Sales Performance - The company faced a 12% decrease in third-party sales in China in local currency for 2025 compared to 2024, with approximately 18% of total sales attributed to the Chinese market [45]. - Sales to the five largest customers represented approximately 41% of total sales in 2025, indicating a high customer concentration risk [49]. - Residential new construction activity in North America declined in 2025, with projections for new housing starts to remain flat and housing completions expected to decrease in 2026 compared to 2025 [49]. - Approximately 31% of total sales in 2025 were generated from international markets, primarily in China and Canada, exposing the company to various geopolitical and economic risks [47]. - Water heater sales in North America increased by 1% in 2025, with residential industry unit volumes estimated to be flat compared to the prior year [86]. - Boiler sales grew by 8% in 2025, with expectations of 6% to 8% growth in 2026 due to pricing benefits and demand for high-efficiency condensing gas boilers [86]. - North America water treatment product sales are projected to grow by 10% to 12% primarily due to tariff-related pricing benefits [86]. - The Rest of World segment generated $880.4 million in sales for 2025, down from $918.6 million in 2024 and $956.9 million in 2023 [189]. Financial Performance - Net sales for 2025 were $3,830.2 million, a slight increase of $12.1 million from 2024's $3,818.1 million, driven by price increases and higher sales volumes of commercial water heaters and boilers, along with $54 million from the acquisition of Pureit [90]. - Gross profit margin improved to 38.8% in 2025 from 38.1% in 2024, primarily due to pricing actions and a higher mix of commercial products [91]. - Selling, general, and administrative (SG&A) expenses rose to $759.4 million in 2025, an increase of $20.1 million from 2024, mainly due to higher employee costs [92]. - Interest expense increased to $13.5 million in 2025 from $6.7 million in 2024, attributed to higher average debt levels [94]. - Total segment earnings for 2025 reached $804.1 million, up from $771.6 million in 2024, driven by North America segment earnings of $727.9 million [122]. - Adjusted earnings for 2025 were $546.2 million, slightly down from $548.0 million in 2024, while diluted earnings per share increased to $3.85 from $3.73 [120]. - Net earnings for 2025 were $546.2 million, up from $533.6 million in 2024, representing an increase of about 2.3% [145]. - Free cash flow for 2025 was reported at $546.0 million, an increase from $473.8 million in 2024, supported by cash provided by operating activities of $616.8 million [124]. Acquisitions and Investments - The company signed a definitive agreement to acquire LVC Holdco LLC (Leonard Valve) for $470 million, expected to contribute approximately $70 million in sales in 2026 [84]. - The acquisition of Pureit from Unilever for approximately $125 million contributed $54 million to sales in 2025 [84]. - The company continues to seek acquisitions to enable growth and expand its core business [84]. Risk Factors - The company is subject to risks from import tariffs and trade regulations, which could significantly increase raw material costs and affect profit margins [41]. - The company has experienced inflation-related increases in transportation and input costs, which could impact profitability if not recovered through price increases [44]. - Changes in consumer preferences towards lower-priced models and e-commerce could adversely affect sales and market positioning [44]. - The company is actively assessing its China business strategy, which may lead to uncertain outcomes and impacts on financial performance [46]. - Product defects may lead to increased warranty costs and potential damage to brand reputation, impacting financial condition and cash flows [52]. - Future acquisitions could consume significant capital, and integration challenges may hinder profitability and strategic objectives, potentially increasing debt levels [53][54]. - Regulatory changes, particularly related to energy efficiency and environmental standards, could raise manufacturing and operational costs, affecting product demand and competitiveness [55]. - The company is exposed to various market risks, primarily currency, and employs forward contracts to mitigate these risks [129]. - The company anticipates potential impacts from global inflationary pressures and geopolitical tensions, which could affect demand for its products [131]. Cash and Capital Management - Cash provided by operating activities was $616.8 million in 2025, up from $581.8 million in 2024, due to higher earnings and a one-time tax adjustment [105]. - Capital expenditures totaled $70.8 million in 2025, down from $108.0 million in 2024, with projections for 2026 between $70 million and $80 million [106]. - The company reported a cash decrease of $65.1 million in 2025, with cash and cash equivalents ending at $174.5 million [148]. - The company repurchased 5,942,601 shares at a total cost of $400.8 million in 2025, with plans to repurchase approximately $200 million in 2026 [111]. - The balance of Treasury Stock at the end of 2025 was $(2,904.3) million, an increase from $(2,502.0) million in 2024, primarily due to share repurchases [149]. Assets and Liabilities - The total current assets decreased from $1,392.9 million in 2024 to $1,291.5 million in 2025, a decline of approximately 7.3% [144]. - Total liabilities decreased from $1,356.5 million in 2024 to $1,284.8 million in 2025, a reduction of approximately 5.3% [144]. - The company’s retained earnings increased from $3,601.3 million in 2024 to $3,951.8 million in 2025, reflecting a growth of about 9.7% [144]. - The company’s diluted net earnings per share increased from $3.63 in 2024 to $3.85 in 2025, a rise of approximately 6.1% [145]. - The company’s total intangible assets increased from $512.1 million in 2024 to $568.1 million in 2025, with amortization expenses of $14.8 million recorded in 2025 [206]. Governance and Management - The Smith Family controls approximately 67.8% of the total voting power, which may influence corporate governance and strategic decisions [57]. - The company has not experienced material cybersecurity incidents in recent years, but continues to invest in cybersecurity measures to protect its systems and data [64]. - The company conducts an Enterprise Risk Management process to identify and manage significant risks, including decarbonization and cyber threats [126]. Environmental and Regulatory Matters - The company has taken steps to mitigate risks from natural disasters, but facilities located in floodplains and disaster-prone areas remain vulnerable [42]. - Environmental expenditures were not material in 2025, and the company expects them to remain non-material in the future [125]. - The company expects no material adverse effect from environmental claims on its financial position or results of operations [238].

