A. O. Smith reported nearly flat third-quarter sales and lower earnings, as growth in North American boilers and pricing helped offset softer residential water-heater demand and weakness in China. The company also updated its 2026 outlook to exclude its China business for the full year, following agreements announced earlier this week for a partner to acquire an 81% stake.
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Third-quarter results: Sales were $940.5 million, compared with $942.5 million a year earlier. Net earnings fell 4% to $126.3 million, and diluted earnings per share edged down to 93 cents from 94 cents.
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North America: Sales rose 3% to $761.6 million. Growth in boiler sales, up 13%, Leonard Valve acquisition sales and pricing benefits partly offset lower residential water-heater volumes.
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Rest of World: Sales declined 7% to $192.8 million, reflecting continued weakness in China’s consumer-appliance market.
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Cash flow: Through the first nine months of the year, operating cash flow was $429 million. Free cash flow increased 4% to $396 million.
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China transaction: A. O. Smith said definitive agreements provide for CPE to acquire an 81% interest in its China business. A. O. Smith will retain a 19% stake and a long-term license for its brand. The agreements conclude the company’s strategic assessment of the business; the announcement did not provide further transaction terms or a closing date.
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Updated 2026 outlook: Excluding China for the full year, A. O. Smith expects sales growth of about 4% and adjusted earnings per share of $3.42 to $3.52. The EPS outlook excludes an estimated $20 million in pre-tax North America water-treatment restructuring and impairment expenses.
The China arrangement shifts majority ownership and leadership of that business to CPE while leaving A. O. Smith with a minority interest and continued brand involvement. The revised outlook also uses a China-excluded basis for the entire year, so it should be read separately from results that include the business.