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Here's Why Investors Should Consider Retaining A. O. Smith Stock Now
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Key Takeaways
A. O. Smith expects 2026 boiler sales to grow 6-8%, supporting total sales growth of about 2-3%.
AOS expects Leonard Valve to add $70 million to 2026 sales after acquisitions lifted first-half sales 2%.
A. O. Smith faces China weakness, with 2026 sales expected to decline in the low double digits.
A. O. Smith Corporation (AOS - Free Report) has been witnessing persistent strength in its North America boiler business. Sales from the North America boiler business surged 21% year over year in second-quarter 2026. The company expects sales from the boiler business to grow about 6-8% in 2026, while the same from its North America water treatment business are anticipated to rise approximately 5-6%. For 2026, A. O. Smith expects total sales to grow about 2-3% year over year.
A. O. Smith believes in adding complementary businesses to its portfolio via acquisitions. For instance, the company’s acquisition of LVC Holdco LLC (Leonard Valve) in January 2026 strengthened its water heating and boiler offerings. It expects the Leonard Valve buyout to contribute approximately $70 million to its sales in 2026. In the first six months of 2026, acquisitions boosted the company’s sales by 2%.
AOS has been committed to rewarding shareholders through dividend payouts and share repurchases. In the first half of 2026, it distributed dividends of $99.8 million and repurchased shares worth $162.4 million. It announced a hike of 6% in its quarterly dividend rate in October 2025. Also, in January 2026, the company’s board boosted the buyback program by another 5 million shares. For 2026, it expects to repurchase shares worth approximately $300 million.
Despite the positives, the company is grappling with softness in the Rest of the World segment due to lower volumes of residential water treatment and water heater products in China. The segment’s sales declined 19% year over year in the second quarter of 2026. Organic sales in China fell 22% in the same period. AOS issued a lackluster 2026 sales outlook for China. It currently expects sales from China to decline in the low double digits on a year-over-year basis in local currency.
AOS Stock’s Price Performance
Image Source: Zacks Investment Research
In the past month, the Zacks Rank #3 (Hold) company’s shares declined 5.8% against the industry’s 5.4% growth.
A. O. Smith exited second-quarter 2026 with a high long-term debt of $598 million compared with $112.7 million at the end of 2025. The significant rise in debt level was attributable to cash borrowed by the company under a new term loan for the acquisition of Leonard Valve. Considering its high debt level, its cash and cash equivalents of $181.3 million do not look impressive.
Key Picks
Some better-ranked stocks from the same space are discussed below.
The company delivered a trailing four-quarter average earnings surprise of 14.6%. In the past 60 days, the consensus estimate for ALRM’s 2026 earnings has increased 3.9%.
Helios Technologies (HLIO - Free Report) currently sports a Zacks Rank of 1. HLIO delivered a trailing four-quarter average earnings surprise of 13.1%. In the past 60 days, the Zacks Consensus Estimate for Helios Technologies’ 2026 earnings has increased 10%.
Enersys (ENS - Free Report) currently carries a Zacks Rank #2 (Buy). Enersys’ earnings topped the consensus estimate in each of the trailing four quarters. The average earnings surprise was 11.5%. In the past 60 days, the Zacks Consensus Estimate for Enersys’ fiscal 2027 (ending March 2027) earnings has increased 10.8%.
View the Zacks #1 Rank List
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Here's Why Investors Should Consider Retaining A. O. Smith Stock Now
Key Takeaways
A. O. Smith Corporation (AOS - Free Report) has been witnessing persistent strength in its North America boiler business. Sales from the North America boiler business surged 21% year over year in second-quarter 2026. The company expects sales from the boiler business to grow about 6-8% in 2026, while the same from its North America water treatment business are anticipated to rise approximately 5-6%. For 2026, A. O. Smith expects total sales to grow about 2-3% year over year.
A. O. Smith believes in adding complementary businesses to its portfolio via acquisitions. For instance, the company’s acquisition of LVC Holdco LLC (Leonard Valve) in January 2026 strengthened its water heating and boiler offerings. It expects the Leonard Valve buyout to contribute approximately $70 million to its sales in 2026. In the first six months of 2026, acquisitions boosted the company’s sales by 2%.
AOS has been committed to rewarding shareholders through dividend payouts and share repurchases. In the first half of 2026, it distributed dividends of $99.8 million and repurchased shares worth $162.4 million. It announced a hike of 6% in its quarterly dividend rate in October 2025. Also, in January 2026, the company’s board boosted the buyback program by another 5 million shares. For 2026, it expects to repurchase shares worth approximately $300 million.
Despite the positives, the company is grappling with softness in the Rest of the World segment due to lower volumes of residential water treatment and water heater products in China. The segment’s sales declined 19% year over year in the second quarter of 2026. Organic sales in China fell 22% in the same period. AOS issued a lackluster 2026 sales outlook for China. It currently expects sales from China to decline in the low double digits on a year-over-year basis in local currency.
AOS Stock’s Price Performance
Image Source: Zacks Investment Research
In the past month, the Zacks Rank #3 (Hold) company’s shares declined 5.8% against the industry’s 5.4% growth.
A. O. Smith exited second-quarter 2026 with a high long-term debt of $598 million compared with $112.7 million at the end of 2025. The significant rise in debt level was attributable to cash borrowed by the company under a new term loan for the acquisition of Leonard Valve. Considering its high debt level, its cash and cash equivalents of $181.3 million do not look impressive.
Key Picks
Some better-ranked stocks from the same space are discussed below.
Alarm.com Holdings, Inc. (ALRM - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The company delivered a trailing four-quarter average earnings surprise of 14.6%. In the past 60 days, the consensus estimate for ALRM’s 2026 earnings has increased 3.9%.
Helios Technologies (HLIO - Free Report) currently sports a Zacks Rank of 1. HLIO delivered a trailing four-quarter average earnings surprise of 13.1%. In the past 60 days, the Zacks Consensus Estimate for Helios Technologies’ 2026 earnings has increased 10%.
Enersys (ENS - Free Report) currently carries a Zacks Rank #2 (Buy). Enersys’ earnings topped the consensus estimate in each of the trailing four quarters. The average earnings surprise was 11.5%. In the past 60 days, the Zacks Consensus Estimate for Enersys’ fiscal 2027 (ending March 2027) earnings has increased 10.8%.