A. O. Smith reported nearly flat third-quarter sales and lower earnings, as growth in North America was offset by weakness in China. The water technology company also updated its 2026 outlook to exclude its China business and outlined a planned sale of a majority stake in that business to CPE.
Key details
- Third-quarter results: Sales were $940.5 million, compared with $942.5 million a year earlier. Net earnings fell 4% to $126.3 million, while diluted earnings per share slipped 1% to 93 cents.
- North America: Segment sales rose 3% to $761.6 million. Growth in boiler sales, Leonard Valve acquisition sales and pricing benefits helped offset lower residential water heater volumes.
- Rest of World: Segment sales declined 7% to $192.8 million, reflecting continued weakness in China’s consumer appliance market.
- Cash generation: Through the first nine months of 2026, operating cash flow was $429 million. Free cash flow increased 4% to $396 million.
- China transaction: Under definitive agreements announced October 27, CPE is to acquire an 81% interest in A. O. Smith’s China business. A. O. Smith will retain a 19% stake and a long-term license to its brand. The announcement does not provide a purchase price or closing date.
- Updated 2026 outlook: The company now excludes the China business for the full year. On that basis, it expects net sales growth of about 4% and adjusted earnings per share of $3.42 to $3.52. The EPS range excludes an estimated $20 million in full-year pretax restructuring and impairment expenses related to North America water treatment.
What changes
If completed, the China transaction would give CPE majority ownership and leadership of the business, while A. O. Smith would retain a minority interest and brand connection. The company said the move completes its strategic assessment of China and allows it to concentrate capital and resources on other opportunities.