Core Viewpoint - A. O. Smith Corporation (NYSE:AOS) has shown resilience with a fourth-quarter earnings beat, although the 2026 revenue outlook is weaker than expected, leading to a mixed market reaction [2][3]. Financial Performance - The company reported an adjusted net income of $125.4 million, or $0.90 per share, for the fourth quarter, up from $109.7 million, or $0.75 per share, a year earlier [4]. - North American sales increased by 3.5% to $713.7 million, driven by pricing strategies and improved profitability in water treatment, which offset higher input costs [4]. - Total revenue for the quarter ended December 31 was $912.5 million, remaining essentially flat compared to the previous year [4]. - A. O. Smith expects full-year earnings per share to range between $3.85 and $4.15 [4]. Market Reaction - Following the earnings report, shares of A. O. Smith rose approximately 5%, attributed to short covering despite the mixed results [2]. Strategic Insights - The company continues to face challenges in China, yet it reported improved margins in that market, indicating potential for strategic partnerships and other options to enhance its business there [3][5].

Core Insights - Zacks Premium offers tools for investors to enhance their stock market engagement and confidence, including daily updates, research reports, and stock screens [1] Zacks Style Scores - Zacks Style Scores are indicators that help investors select stocks likely to outperform the market in the next 30 days, rated from A to F based on value, growth, and momentum characteristics [2] - The Value Score identifies attractive and discounted stocks using ratios like P/E, PEG, and Price/Sales [3] - The Growth Score focuses on a company's financial health and future outlook, analyzing projected and historical earnings, sales, and cash flow [4] - The Momentum Score helps investors capitalize on price trends, utilizing factors like one-week price changes and monthly earnings estimate changes [5] - The VGM Score combines the three Style Scores to identify stocks with the best value, growth forecasts, and momentum, serving as a strong indicator alongside the Zacks Rank [6] Zacks Rank - The Zacks Rank is a proprietary model based on earnings estimate revisions, aiding investors in building successful portfolios [7] - Stocks rated 1 (Strong Buy) have produced an average annual return of +23.83% since 1988, significantly outperforming the S&P 500 [8] - Investors are encouraged to select stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B for optimal success [9] Stock Example: A.O. Smith Corporation - A.O. Smith Corporation is a leading manufacturer of water heating equipment and treatment products, known for innovative and energy-efficient solutions [11] - The company holds a Zacks Rank of 3 (Hold) with a VGM Score of B, indicating potential for growth investors [12] - A.O. Smith is forecasted to achieve year-over-year earnings growth of 7% for the current fiscal year, with upward revisions in earnings estimates and an average earnings surprise of +7.2% [12]

