AOS US S&P 500Russell 1000 Earnings call
A. O. Smith (AOS) · Q2 2026 results and valuation
Share price: $64.61 · 2026-11-11
Results Q2 2026 vs Q1 2026 · previous quarter · published 30 Jul 2026 and 30 Apr 2026
Net income up 5.8% on the previous quarter. Management sounded cautious, in its script and in answers to analysts.
1 · Numbers
+5.8%
Net income vs Q1 2026
Outlook given
Net income 124.9M vs 118.0M
Revenue +6.2%
Why Against the same quarter last year (−17.9%), net income fell because the benefits of organic growth and the contribution from Leonard Valve were largely offset by higher steel and other input costs, including tariffs and inflationary costs.
2 · How management spoke
Cautious
Among the least upbeat of all company calls
Answers to analysts: restrained, in line with the script.
Similar to last call.
3 · What stood out
A.O. Smith increased its 2026 share repurchase target by 50% to $300 million to reinforce its commitment to disciplined capital deployment and returning cash to shareholders.
Valuation
Is A. O. Smith undervalued?
Reverse DCF. Free cash flow from the last full fiscal year (2025-12-31), grown for 10 years, discounted back, plus a terminal value. “Implied growth” is the rate the current price assumes.
At 0.7% growth a year (3-year revenue growth), the model's fair value is $41.76 a share — the stock trades 55% above it. Today's price assumes 6.2% growth a year.
Current price
$64.61
close of 2026-11-11
Market implies growth of iThe yearly free-cash-flow growth, for the next 10 years, that today’s share price already assumes. If you believe the company grows faster than this, the stock is cheap under this model; slower, and it is expensive.
+6.2% for 10 yrs
Fair value / share
$41.76
Buy below
$31.32
Price vs fair value
Overvalued 55%
Price vs buy-below price
Overvalued 106%
Management expects
Sales +3% · from the Q2 2026 report: “AOS lowered its full-year sales growth forecast to 2% to 3% and adjusted EPS to $3.70 to $3.85 per share from its previous outlook of 2% to 4% and $3.70 to $4.”
A guidance figure for sales, usually one year ahead, not a 10-year free-cash-flow rate.
Read between the lines
-
Guidance
AOS lowered its full-year sales growth forecast to 2% to 3% and adjusted EPS to $3.70 to $3.85 per share from its previous outlook of 2% to 4% and $3.70 to $4.
Source quote
“Together with continued weakness in China, these factors are expected to result in Q3 EPS that is lower than both Q2 and Q4.”
-
Guidance
AOS increased its 2026 share repurchase target by 50% to $300 million to reinforce its commitment to disciplined capital deployment and returning cash to shareholders.
-
Figure
North America boiler business sales increased 21% this quarter, contributing to 12% growth in the first half of the year.
Source quote
“North America boiler business delivered a strong quarter. With sales increasing 21%, contributing to 12% growth in the first half of the year.”
-
Figure
Steel costs rose approximately 20% year over year in Q2, and combined with tariffs and inflationary costs, they largely offset pricing benefits.
Source quote
“Steel costs rose year over year approximately 20% in Q2 and combined with tariffs and other inflationary costs, largely offset pricing benefits.”
-
Key theme
Margins will face pressure through the half of the year because costs, particularly in the fourth quarter, are ramping up quickly.
Source quote
“But we will see some pressures on margins as we go through the half of the year because the costs, particularly in the fourth quarter, are ramping up pretty quicklyly.”
3 more
-
Guidance
The company expects to see the positive impact of pricing on both water heaters and boilers starting midway through the third quarter.
-
Guidance
AOS expects overall tariffs and tariff refunds to have no material impact on earnings or margins for the full year.
-
Key theme
AOS expects a smaller impact from price increase pull-forward than what has been seen in other companies.
Source quote
“So we do expect to have a less of an impact than what we have seen in other price increase pull-forward.”
Tone
How upbeat the language was, compared with other companiesiTone counts positive minus negative finance words, adjusted for length. Executives mostly speak positively, so the labels compare each call with every company's latest call: “typical” is the middle third, “very upbeat” the top tenth, “cautious” the bottom tenth.. Dot: Q2 2026. Ring: Q1 2026.
Script and answers carried a similar tone, so the script's message held up under questioning.
Sentences that drove the tone
“Rest of the World segment sales of $195 million decreased 19% due to weak continued weak consumer demand in China driving lower volumes.”
“Actively manage our portfolio, invest in innovation to drive organic growth, and advance operational excellence to improve productivity.”
“During the quarter, we advanced actions to optimize our footprint and streamline our brand portfolio, which we believe position the business to operate more efficiently, and accelerate profitable growth over...”
