A. O. Smith (AOS) Q2 2026 earnings summary

Executive summary

• Q2 2026 net sales were $1.0 billion, with adjusted EPS of $1.03, driven by strong North America performance and disciplined execution, offset by continued weakness in China; net earnings were $124.9 million and diluted EPS $0.91, excluding $22.6 million in restructuring and impairment expenses.

• North America sales rose 5% to $820.5 million, with organic growth of 3%, 21% boiler sales growth, and a $16 million contribution from the Leonard Valve acquisition; Rest of World sales fell 19% to $194.9 million, mainly due to a 28% drop in China sales.

• Free cash flow for the first half was $233 million, up 67% from 2025, supporting a 50% increase in the 2026 share repurchase target to $300 million.

• Leadership transition completed as Carrie Anderson became CFO, ensuring continuity and execution of strategic priorities.

• Strategic assessment of the China business is nearing completion, with all options under consideration.

Financial highlights

• Q2 2026 net sales: $1,004.3 million (-1% YoY); net earnings: $124.9 million (-18% YoY); adjusted earnings: $142 million (-7% YoY); adjusted EPS: $1.03 (-4% YoY).

• Gross profit margin for Q2 2026 was 38.6%, down from 39.3% a year earlier, impacted by lower volumes and higher material costs.

• North America segment margin was 21.6% (reported), 24.4% (adjusted); Rest of World segment margin was 5.2%.

• Cash and equivalents at quarter-end were $181 million, with net debt of $456 million and a leverage ratio of 25.7%.

• Approximately 2.6 million shares repurchased for $162 million in the first half.

Outlook and guidance

• Full-year 2026 sales growth expected at 2–3% and adjusted EPS of $3.70–$3.85, with GAAP EPS of $3.60–$3.75; guidance narrowed from prior range.

• North America residential water heater industry outlook revised to down low double digits; boiler sales growth maintained at 6–8%; Leonard Valve sales targeted at $70 million.

• China sales expected to decline at a low double-digit rate in local currency.

• Free cash flow for 2026 expected between $525 million and $575 million.

• Q3 EPS projected to be lower than Q2 and Q4 due to cost pressures and demand phasing.