A. O. Smith (AOS) Q2 2025 earnings summary

Executive summary

• Q2 2025 sales were $1.01 billion, down 1% year-over-year, with EPS up 1% to $1.07 and margin expansion driven by restructuring and operational discipline.

• North America water heater sales declined 2%, while boiler sales rose 6% on strong commercial demand; China sales fell 11% in local currency amid economic headwinds.

• Initiated a strategic assessment of the China business, considering partnerships and other options to address ongoing challenges.

• Acquisitions of Pureit and Impact Water Products expanded presence in South Asia and North America, contributing $28 million in H1 2025 sales.

• Continued focus on operational excellence, innovation, and portfolio management, with new product launches and leadership changes.

Financial highlights

• Q2 2025 net sales were $1,011.3 million, down 1.3% year-over-year; diluted EPS was $1.07, up from $1.06 in Q2 2024.

• Gross profit margin improved to 39.3% in Q2 2025 from 38.7% in Q2 2024.

• Free cash flow for H1 2025 was $139.9 million, up from $119.1 million in H1 2024.

• Cash balance as of June 30, 2025 was $178 million; net debt at $126 million; leverage ratio at 14.1%.

• 3.8 million shares repurchased for $251 million in H1 2025; quarterly dividend of $0.34 per share approved.

Outlook and guidance

• Raised 2025 EPS guidance to $3.70–$3.90 and full-year sales outlook to 1%-3% growth; North America boiler sales expected to rise 4%-6%.

• China sales projected to decrease 5%-8% in local currency; Rest of World margin expected at 8%-10%.

• Free cash flow guidance for 2025 is $500–$525 million; capex forecasted at $90–$100 million.

• Guidance excludes impacts from future acquisitions and China business assessment outcomes.