A. O. Smith Corporation reported first‑quarter 2026 revenue of $945.6 million, a 2% decline from $963.9 million in the same quarter a year earlier, and net earnings of $118 million, down 14% from $136.6 million in Q1 2025. Diluted earnings per share fell to $0.85, an 11% drop from $0.95 in Q1 2025, missing the consensus estimate of $0.94–$0.95.
North America sales rose 1% to $753.4 million, while Rest of World sales fell 11% to $200.7 million. China sales declined 17% in local currency, reflecting continued weak consumer demand. The North America segment posted a 23.3% margin and $175.4 million in earnings, a contraction from 24.7% and $185.2 million in Q1 2025. The Rest of World segment margin fell to 6.2% with earnings of $12.4 million, down from 8.7% and $19.7 million a year earlier.
The company’s recent acquisition of Leonard Valve, completed in January 2026, contributed $16 million to sales in Q1 2026. Integration and restructuring costs are expected to total $20 million in pre‑tax restructuring and impairment expenses in the second quarter, as the company continues to right‑size its China and North America water‑treatment businesses.
Management lowered the full‑year 2026 sales outlook to $3.83 billion–$4.00 billion, a reduction from the prior guidance of $3.83 billion–$4.00 billion, and trimmed diluted EPS guidance to $3.60–$3.90 from the previous $3.70–$4.00 range. The cuts reflect persistent headwinds in China and uncertainty around regulatory changes in North America.
Steve Shafer, CEO, said, "Our team executed with focus and agility in the first quarter, continuing to support our customers well in the face of a continued soft macro environment. As we anticipated, softer demand in China impacted results. In North America, results were impacted by residential water heater industry demand that was modestly below our expectations, compounded by temporary weather‑related disruptions at our Ashland City, Tennessee facility."
Analysts had expected diluted EPS of $0.94–$0.95 and revenue of $969.2 million–$987.5 million. The company missed both metrics, with EPS down $0.09–$0.10 and revenue down $23.6 million–$41.9 million. In pre‑market trading, the stock fell 2.12%–2.37%, reflecting investor concern over the earnings miss and lowered outlook.
The results signal a challenging near‑term environment: margin compression in both North America and Rest of World segments, weaker demand in China, and weather‑related production disruptions. The company’s focus on higher‑margin water‑treatment and water‑management businesses, along with the integration of Leonard Valve, suggests a strategic pivot aimed at improving profitability over the long term, but the current outlook indicates short‑term headwinds remain significant.
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