Core Viewpoint - A.O. Smith reported strong fourth-quarter earnings that surpassed Wall Street expectations, leading to a significant increase in share price [1] Group 1: Fourth-Quarter Performance - The company posted earnings per share (EPS) of $0.90, exceeding the consensus estimate of $0.84 by six cents [1] - Revenue for the quarter was $912.5 million, slightly below analyst expectations of $928.11 million [1] - Total sales remained essentially flat year over year, but diluted EPS increased by 20% compared to the prior-year period, driven by pricing benefits and improved profitability in both North America and Rest of World segments [2] Group 2: Full-Year 2025 Results - For the full year 2025, A.O. Smith reported record diluted EPS of $3.85, a 6% increase from 2024 [3] - Total sales were stable at approximately $3.8 billion, with North America showing slight growth while the Rest of World segment declined by 4%, primarily due to weaker demand in China [3] Group 3: Future Guidance - The company provided guidance for 2026, projecting revenue between $3.9 billion and $4.02 billion, and EPS in the range of $3.85 to $4.15 [3] - The midpoint of the EPS outlook suggests an approximate 4% growth compared to 2025 [3]

Core Insights - A. O. Smith Corporation (AOS) reported fourth-quarter 2025 adjusted earnings of 90 cents per share, exceeding the Zacks Consensus Estimate of 84 cents, marking a 6% year-over-year increase [1] - The company's net sales for the quarter were $912.5 million, falling short of the consensus estimate of $923 million, but remained stable year over year due to strong performance in the commercial water heater and boiler markets in North America [1] Financial Performance - For the full year 2025, A. O. Smith generated revenues of $3.83 billion, reflecting a 0.3% increase year over year, with adjusted earnings at $3.85 per share, up from $3.73 in 2024 [2] - North America sales increased by 3.5% year over year to $713.7 million, surpassing the estimated $702.5 million, driven by effective pricing strategies [3] - The Rest of the World segment reported sales of $205.7 million, down 13.1% year over year, with notable declines in China, although India saw an 18% increase in organic sales [4] Margin and Cost Analysis - A. O. Smith's cost of sales decreased by 2.1% year over year to $562.1 million, while selling, general, and administrative expenses rose by 2.5% to $186.6 million [5] - Gross profit increased by 3.6% year over year to $350.4 million, resulting in a gross margin of 38.4%, up from 37.1% in the previous year [5] Liquidity and Cash Flow - As of December 31, 2025, A. O. Smith's cash and cash equivalents totaled $174.5 million, down from $239.6 million at the end of December 2024 [6] - Long-term debt decreased to $112.7 million from $183.2 million at the end of December 2024, while cash provided by operating activities increased to $616.8 million from $581.8 million year over year [6] Share Repurchase and Future Outlook - In 2025, A. O. Smith repurchased 5.9 million shares for $400.8 million, with approximately 0.8 million shares remaining under the repurchase authorization [9] - The company expects to repurchase shares worth approximately $200 million in 2026, following a board decision to increase the buyback program by an additional 5 million shares [9] - A. O. Smith projects net sales for 2026 to be in the range of $3.90-$4.02 billion, with adjusted earnings per share expected between $3.85 and $4.15 [10]

