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A. O. Smith Exhibits Strong Prospects Despite Persisting Headwinds
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Key Takeaways
A. O. Smith sees strong North America demand from higher commercial boiler and water heater volumes.
AOS expands its portfolio with Leonard Valve and Pureit acquisitions to grow water management offerings.
A. O. Smith boosts dividends and buybacks, while China sales weakness and higher costs pressure results.
A. O. Smith Corporation (AOS - Free Report) is benefiting from solid momentum across the North America segment. Higher commercial water heater and boiler volumes are driving the segment’s performance. The company expects sales from its North America boiler business to grow approximately 4-6% in 2025, while the same from the commercial water heater business is likely to increase in low-single-digit.
A. O. Smith solidified its product portfolio and leveraged business opportunities through asset additions. In November 2025, it 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 AOS’ water heating and boiler offerings and boost its presence in the water management market. 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.
A. O. Smith’s commitment to rewarding shareholders through dividends and share buybacks is encouraging. In the first nine months of 2025, the company paid dividends worth $145.1 million, up 3% year over year. In October 2025, it increased the quarterly dividend rate by 6% to 36 cents per share (annually $1.44). AOS has increased its dividend consecutively for more than 30 years. In the first nine months, it also repurchased 5 million shares for $335.4 million. For 2025, the company expects to repurchase shares worth approximately $400 million.
Price Performance of AOS
In the past six months, this Zacks Rank #3 (Hold) company’s shares have risen 0.7% against the industry’s 2.7% decline.
Image Source: Zacks Investment Research
However, lower volumes of residential water treatment and water heater products in the region are challenging for the Rest of the World segment. The segment’s revenues declined 1% year over year in the third quarter of 2025. Also, A. O. Smith has issued a lackluster 2025 sales outlook for China. It currently expects the metric to decrease approximately 10% year over year in local currency.
High costs pose a threat to the company’s bottom line. In the third quarter, AOS’ cost of sales increased 2.2% year over year. In the same period, its selling, general and administrative (SG&A) expenses grew 7% year over year. The metric, as a percentage of sales, increased 40 basis points. The increase was attributable to higher employee costs from increased wages and management incentives.
DNOW delivered a trailing four-quarter average earnings surprise of 43.5%. In the past 30 days, the consensus estimate for DNOW’s 2025 earnings has remained steady.
Nordson Corporation (NDSN - Free Report) presently carries a Zacks Rank #2 (Buy). NDSN delivered a trailing four-quarter average earnings surprise of 2.2%.
In the past 30 days, the consensus estimate for Nordson’s fiscal 2026 earnings has increased 2.3%.
Watts Water Technologies, Inc. (WTS - Free Report) presently carries a Zacks Rank of 2. WTS delivered a trailing four-quarter average earnings surprise of 10.9%.
In the past 30 days, the consensus estimate for Watts Water’s 2025 earnings has remained steady.
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A. O. Smith Exhibits Strong Prospects Despite Persisting Headwinds
Key Takeaways
A. O. Smith Corporation (AOS - Free Report) is benefiting from solid momentum across the North America segment. Higher commercial water heater and boiler volumes are driving the segment’s performance. The company expects sales from its North America boiler business to grow approximately 4-6% in 2025, while the same from the commercial water heater business is likely to increase in low-single-digit.
A. O. Smith solidified its product portfolio and leveraged business opportunities through asset additions. In November 2025, it 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 AOS’ water heating and boiler offerings and boost its presence in the water management market. 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.
A. O. Smith’s commitment to rewarding shareholders through dividends and share buybacks is encouraging. In the first nine months of 2025, the company paid dividends worth $145.1 million, up 3% year over year. In October 2025, it increased the quarterly dividend rate by 6% to 36 cents per share (annually $1.44). AOS has increased its dividend consecutively for more than 30 years. In the first nine months, it also repurchased 5 million shares for $335.4 million. For 2025, the company expects to repurchase shares worth approximately $400 million.
Price Performance of AOS
In the past six months, this Zacks Rank #3 (Hold) company’s shares have risen 0.7% against the industry’s 2.7% decline.
Image Source: Zacks Investment Research
However, lower volumes of residential water treatment and water heater products in the region are challenging for the Rest of the World segment. The segment’s revenues declined 1% year over year in the third quarter of 2025. Also, A. O. Smith has issued a lackluster 2025 sales outlook for China. It currently expects the metric to decrease approximately 10% year over year in local currency.
High costs pose a threat to the company’s bottom line. In the third quarter, AOS’ cost of sales increased 2.2% year over year. In the same period, its selling, general and administrative (SG&A) expenses grew 7% year over year. The metric, as a percentage of sales, increased 40 basis points. The increase was attributable to higher employee costs from increased wages and management incentives.
Stocks to Consider
Some better-ranked companies are discussed below.
DNOW Inc. (DNOW - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DNOW delivered a trailing four-quarter average earnings surprise of 43.5%. In the past 30 days, the consensus estimate for DNOW’s 2025 earnings has remained steady.
Nordson Corporation (NDSN - Free Report) presently carries a Zacks Rank #2 (Buy). NDSN delivered a trailing four-quarter average earnings surprise of 2.2%.
In the past 30 days, the consensus estimate for Nordson’s fiscal 2026 earnings has increased 2.3%.
Watts Water Technologies, Inc. (WTS - Free Report) presently carries a Zacks Rank of 2. WTS delivered a trailing four-quarter average earnings surprise of 10.9%.
In the past 30 days, the consensus estimate for Watts Water’s 2025 earnings has remained steady.