A.O. Smith: 2Q First Take: North America Holds Up but Residential and China Stay the Swing Factors

Research evidence excerpt

A.O. Smith: 2Q First Take: North America Holds Up but Residential and China Stay the Swing Factors

J P M O R G A N North America Equity Research

30 July 2026

A.O. Smith Underweight

AOS, AOS US

2Q First Take: North America Holds Up but Residential Price (29 Jul 26):$62.04

and China Stay the Swing Factors

North America Small and Mid Cap

A.O. Smith delivered a mixed 2Q26: adjusted EPS of $1.03 beat our $0.96 and Industrials

consensus $0.95, while revenue of $1,004M topped our $999M and consensus Tomohiko Sano AC

$994M. However, management lowered the top end of its FY26 outlook, now (1-212) 622-1099

guiding revenue to $3.9-$3.95B (from $3.9-$4.0B) and adjusted EPS to $3.70- tomohiko.sano@jpmorgan.com

$3.85 (from $3.70-$4.00), driven primarily by continued softness in residential Ethan Coyle

water heater industry volumes. The ~1% revenue decline reflected ongoing U.S. (1-212) 270-0613

ethan.coyle@jpmchase.com

residential softness and China pressure internationally. Adjusted EBITDA was

Brendan Shea, CFA

$213M (vs. $210M/$207M), with a 21.2% margin. With expectations already reset

(1-212) 622-0770

on housing and China risk, the 2Q beat helps, but the guide trim and uninspiring brendan.shea@jpmorgan.com

2H setup likely keep upside capped. J.P. Morgan Securities LLC

• North America Resilient, China Still a Drag: “Two-Speed” Quarter: AOS

posted North America revenue of $821M (vs. our $819M; consensus $815M),

with adjusted operating income of $200M and a 24.4% margin modestly above

both our view and consensus. Results benefited from Leonard Valve, stronger

boiler growth (+21% YoY), and carryover pricing, while residential water

heater volumes remain the key swing factor into 2H. International continued

to lag, reflecting ongoing China-related pressure: Rest of World revenue was