water treatment products, with revenue recognized largely at the time products are shipped/sold to customers through its distribution network (e.g., wholesalers and plumbing/HVAC suppl...
A. O. Smith Corporation Earnings Call Summary
Earnings Call Date:Oct 29, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Feb 02, 2027
Earnings Call Sentiment Positive
The call was broadly positive, led by the China transaction, stronger portfolio focus, raised boiler guidance, North American growth, cash generation, shareholder returns, and continued investment in water treatment and water management. These positives were tempered by flat consolidated sales, weak China and residential water heater demand, elevated steel and freight costs, lower water treatment and Leonard Valve guidance, margin pressure, and near-term production and project timing challenges.Positive Updates
China Transaction Creates Strategic Focus and Shareholder Return Opportunity
A. O. Smith announced a definitive agreement to sell an 81% interest in its China business to CPE, valuing the business at $400 million. A. O. Smith will retain a 19% minority stake, continue the brand under a multi-decade licensing agreement, and expects total value including future royalties to exceed $500 million. The transaction is expected to close in the first half of 2027, subject to regulatory approvals and customary closing conditions.
Negative Updates
Total Company Sales Essentially Flat
Third-quarter total company sales were $941 million, essentially flat compared with the prior year, and earnings per share were $0.93.
Read all updates
Q3-2026 Updates
Positive
Negative
China Transaction Creates Strategic Focus and Shareholder Return Opportunity
A. O. Smith announced a definitive agreement to sell an 81% interest in its China business to CPE, valuing the business at $400 million. A. O. Smith will retain a 19% minority stake, continue the brand under a multi-decade licensing agreement, and expects total value including future royalties to exceed $500 million. The transaction is expected to close in the first half of 2027, subject to regulatory approvals and customary closing conditions.
Read all positive updates
Company Guidance
For full year 2026, sales excluding China are expected to grow approximately 4%, with adjusted EPS between $3.42 and $3.52 per share; the residential water heater industry outlook remains down low single digits, the commercial water heater industry flat to 2025, full year boiler sales are expected to grow 10% to 12%, North America water treatment sales approximately 3% to 4%, priority dealer channel sales approximately 10%, and Leonard Valve sales approximately $55 million compared with approximately $70 million previously; excluding currency impacts, India sales are expected to grow double digits in local currency, while foreign currency translation is expected to be a meaningful headwind to Rest of World businesses excluding China, full year steel and freight costs are expected to each increase approximately 15% compared to 2025, adding approximately 5% to full year North America segment cost of goods sold, North America margin guidance remains approximately 24%, annual water treatment savings are expected to be approximately $6 million to $8 million with approximately $1 million realized in the second half of 2026, and pricing includes a 4% to 7% increase on most North America water heater and boiler products and an additional price increase of up to 9.5% on most water heater products effective in December.A. O. Smith Corporation Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
74
Positive
Cash Flow
70
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 3.80B | 3.83B | 3.82B | 3.85B | 3.75B | 3.54B |
| Gross Profit | 1.47B | 1.49B | 1.46B | 1.48B | 1.33B | 1.31B |
| EBITDA | 760.10M | 814.50M | 786.50M | 823.80M | 310.00M | 707.80M |
| Net Income | 494.60M | 546.20M | 533.60M | 556.60M | 235.70M | 487.10M |
Balance Sheet | ||||||
| Total Assets | 3.65B | 3.14B | 3.24B | 3.21B | 3.33B | 3.47B |
| Cash, Cash Equivalents and Short-Term Investments | 234.50M | 193.20M | 276.10M | 363.40M | 481.80M | 631.40M |
| Total Debt | 714.80M | 192.10M | 216.70M | 155.20M | 366.90M | 219.00M |
| Total Liabilities | 1.83B | 1.28B | 1.36B | 1.37B | 1.58B | 1.64B |
| Stockholders Equity | 1.82B | 1.86B | 1.88B | 1.84B | 1.75B | 1.83B |
Cash Flow | ||||||
| Free Cash Flow | 561.70M | 546.00M | 473.80M | 597.70M | 321.10M | 566.00M |
| Operating Cash Flow | 612.50M | 616.80M | 581.80M | 670.30M | 391.40M | 641.10M |
| Investing Cash Flow | -500.30M | -53.00M | -267.10M | -24.10M | 8.10M | -349.90M |
| Financing Cash Flow | -34.30M | -633.10M | -408.40M | -684.70M | -430.80M | -421.00M |
A. O. Smith Corporation Technical Analysis
Positive
62.48
Price Trends
58.63
Positive
59.45
Positive
62.63
Positive
Market Momentum
1.25
Negative
67.06
Neutral
76.56
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AOS, the sentiment is Positive. The current price of 62.48 is above the 20-day moving average (MA) of 58.99, above the 50-day MA of 58.63, and below the 200-day MA of 62.63, indicating a bullish trend. The MACD of 1.25 indicates Negative momentum. The RSI at 67.06 is Neutral, neither overbought nor oversold. The STOCH value of 76.56 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AOS.
A. O. Smith Corporation Risk Analysis
A. O. Smith Corporation disclosed 20 risk factors in its most recent earnings report. A. O. Smith Corporation reported the most risks in the "Ability to Sell" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
A. O. Smith Corporation Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
82 Outperform | $11.60B | 30.33 | 18.56% | 0.66% | 17.13% | 23.21% | |
72 Outperform | $8.57B | 17.62 | 26.73% | 2.31% | -0.71% | -3.46% | |
72 Outperform | $7.40B | 25.75 | 17.71% | 0.98% | 10.06% | 53.01% | |
69 Neutral | $4.21B | 21.20 | 14.50% | 1.16% | 7.28% | 45.11% | |
68 Neutral | $10.58B | 17.49 | 16.02% | 1.63% | -3.93% | -4.74% | |
67 Neutral | $21.19B | 20.44 | 9.96% | 1.83% | 1.82% | 16.29% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
AOS
A. O. Smith Corporation
63.07
-1.44
-2.24%
FELE
Franklin Electric Co
95.38
1.63
1.74%
PNR
Pentair
66.26
-38.53
-36.77%
ZWS
Zurn Water Solutions
44.80
-1.88
-4.03%
WTS
Watts Water Technologies
347.60
76.96
28.44%
XYL
Xylem
92.40
-56.36
-37.89%
A. O. Smith Corporation Corporate Events
Business Operations and StrategyStock BuybackM&A Transactions
A. O. Smith to Sell Majority China Business Stake
Positive
Oct 28, 2026
On October 27, 2026, A. O. Smith announced definitive agreements to sell an 81% stake in its China business to CPE, a leading China-focused alternative asset manager, while retaining a 19% interest and a long-term brand licensing arrangement. The ...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.