A. O. Smith (AOS) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 2024 sales of $1.024 billion, up 7% year-over-year, with adjusted EPS rising 5% to $1.06, driven by higher water heater volumes and pricing in North America.

• North America water heater and boiler sales rose 10%; India and China delivered local currency sales growth of 16% and 2%, respectively.

• Announced agreement to acquire Pureit, a leading South Asian water purification business, for $120 million, expected to close by year-end 2024 and double market penetration in the region.

• Completed acquisition of Impact Water Products and recognized for ethics, innovation, and sustainability in 2024.

Financial highlights

• North America segment Q2 sales reached $791 million, up 9% year-over-year; segment earnings were $198 million.

• Rest of World Q2 sales were $245 million, nearly flat year-over-year; India sales grew 16% in local currency.

• Gross profit margin for Q2 2024 was 38.7%, down from 40.0% in Q2 2023, mainly due to higher material costs.

• Free cash flow for H1 2024 was $119.1 million, down from $236 million in the prior year due to higher inventory, receivables, and incentive payments.

• Cash balance at June end was $233 million; net cash position $93 million; leverage ratio 6.8%.

Outlook and guidance

• 2024 consolidated sales expected to grow 3%–5% year-over-year; full-year EPS guidance narrowed to $3.95–$4.10, midpoint up 6% over 2023 adjusted EPS.

• North America segment margin projected at ~25%; Rest of World at ~10%.

• Free cash flow for 2024 expected between $525 million and $575 million; CapEx projected at $105–$115 million.

• $300 million in share repurchases planned; effective tax rate ~24%.

• U.S. residential water heater volumes projected flat; commercial volumes to rise low single digits; China sales growth guidance flat to 3% in local currency, with a 2% negative currency impact.