A. O. Smith (AOS) Q1 2026 earnings summary

Executive summary

• Q1 2026 net sales were $946 million, down 2% year-over-year, with North America up 1% and Rest of World down 11%, mainly due to weak China demand; EPS was $0.85, down 11%–14% from Q1 2025.

• Leonard Valve acquisition completed for $470 million, contributing $16 million in Q1 sales and expected to add $70 million in 2026.

• Strong free cash flow of $119 million was achieved, up significantly year-over-year, driven by working capital management.

• Strategic restructuring announced for North America water treatment, with a $20 million charge in Q2 and projected annual savings of $6–8 million starting in 2027.

• Full-year 2026 EPS guidance was lowered due to ongoing China challenges and regulatory uncertainty in North America.

Financial highlights

• North America segment sales rose 1% to $753.4 million; segment earnings fell to $175.4 million with margin down 140 bps to 23.3%.

• Rest of World segment sales dropped 11% to $200.7 million; segment earnings fell to $12.4 million, with margin down 250 bps to 6.2%.

• Free cash flow for Q1 was $119 million, up from $17.4 million in Q1 2025.

• Cash balance at quarter-end was $204 million; net debt was $412 million; leverage ratio at 24.7%.

• Repurchased about 700,000 shares for $51 million in Q1; quarterly dividend of $0.36 per share approved.

Outlook and guidance

• 2026 adjusted EPS guidance revised to $3.70–$4.00, excluding a $20 million restructuring charge in Q2; GAAP EPS guidance at $3.60–$3.90.

• Full-year sales growth expected at 2%–4%; North America segment margin projected at ~24%, Rest of World at 6%–7%.

• Free cash flow for 2026 expected between $525 million–$575 million; capex projected at $70–$80 million.

• North America water heater industry shipments expected flat to down; China sales expected to decline low double digits in local currency for 2026.

• India business projected to grow ~10%.