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A. O. Smith Corporation
(NYSE:AOS)
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Rating:74Outperform
Price Target:
$65.00
▲(0.28% Upside)
Action:Reiterated
Date:06/23/26
The score is led by strong financial quality—high margins, low leverage, and robust free cash flow—supported by reasonable valuation and an earnings outlook that maintains EPS/FCF targets and capital returns. It’s held back by weak technical trend (below key moving averages) and meaningful near-term operating headwinds highlighted on the call, particularly China/Rest-of-World weakness and rising input/interest costs.
Positive Factors
High margins and cash generation
Sustained high margins and strong free cash flow indicate durable earnings quality and internal funding capacity. Over the next 2–6 months this supports reinvestment, R&D, and capital returns while insulating operating performance from cyclical volume swings.
Negative Factors
China demand weakness
Material and persistent China weakness is a structural headwind for international growth and margins. Continued declines can reduce scale, lower utilization in regional operations, and lengthen recovery time for overseas segments over the next several quarters.
Read all positive and negative factors
Positive Factors
Negative Factors
High margins and cash generation
Sustained high margins and strong free cash flow indicate durable earnings quality and internal funding capacity. Over the next 2–6 months this supports reinvestment, R&D, and capital returns while insulating operating performance from cyclical volume swings.
Read all positive factors
A. O. Smith Corporation Key Performance Indicators (KPIs)
A. O. Smith Corporation (AOS) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$8.33B
Dividend Yield2.04%
Average Volume (3M)1.77M
Price to Earnings (P/E)16.1
Beta (1Y)0.64
Revenue Growth0.23%
EPS Growth4.76%
CountryUS
Employees12,700
SectorIndustrials
Sector Strength72
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)3.75
Shares Outstanding111,965,460
10 Day Avg. Volume1,442,273
30 Day Avg. Volume1,770,546
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 Cap1.03
Enterprise Value/Revenue2.24
Enterprise Value/Gross Profit5.79
Enterprise Value/Ebitda10.77
Forecast
1Y Price Target
$68.67Price Target Upside5.93% Upside
Rating ConsensusHold
Number of Analyst Covering7
EPS Forecast (FY)3.78
Revenue Forecast (FY)$3.92B
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 and related parts/services through a mix of residential and commercial channels. Its key revenue streams include: (1) Residential water heaters (e.g., gas, ele...
A. O. Smith Corporation Earnings Call Summary
Earnings Call Date:Apr 30, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Jul 30, 2026
Earnings Call Sentiment Neutral
The call presents a balanced picture: notable operational and financial positives (strong free cash flow, share repurchases, dividend, Leonard Valve contribution, margin expansion in North America, and maintained free cash flow/EPS guidance) are tempered by material near-term headwinds (steep China declines, Rest of World weakness, rising steel and freight costs, one-time restructuring and weather-related production impacts, and higher leverage from the acquisition). Management articulated actions to improve profitability and provided clear guidance, but near-term margin pressure and China weakness represent meaningful risks.Positive Updates
Strong Free Cash Flow and Balance Sheet Actions
Generated free cash flow of $119M in Q1 (a significant increase vs. 2025); cash balance $204M; repurchased ~700k shares for $51M in Q1 and plan to repurchase $200M in 2026; Board approved quarterly dividend of $0.36 per share.
Negative Updates
Total Company Sales and EPS Decline
Total company Q1 sales decreased 2% to $946M; adjusted EPS was $0.85, down 11% year over year, driven by lower volumes and $0.03 of transaction-related expenses from the Leonard Valve acquisition.
Read all updates
Q1-2026 Updates
Positive
Negative
Strong Free Cash Flow and Balance Sheet Actions
Generated free cash flow of $119M in Q1 (a significant increase vs. 2025); cash balance $204M; repurchased ~700k shares for $51M in Q1 and plan to repurchase $200M in 2026; Board approved quarterly dividend of $0.36 per share.
