A. O. Smith Corporation (AOS.N): 2Q26 Model Update; US Resi Water Heaters and Incremental Cost Headwinds Weigh on FY26 Guide

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A. O. Smith Corporation (AOS.N): 2Q26 Model Update; US Resi Water Heaters and Incremental Cost Headwinds Weigh on FY26 Guide

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30 Jul 2026 18:12:59 ET │ 14 pages

A. O. Smith Corporation (AOS.N)

2Q26 Model Update; US Resi Water Heaters and Incremental Cost

Headwinds Weigh on FY26 Guide

CITI'S TAKE Neutral

Price (30 Jul 26 16:00) US$59.81 AOS 2Q26 adj. EPS beat expectations ($1.03 vs. Citi/Street pre-print

Target price US$64.00↓ estimate of $0.94/$0.96), but a lowered FY26 outlook reflects a more

challenging environment. In our view, 2Q26 (and in general, FY26) from US$65.00

continues to reflect a mixed demand set-up with NA pricing carryover and Expected share price return 7.0%

boiler demand being offset by weakness in China’s consumer appliance Expected dividend yield 2.3%

market (down 28% y/y in local currency) and lower US resi-water heater Expected total return 9.3%

volumes (AOS lowered its US resi-water heater outlook from ~flat to down Market Cap US$8,244M

LSD). Additionally, 2Q results benefitted from early buy in AOS’ boiler

business and customer pre-buy activities ahead of planned water

heater/boiler price increases, which we think could constrain near-term

upside. Given limited visibility on demand recovery and incremental cost Andrew KaplowitzAC

headwinds (steel inflation higher in 2H vs. 1H and the current tariff regime +1-212-816-0642

expected to have modestly higher cost impact vs. prior expectations), we andrew.kaplowitz@citi.com

maintain our Neutral rating on AOS. Jose Sulca Flores

jose.alonso.sulcaflores@citi.com

2Q26 Results — 2Q26 sales of $1,004mn was below Citi/above Street pre-print

estimates of $1,020mn/$995mn while overall 2Q26 adj. EPS of $1.03 was above

Citi/Street pre-print estimates of $0.94/$0.96. AOS reported North America Sales