Financial Data and Key Metrics Changes - The company reported sales of $3.8 billion in 2025, a slight increase over the previous year, with earnings per share (EPS) rising 6% to a record $3.85 [10][6] - Free cash flow for 2025 was $546 million, a 15% increase compared to 2024, with a free cash flow conversion rate of 100% [13][14] - The company returned $597 million to shareholders through dividends and share repurchases [6][14] Business Line Data and Key Metrics Changes - North America segment sales were $3 billion, slightly up from 2024, with a segment margin of 24.4%, an increase of 20 basis points year-over-year [10][11] - North America water heater sales increased by 1%, while boiler sales grew by 8% due to higher commercial and residential volumes [7][10] - Water treatment sales in North America decreased by 2%, but sales in priority channels grew by 10% [8][9] - Rest of the World segment sales decreased by 4% to $880 million, primarily due to lower sales in China [11][12] Market Data and Key Metrics Changes - In China, third-party sales decreased by 12% in local currency due to economic weakness and soft consumer demand [9][11] - The company expects China sales to decrease mid-single digits in 2026 due to ongoing market challenges [20][21] - The India business, including Pureit, is projected to grow approximately 10% as the company leverages brand synergies [21][28] Company Strategy and Development Direction - The company is focused on portfolio management, innovation, and operational excellence as key strategic priorities [22][24] - The acquisition of Leonard Valve is aimed at expanding into the water management market, enhancing digital capabilities and integrated product offerings [26][27] - The company plans to continue investing in gas tankless offerings and other energy-efficient products to maintain market leadership [16][22] Management's Comments on Operating Environment and Future Outlook - Management noted that the U.S. residential market is expected to remain flat to down due to pressures in new home construction [18][19] - The company anticipates a return to growth in China in the second half of 2026, driven by internal actions and market recovery [21][38] - Management expressed confidence in the company's ability to navigate competitive pressures and maintain profitability through strategic actions [28][29] Other Important Information - The company has increased its dividend for over 30 consecutive years, with a quarterly dividend of $0.36 per share approved [14][15] - The company expects to repurchase approximately $200 million of its stock in 2026 [17][15] Q&A Session Summary Question: What is driving the persistent downturn in residential volumes? - Management indicated that the downturn is primarily due to pressures in new home construction, with emergency and proactive replacements remaining stable [36][37] Question: What indicators suggest a return to growth in China? - Management highlighted the need to move past the impact of government subsidies and focus on remodeling and refurbishments as key drivers for growth [38] Question: Can you elaborate on the competitive intensity in the wholesale channel? - Management noted that competitive pressure is increasing due to low new home construction and retail gaining market share, but emphasized their strong position in both retail and wholesale channels [42][43] Question: What is the growth outlook for the water treatment business? - Management expressed optimism about continued growth and margin expansion in the water treatment business, driven by strategic focus and integration efforts [70][73]

A. O. Smith (NYSE:AOS) Q4 2025 Earnings call January 29, 2026 10:00 AM ET Company ParticipantsAndrew Kaplowitz - Managing DirectorBryan Blair - Managing DirectorChuck Lauber - CFODavid MacGregor - PresidentEthan Morgan - Managing DirectorHelen Gurholt - VP of Investor Relations and Financial Planning and AnalysisJames F. Stern - EVPJeff Hammond - Managing DirectorNathan Jones - Managing DirectorSteve Shafer - CEOConference Call ParticipantsMike Halloran - Senior AnalystScott Graham - Senior Equity Research ...

A. O. Smith (NYSE:AOS) Q4 2025 Earnings call January 29, 2026 10:00 AM ET Speaker2Hello, and thank you for standing by. Welcome to A. O. Smith Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press Star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your ...

A.O. Smith (AOS) reported $912.5 million in revenue for the quarter ended December 2025, representing no change year over year. EPS of $0.90 for the same period compares to $0.85 a year ago.The reported revenue represents a surprise of -1.15% over the Zacks Consensus Estimate of $923.14 million. With the consensus EPS estimate being $0.84, the EPS surprise was +7.78%.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expect ...

Full Year & Fourth Quarter 2025 Results January 29, 2026 Charles T. Lauber Executive Vice President and Chief Financial Officer Fourth Quarter 2025 Earnings Presentation 2 Stephen M. Shafer President and Chief Executive Officer Highlights North America Rest of World Helen E. Gurholt Vice President - Investor Relations, Financial Planning & Analysis Forward Looking Statements This presentation contains statements that we believe are "forward-looking statements" within the meaning of the Private Securities Li ...