A. O. Smith (AOS) Q3 2024 earnings summary

Executive summary

• Q3 2024 sales declined 4% year-over-year to $903M, mainly due to lower China and North America water heater demand, while India sales grew 12% and North America boiler and water treatment businesses delivered double-digit growth.

• Net earnings for Q3 were $120.1M, down from $135.4M last year; diluted EPS declined 9% to $0.82.

• Dividend increased by 6% to $0.34/share, marking 32 consecutive years of annual increases.

• Pureit acquisition from Unilever for $120M is on track to close by year-end, expected to double India business and enhance South Asia presence.

• Acquisitions in water treatment added $6M in Q3 and $14M in nine months to net sales.

Financial highlights

• Q3 2024 net earnings were $120.1M, down from $135.4M in Q3 2023; adjusted EPS was $0.82, compared to $0.90 last year.

• North America segment Q3 sales were $703M, down 1% year-over-year; segment earnings fell to $162.5M with a margin of 23.1%.

• Rest of World Q3 sales dropped 10% to $210M; China sales declined 17% in local currency, India sales up 12%.

• Free cash flow for the first nine months was $282.5M, down from $396.3M in 2023, due to higher inventories and incentive payments.

• Cash balance at quarter-end was $256M; net cash position $136M; leverage ratio 5.9%.

Outlook and guidance

• 2024 consolidated sales expected to be flat year-over-year, in the range of $3.8–$3.9B; guidance excludes future acquisitions.

• Full-year EPS guidance reaffirmed at $3.70–$3.85.

• China sales guidance lowered to a 6–8% decrease in local currency; North American boiler and water treatment sales to grow 8–10%.

• U.S. residential and commercial water heater industry volumes projected to be flat; boiler sales growth guidance revised to ~8%.

• Free cash flow guidance reduced to $415M; CapEx for 2024 projected at $105–$115M, up due to expansion projects.