Full figures
USD · SEC EDGAR XBRL (10-Q, period end 2026-06-30)
| Metric | Q2 2026period end 2026-06-30 | Q1 2026period end 2026-03-31 | Change | Q2 2025 | YoY |
|---|---|---|---|---|---|
| Revenue | 1.00B | 945.6M | +6.2% | 1.01B | −0.7% |
| Gross profit | 387.8M | 365.7M | +6.0% | 397.1M | −2.3% |
| Operating income | 166.1M | 161.8M | +2.7% | 206.2M | −19.4% |
| Net income | 124.9M | 118.0M | +5.8% | 152.2M | −17.9% |
| EPS | 0.91 | 0.85 | +7.1% | 1.07 | −15.0% |
| P/E today 18.0 | 17.5 | 17.6 | −0.1 | 18.3 | −0.8 |
Topics
Most discussed now
- The organic growth was driven primarily by 21% boiler sales growth, as well as carryover pricing benefits in A. O. Smith's water...
- New You will then hear an automated message advising your hand is raised.
- New A. O. Smith has a highly experienced group of leaders with the right balance of fresh perspective, and deep industry knowledge.
- New A. O. Smith has had a lot of great discussions with a lot of different potential parties.
- Carrie brings extensive financial leadership experience, across multiple industries.
Faded since Q1 2026
- Fading Despite these headwinds, diligent working capital management helped to drive strong free cash flow performance in the quarter.
- Fading A. O. Smith's North America boiler sales grew 2% compared to 2025 as residential boiler volume growth and carryover pricing benefits more...
- Dropped What the DOE issued late last week was because of that uncertainty around what would happen through the legal system...
- Fading With the discontinuation of most government stimulus programs and continued low consumer confidence, the water heater and water treatment…
Latest announcements
Official filings, newest first. Summaries are generated from each filing and its attachment; every figure is checked against the source.
- Results of operations · SEC 8-K
- Regulation FD disclosure · SEC 8-K
- Results of operations · SEC 8-K
A. O. Smith reported second-quarter 2026 net sales of $1,004.3 million, a 1% decrease from $1,011.3 million in the same period of the previous year.
- Director or officer change · SEC 8-K
Executive Chairman Kevin Wheeler will retire on July 1, 2026, and Stephen Shafer, the current president and CEO since July 1, 2025, will be appointed as the new chairman.
- Director or officer change · SEC 8-K
A.O. Smith Corporation appointed Carrie Anderson as Executive Vice President and Chief Financial Officer effective July 1, 2026, to succeed Charles T. Lauber, who is retiring.
- Results of operations · SEC 8-K
A. O. Smith reported first-quarter 2026 net sales of $945.6 million and net earnings of $118 million, representing a 2% and 14% decrease respectively compared to the first quarter of 2025.
- Shareholder vote results; Other events · SEC 8-K
A.O. Corporation held its annual meeting on April 13, 2026, where shareholders voted on the board of directors, executive compensation, and the ratification of Ernst & Young LLP as the independent accounting firm.
- Results of operations · SEC 8-K
A. O. Smith reported 2025 net earnings of $546.2 million, up 2% from $533.6 million in 2024, and a record diluted earnings per share of $3.85, up 6% from $3.63.
Balance sheet & ownership
From SEC filings; short interest is FINRA data via Yahoo. Collected 2026-10-18.
Cash & runway
Cash & equivalents
$181.3M
2026-06-30
Implied runway
—
operating cash flow positive over the TTM window
Dilution
weighted-average basic shares, per quarter. Change: -3.2% YoY, -0.8% QoQ.
| Quarter | Shares |
|---|---|
| Q3 2024 | 145.6M |
| Q1 2025 | 143.6M |
| Q2 2025 | 141.6M |
| Q3 2025 | 140.0M |
| Q1 2026 | 138.3M |
| Q2 2026 | 137.1M |
Insider transactions
Form 4 open-market trades (codes S/P), trailing 12 months. 37 filings parsed.
Sold by insiders
1.5K shares
$110.6K · 2 transactions
Bought by insiders
0 shares
0 transactions
Net direction
net selling
Catalyst calendar
management-stated targets — from the latest earnings call; plans, not promises.
-
by our next quarterly earnings call
share conclusion on strategic assessment of the China business
Source quote
“We expect to share our conclusion on that assessment by our next quarterly earnings call.”
-
beginning in 2027
annual savings of approximately $6 to $8 million
Source quote
“We expect annual savings of approximately $6 to $8 million beginning in 2027.”
-
first half of this year
cash flow performance
Source quote
“Cash flow performance remained a significant strength in the first half of this year.”
-
first half of 2026
free cash flow generation
Source quote
“We generated free cash flow of $233 million in the first half of 2026, a 67% increase over 2025.”
-
first half of the year
share repurchases
Source quote
“In addition, we repurchased approximately 2.6 million shares for a total of $162 million during the first half of the year.”