Here's Why It is Appropriate to Retain A. O. Smith Stock Now

Core Viewpoint - A. O. Smith Corporation (AOS) is experiencing growth through strategic acquisitions and investments in research and development, while also rewarding shareholders with dividends and share repurchases [1][5][6]. Group 1: Company Overview - A. O. Smith is a leading manufacturer of commercial and residential water heating equipment and water treatment products, focusing on innovative and energy-efficient solutions sold globally [2]. Group 2: Expansion Efforts - In November 2024, AOS acquired the Pureit business from Unilever, which is expected to contribute approximately $50 million to sales in 2025, enhancing its position in the water treatment industry in India [3]. - The acquisition of Impact Water Products in March 2024 expanded AOS's water treatment footprint in North America [4]. Group 3: Investments in R&D - AOS is investing in R&D and manufacturing efficiency, including a new gas tankless water heater manufacturing facility in Juarez, Mexico, to mitigate tariff charges [5]. - The company unveiled a commercial R&D testing lab facility in Lebanon, TN, in Q1 2025 to boost production capacity for water heaters and boilers [5]. Group 4: Rewards to Shareholders - In Q1 2025, AOS paid dividends of $49.2 million, a 4% increase year over year, and repurchased 1.8 million shares for $120.6 million [6]. - The dividend was increased by 6% to 34 cents per share in October 2024, with plans to repurchase shares worth approximately $400 million in 2025 [6]. Group 5: Business Challenges - AOS is facing challenges with lower volumes in residential water treatment and gas water heaters in China, leading to flat revenues in the Rest of the World segment in Q1 2025 and a 9% decline year over year in Q4 2024 [9]. - The North America segment also saw a 7% decline in sales year over year in Q1 2025 due to reduced orders for water heater products [9]. - Adverse foreign currency movements impacted the Rest of the World segment's revenues by $2 million in Q1 2025 and $13 million in 2024 [10].