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Shares of A. O. Smith (NYSE:AOS) fell 1.2% in premarket trading Thursday after the company reported second-quarter results that reflected persistent challenges in China and flattish performance in key North American markets.
The Milwaukee-based water-technology company posted revenue of $1.01 billion for the quarter ended June 30, a 1% year-over-year decline, in line with the Wall Street estimate of $1 billion. Earnings came in at $1.07 a share, topping the consensus estimate of $1.
While commercial boiler sales remained strong and North America margins improved to 25.4%, overall sales were weighed down by a double-digit decline in China. The company’s “Rest of World” segment saw sales fall 2%, driven by an 11% drop in China revenue (in local currency), which offset a 19% increase in India and $16 million in contributions from the company’s Pureit acquisition.
New Chief Executive Steve Shafer acknowledged the China challenges and announced that the company has launched a formal strategic review of the business there, including potential partnerships or other structural changes.
“We believe the China market has substantial long-term prospects,” Shafer said in a statement, without offering a timeline for the evaluation.
In North America, sales dipped 1% to $779 million, as higher boiler demand was offset by lower residential water heater volumes. The company noted that productivity initiatives helped smooth out some pre-buy distortions tied to pricing and tariffs.
Raising lower end of guidance
A. O. Smith (NYSE:AOS) raised its full-year outlook. It now expects 2025 revenue to grow 1% to 3% and earnings of $3.70 to $3.90 a share, upping the lower end of prior guidance of $3.60 to $3.90 a share. The company repurchased $251 million in stock in the first half of the year and plans to return $400 million to shareholders in buybacks by year-end.