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Here's Why It is Appropriate to Retain A. O. Smith Stock Now
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A. O. Smith Corporation (AOS - Free Report) has been benefiting from accretive acquisitions and investments in research & development (R&D). The company’s consistent measures to reward its shareholders through dividends hold promise.
Headquartered in Milwaukee, WI, A. O. Smith is one of the leading manufacturers of commercial and residential water heating equipment and water treatment products in the world. The company specializes in offering innovative and energy-efficient solutions and products, which are developed and sold globally.
Let’s discuss the factors that are likely to continue benefiting this company.
Expansion Efforts: AOS believes in expanding its market presence, solidifying its customer base and enhancing product offerings through acquisitions. In November 2024, the company acquired the Pureit business from Unilever. The inclusion of Pureit’s expertise in water treatment solutions, coupled with its strong brand recognition, will enable A. O. Smith to expand its customer offerings and boost its position in the water treatment industry in India. The company expects the addition of Pureit to contribute approximately $50 million to its sales in 2025.
In March 2024, it acquired privately held water treatment company Impact Water Products, which expanded its water treatment footprint in North America. The acquired company is included in the North America segment.
Investments in R&D: A. O. Smith is positioning itself for sustained growth through strategic investments in R&D and manufacturing efficiency. In 2024, the company completed the construction of a new gas tankless water heater manufacturing facility in Juarez, Mexico. To mitigate the new imposed tariff charges, A. O. Smith plans to transfer its gas tankless water heater production from China to this Mexico facility. In the first quarter of 2025, the company unveiled a commercial R&D testing lab facility in Lebanon, TN, to boost the production capacity of water heaters and boilers. These initiatives reflect A. O. Smith's commitment to innovation and operational efficiency, positioning it for continued success in a competitive market.
Rewards to Shareholders: AOS is committed to returning value to shareholders through share repurchases and dividends. In the first three months of 2025, the company paid dividends worth $49.2 million, up 4% year over year and repurchased 1.8 million shares for $120.6 million. In October 2024, it increased the dividend by 6% to 34 cents per share (annually: $1.36). While exiting the first quarter, 5 million shares were left to be repurchased under the existing authorization. In January 2025, the company’s board boosted the buyback program by another 5 million shares. For 2025, it expects to repurchase shares worth approximately $400 million.
Shares of this Zacks Rank #3 (Hold) company have gained 0.2% in the year to date period against the industry’s 3.5% decline.
Image Source: Zacks Investment Research
Some Downsides of AOS
Business Weakness: AOS has been witnessing weakness across its segments. Lower volumes of residential water treatment and gas water heaters in China are challenging for the Rest of the World segment. The segment’s revenues were flat in the first quarter of 2025 and declined 9% year over year in the fourth quarter of 2024. A decline in orders for water heater products in the North America segment is also concerning. In the first quarter, the North America segment’s sales declined 7% year over year.
Forex Woes: International businesses expose AOS to risks arising from geopolitical issues, unfavorable movement in foreign currencies and others. This is because a strengthening U.S. dollar may require the company to either raise prices or contract profit margins in locations outside the United States. For example, adverse foreign currency movements lowered the Rest of the World segment’s revenues by $2 million in the first quarter of 2025 and $13 million in 2024.
CCK delivered a trailing four-quarter average earnings surprise of 16.3%. In the past 60 days, the Zacks Consensus Estimate for Crown Holdings’ 2025 earnings has increased 3.8%.
AptarGroup, Inc. (ATR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 7.3%.
In the past 60 days, the consensus estimate for ATR’s 2025 earnings has increased 4.3%.
The Gorman-Rupp Company (GRC - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 2.4%.
The Zacks Consensus Estimate for GRC’s 2025 earnings has increased a penny in the past 60 days.
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Here's Why It is Appropriate to Retain A. O. Smith Stock Now
A. O. Smith Corporation (AOS - Free Report) has been benefiting from accretive acquisitions and investments in research & development (R&D). The company’s consistent measures to reward its shareholders through dividends hold promise.
Headquartered in Milwaukee, WI, A. O. Smith is one of the leading manufacturers of commercial and residential water heating equipment and water treatment products in the world. The company specializes in offering innovative and energy-efficient solutions and products, which are developed and sold globally.
Let’s discuss the factors that are likely to continue benefiting this company.
Expansion Efforts: AOS believes in expanding its market presence, solidifying its customer base and enhancing product offerings through acquisitions. In November 2024, the company acquired the Pureit business from Unilever. The inclusion of Pureit’s expertise in water treatment solutions, coupled with its strong brand recognition, will enable A. O. Smith to expand its customer offerings and boost its position in the water treatment industry in India. The company expects the addition of Pureit to contribute approximately $50 million to its sales in 2025.
In March 2024, it acquired privately held water treatment company Impact Water Products, which expanded its water treatment footprint in North America. The acquired company is included in the North America segment.
Investments in R&D: A. O. Smith is positioning itself for sustained growth through strategic investments in R&D and manufacturing efficiency. In 2024, the company completed the construction of a new gas tankless water heater manufacturing facility in Juarez, Mexico. To mitigate the new imposed tariff charges, A. O. Smith plans to transfer its gas tankless water heater production from China to this Mexico facility. In the first quarter of 2025, the company unveiled a commercial R&D testing lab facility in Lebanon, TN, to boost the production capacity of water heaters and boilers. These initiatives reflect A. O. Smith's commitment to innovation and operational efficiency, positioning it for continued success in a competitive market.
Rewards to Shareholders: AOS is committed to returning value to shareholders through share repurchases and dividends. In the first three months of 2025, the company paid dividends worth $49.2 million, up 4% year over year and repurchased 1.8 million shares for $120.6 million. In October 2024, it increased the dividend by 6% to 34 cents per share (annually: $1.36). While exiting the first quarter, 5 million shares were left to be repurchased under the existing authorization. In January 2025, the company’s board boosted the buyback program by another 5 million shares. For 2025, it expects to repurchase shares worth approximately $400 million.
Shares of this Zacks Rank #3 (Hold) company have gained 0.2% in the year to date period against the industry’s 3.5% decline.
Image Source: Zacks Investment Research
Some Downsides of AOS
Business Weakness: AOS has been witnessing weakness across its segments. Lower volumes of residential water treatment and gas water heaters in China are challenging for the Rest of the World segment. The segment’s revenues were flat in the first quarter of 2025 and declined 9% year over year in the fourth quarter of 2024. A decline in orders for water heater products in the North America segment is also concerning. In the first quarter, the North America segment’s sales declined 7% year over year.
Forex Woes: International businesses expose AOS to risks arising from geopolitical issues, unfavorable movement in foreign currencies and others. This is because a strengthening U.S. dollar may require the company to either raise prices or contract profit margins in locations outside the United States. For example, adverse foreign currency movements lowered the Rest of the World segment’s revenues by $2 million in the first quarter of 2025 and $13 million in 2024.
Stocks to Consider
Some better-ranked companies are discussed below:
Crown Holdings, Inc. (CCK - Free Report) currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CCK delivered a trailing four-quarter average earnings surprise of 16.3%. In the past 60 days, the Zacks Consensus Estimate for Crown Holdings’ 2025 earnings has increased 3.8%.
AptarGroup, Inc. (ATR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 7.3%.
In the past 60 days, the consensus estimate for ATR’s 2025 earnings has increased 4.3%.
The Gorman-Rupp Company (GRC - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 2.4%.
The Zacks Consensus Estimate for GRC’s 2025 earnings has increased a penny in the past 60 days.