A. O. Smith Corporation reported a decline in financial performance for the first quarter of 2026, with net sales of $945.6 million, down from $963.9 million in the same period last year. The decrease in revenue was primarily attributed to lower sales volumes in residential water heaters in North America, which were impacted by weather-related production and shipping constraints, as well as a significant decline in sales in China. The company's gross profit also fell to $365.7 million from $375.4 million, resulting in a gross profit margin of 38.7%, slightly down from 38.9% in the prior year. Net earnings for the quarter were $118.0 million, compared to $136.6 million in the first quarter of 2025, leading to a basic and diluted earnings per share of $0.85, down from $0.95.
In terms of operational changes, A. O. Smith completed the acquisition of Leonard Valve on January 6, 2026, for $470 million, which is expected to enhance its presence in the water management market. The acquisition contributed approximately $16 million to sales in the first quarter. However, the company also faced increased selling, general, and administrative expenses, which rose to $203.9 million from $192.6 million, largely due to higher employee costs and transaction expenses related to the acquisition. Interest expense increased significantly to $7.1 million from $2.9 million, reflecting higher debt levels following the acquisition.
The North America segment reported net sales of $753.4 million, a slight increase from $748.7 million in the previous year, driven by pricing actions and the acquisition of Leonard Valve. However, this was offset by lower residential water heater volumes. The Rest of World segment saw a decline in sales to $200.7 million from $226.7 million, primarily due to a 17% decrease in sales in China, attributed to challenging market conditions and the cessation of government subsidy programs. The company anticipates a low double-digit decrease in third-party sales in China for the full year.
Looking ahead, A. O. Smith has revised its full-year sales growth outlook to between 2% and 4%, down from a previous estimate of 2% to 5%. The company expects continued challenges in the Chinese market and has announced a restructuring plan for its North America water treatment business, which is projected to incur a $20 million charge in the second quarter. The company aims to achieve annual savings of approximately $6 million to $8 million from this restructuring. A. O. Smith's effective income tax rate for the quarter was 23.7%, and it projects a full-year rate of approximately 24.0% to 24.5%.
About SMITH A O CORP
A. O. Smith Corporation is a global manufacturer of water heating, boilers, and water treatment products for residential and commercial markets. Its core segments include North America and Rest of World, serving industries such as hospitality, healthcare, and industrial sectors. The company emphasizes energy-efficient, innovative solutions, leveraging extensive R&D, a broad distribution network, and a focus on sustainability and quality to maintain competitive advantage.
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