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Why Investors Should Retain A. O. Smith Stock in Portfolio Now
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Key Takeaways
AOS sees solid North American commercial heater and boiler demand, with India sales up 12.9% in Q3.
Recent acquisitions, including Leonard Valve and Pureit, aim to expand products and market reach.
Higher costs and weaker China volumes pressure results, with 2025 China sales expected to drop 10%.
A. O. Smith Corporation (AOS - Free Report) has been benefiting from strong demand for commercial water heaters and boilers in North America. Also, organic sales from India have been particularly strong, jumping 12.9% year over year in the third quarter of 2025. A. O. Smith expects sales from its North America boiler business to grow approximately 4-6% this year, while that from the commercial water heater business to increase in low-single-digit.
A. O. Smith remains focused on acquiring businesses to gain access to new customers, regions and product lines. For instance, in November 2025, the company entered into a deal to acquire LVC Holdco LLC (Leonard Valve) for $470 million. Anticipated to be completed in first-quarter 2026, the buyout is likely to strengthen its water heating and boiler offerings and boost its presence in the water management market.
Also, 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, enabled A. O. Smith to expand its customer offerings and boost its position in the water treatment industry in India.
Management is committed to rewarding shareholders through dividend payouts and share repurchases. In the first nine months of 2025, it paid dividends worth $145.1 million and repurchased shares worth $335.4 million. In October 2025, it hiked its dividend by 6% to 36 cents per share.
Also, AOS’ sound liquidity position adds to its strength. Exiting the third quarter of 2025, it had cash and cash equivalents of $152.7 million, higher than the current debt of $19 million.
AOS Stock’s Price Performance
Image Source: Zacks Investment Research
In the past month, the Zacks Rank #3 (Hold) company has gained 0.4% against the industry’s 7.7% decline.
However, lower volumes of residential water treatment and water heater products in China remain challenging for the Rest of the World segment. The segment’s revenues declined 1% year over year in the third quarter. AOS issued a lackluster 2025 sales outlook for China. It currently expects the metric to decrease approximately 10% year over year in local currency.
Also, rising operating expenses pose a threat to A. O. Smith’s bottom line. In the third quarter, the cost of sales and selling, general and administrative expenses increased 2.2% and 7%, respectively, on a year-over-year basis. The rise was attributable to higher employee costs from increased wages and management incentives.
Key Picks
Some better-ranked stocks from the same space are discussed below.
The Zacks Consensus Estimate for Parker-Hannifin’s 2025 earnings has increased 4% in the past 60 days.
Enersys (ENS - Free Report) presently carries a Zacks Rank of 2 and has a trailing four-quarter earnings surprise of 5%, on average. The consensus estimate for ENS’ 2025 earnings has increased 5.3% in the past 60 days.
Powell Industries (POWL - Free Report) presently carries a Zacks Rank of 2. POWL delivered a trailing four-quarter earnings surprise of 8.4%, on average. The Zacks Consensus Estimate for Powell’s 2025 earnings has increased 2.5% in the past 60 days.
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Why Investors Should Retain A. O. Smith Stock in Portfolio Now
Key Takeaways
A. O. Smith Corporation (AOS - Free Report) has been benefiting from strong demand for commercial water heaters and boilers in North America. Also, organic sales from India have been particularly strong, jumping 12.9% year over year in the third quarter of 2025. A. O. Smith expects sales from its North America boiler business to grow approximately 4-6% this year, while that from the commercial water heater business to increase in low-single-digit.
A. O. Smith remains focused on acquiring businesses to gain access to new customers, regions and product lines. For instance, in November 2025, the company entered into a deal to acquire LVC Holdco LLC (Leonard Valve) for $470 million. Anticipated to be completed in first-quarter 2026, the buyout is likely to strengthen its water heating and boiler offerings and boost its presence in the water management market.
Also, 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, enabled A. O. Smith to expand its customer offerings and boost its position in the water treatment industry in India.
Management is committed to rewarding shareholders through dividend payouts and share repurchases. In the first nine months of 2025, it paid dividends worth $145.1 million and repurchased shares worth $335.4 million. In October 2025, it hiked its dividend by 6% to 36 cents per share.
Also, AOS’ sound liquidity position adds to its strength. Exiting the third quarter of 2025, it had cash and cash equivalents of $152.7 million, higher than the current debt of $19 million.
AOS Stock’s Price Performance
Image Source: Zacks Investment Research
In the past month, the Zacks Rank #3 (Hold) company has gained 0.4% against the industry’s 7.7% decline.
However, lower volumes of residential water treatment and water heater products in China remain challenging for the Rest of the World segment. The segment’s revenues declined 1% year over year in the third quarter. AOS issued a lackluster 2025 sales outlook for China. It currently expects the metric to decrease approximately 10% year over year in local currency.
Also, rising operating expenses pose a threat to A. O. Smith’s bottom line. In the third quarter, the cost of sales and selling, general and administrative expenses increased 2.2% and 7%, respectively, on a year-over-year basis. The rise was attributable to higher employee costs from increased wages and management incentives.
Key Picks
Some better-ranked stocks from the same space are discussed below.
Parker-Hannifin Corporation (PH - Free Report) presently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter average earnings surprise of 6.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Parker-Hannifin’s 2025 earnings has increased 4% in the past 60 days.
Enersys (ENS - Free Report) presently carries a Zacks Rank of 2 and has a trailing four-quarter earnings surprise of 5%, on average. The consensus estimate for ENS’ 2025 earnings has increased 5.3% in the past 60 days.
Powell Industries (POWL - Free Report) presently carries a Zacks Rank of 2. POWL delivered a trailing four-quarter earnings surprise of 8.4%, on average. The Zacks Consensus Estimate for Powell’s 2025 earnings has increased 2.5% in the past 60 days.