Read all positive updates
Company Guidance
A. O. Smith updated 2026 guidance calling for adjusted EPS of $3.70–$4.00 (excludes an expected ~ $20 million North America water‑treatment restructuring/impairment in Q2 that should yield $6–8 million annual savings beginning in 2027), with Q2 roughly 25% of the midpoint; key assumptions include steel costs rising ~15% year‑over‑year, freight/non‑steel/tariff pressures adding ~3% to total COGS, CapEx of $70–$80 million, free cash flow of $525–$575 million, interest expense of $30–$40 million, an effective tax rate of 24–24.5% and ~138 million diluted shares. Operational and segment metrics: total revenue growth of ~2–4%, North America segment margin ~24% and Rest of World 6–7%; product assumptions include North America boiler sales +6–8% and water treatment sales +5–6%, Leonard Valve to contribute ~ $70 million in sales and deliver double‑digit growth, China sales down low double digits in local currency (Q2 ~15% below Q1); balance sheet and capital return items noted were cash $204 million, net debt $412 million, leverage 24.7%, $119 million FCF in Q1, Q1 EPS $0.85, a $0.36 quarterly dividend, and a planned $200 million of share repurchases for 2026 (700k shares, $51M repurchased in Q1).A. O. Smith Corporation Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
88
Very Positive
Cash Flow
84
Very Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 3.81B | 3.83B | 3.82B | 3.85B | 3.75B | 3.54B |
| Gross Profit | 1.48B | 1.49B | 1.46B | 1.48B | 1.33B | 1.31B |
| EBITDA | 794.70M | 792.20M | 786.50M | 823.80M | 310.00M | 707.80M |
| Net Income | 527.60M | 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 | 203.90M | 193.20M | 276.10M | 363.40M | 481.80M | 631.40M |
| Total Debt | 656.50M | 192.10M | 216.70M | 155.20M | 366.90M | 219.00M |
| Total Liabilities | 1.49B | 1.28B | 1.36B | 1.37B | 1.58B | 1.64B |
| Stockholders Equity | 1.88B | 1.86B | 1.88B | 1.84B | 1.75B | 1.83B |
Cash Flow | ||||||
| Free Cash Flow | 647.50M | 546.00M | 473.80M | 597.70M | 321.10M | 566.00M |
| Operating Cash Flow | 707.50M | 616.80M | 581.80M | 670.30M | 391.40M | 641.10M |
| Investing Cash Flow | -522.70M | -53.00M | -267.10M | -24.10M | 8.10M | -349.90M |
| Financing Cash Flow | -176.70M | -633.10M | -408.40M | -684.70M | -430.80M | -421.00M |
A. O. Smith Corporation Technical Analysis
Neutral
64.82
Price Trends
58.95
Positive
63.58
Negative
66.20
Negative
Market Momentum
0.49
Positive
51.58
Neutral
19.62
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AOS, the sentiment is Neutral. The current price of 64.82 is above the 20-day moving average (MA) of 60.26, above the 50-day MA of 58.95, and below the 200-day MA of 66.20, indicating a neutral trend. The MACD of 0.49 indicates Positive momentum. The RSI at 51.58 is Neutral, neither overbought nor oversold. The STOCH value of 19.62 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 |
|---|---|---|---|---|---|---|---|
81 Outperform | $11.77B | 32.21 | 18.38% | 0.70% | 14.22% | 25.22% | |
74 Outperform | $8.33B | 16.07 | 28.42% | 2.04% | 0.23% | 4.76% | |
72 Outperform | $11.01B | 41.33 | 12.67% | ― | 17.39% | 20.78% | |
69 Neutral | $9.01B | 25.91 | 15.93% | 1.17% | 0.83% | 26.77% | |
68 Neutral | $13.77B | 72.20 | 7.18% | ― | -0.51% | -44.42% | |
66 Neutral | $12.31B | 18.54 | 17.74% | 0.96% | 3.10% | 4.96% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
AOS
A. O. Smith Corporation
60.44
-6.99
-10.37%
FLS
Flowserve
70.48
18.19
34.78%
GNRC
Generac Holdings
233.94
85.25
57.33%
PNR
Pentair
76.19
-29.47
-27.89%
SPXC
SPX
219.87
45.49
26.09%
WTS
Watts Water Technologies
352.36
101.52
40.47%
A. O. Smith Corporation Corporate Events
Business Operations and StrategyExecutive/Board Changes
A. O. Smith Names CEO Stephen Shafer as Chairman
Positive
Jun 22, 2026
On June 22, 2026, A. O. Smith announced that Executive Chairman Kevin J. Wheeler will retire from that role effective July 1, 2026, while remaining on the board of directors. The move marks the transition of long‑time leader Wheeler, whose t...
Executive/Board ChangesShareholder Meetings
A. O. Smith Shareholders Back Board, Reject Director Resignation
Neutral
Apr 17, 2026
At its April 13, 2026 Annual Meeting of Stockholders, A. O. Smith Corporation’s shareholders elected all nominated directors for both its Class A and common stock, approved on an advisory basis the compensation of its named executive officer...
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.