Shares of A.O. Smith (NYSE:AOS) fell as much as 4.3% Tuesday, touching a four-month low, after the water technology company posted third-quarter results that topped profit expectations but missed Wall Street’s sales target and narrowed its full-year guidance.
The maker of water heaters and boilers reported net earnings of $132 million, or $0.94 a share, up from $120.1 million, or $0.82 a share, a year earlier. That surpassed analysts’ consensus estimate of $0.91 a share, according to S&P Global. Revenue rose 4% to $943 million, below forecasts of about $948.1 million.
North America growth offsets China weakness
Chief Executive Steve Shafer in a statement said the company achieved “sales growth of 4%,” led by solid results in North America, where segment sales increased 6% on pricing actions and resilient commercial demand. Segment operating margin expanded 110 basis points to 24.2%, helping lift North America segment earnings 11% to $179.7 million.
However, A.O. Smith (NYSE:AOS) continued to face “economic challenges in China,” where local-currency sales fell 12%, dragging total Rest of World sales down 1% to $207.9 million. That segment’s margin improved to 7.4%, aided by cost control and restructuring efforts.
Cash flow, shareholder returns
Through the first nine months of 2025, cash provided by operations rose 21% to $434 million, and free cash flow increased 35% to $381 million, helped by lower inventory levels. The company repurchased 5 million shares for $335 million during that period and raised its dividend by 6%, marking more than three decades of consecutive annual increases.
Guidance tightened amid market challenges
Despite the solid quarterly performance, A.O. Smith (AOS) narrowed its full-year 2025 earnings outlook to a range of $3.70 to $3.85 a share, versus a prior view of $3.70 to $3.90, and now expects consolidated sales to be flat to up 1% for the year. The company cited soft conditions in China and weakening North American housing construction as key reasons for its more cautious stance.
“We are cautious about the remainder of the year primarily due to continued headwinds in the China market and the impact of weakening new home construction,” Shafer said.
The company reaffirmed its plan to spend roughly $400 million on share repurchases this year and said its outlook excludes any effects from potential acquisitions or the ongoing strategic assessment of its China business.