A. O. Smith Corporation (NYSE:AOS), the Milwaukee-based global water technology company, released its third quarter 2026 earnings results on October 29, 2026, reporting net sales of $940.5 million and announcing definitive agreements for the sale of an 81% interest in its China business to CPE.

Key Highlights

  • Net sales: $940.5 million in Q3 2026, compared to $942.5 million in Q3 2025, a change of approximately 0%.
  • Diluted EPS: $0.93 in Q3 2026, down from $0.94 in Q3 2025, a decline of 1%.
  • North America segment sales: $761.6 million, up 3% year-over-year, driven by the Leonard Valve acquisition, 13% boiler sales growth, and pricing benefits.
  • China business sale: Definitive agreements announced October 27, 2026, valuing the China business at approximately $400 million on a cash-free, debt-free basis, with A. O. Smith retaining a 19% stake and a long-term brand license.
  • Year-to-date free cash flow: $396.2 million in the first nine months of 2026, a 4% increase over the prior year period.
  • Updated full-year 2026 guidance (excluding China): Adjusted EPS of between $3.42 and $3.52; net sales growth of approximately 4%.
  • Dividend increase: Board approved a 6% increase in the dividend rate on October 12, 2026, extending a streak of more than 30 consecutive years of dividend increases.

A. O. Smith Reports Mixed Q3 Results as China Divestiture Reshapes Portfolio

A. O. Smith Corporation, listed on the New York Stock Exchange under the ticker AOS, manufactures and markets water heaters, boilers, and water treatment products across North America and international markets. According to the filing, Q3 2026 net earnings were $126.3 million, compared to $132.0 million in Q3 2025, a decrease of 4%. North America segment earnings were $179.9 million with a segment margin of 23.6%, down from 24.2% in the same period of 2025. The filing attributed the margin compression primarily to lower residential water heater volumes and higher input costs including steel and freight, partially offset by IEEPA tariff refunds and pricing benefits.

The Rest of World segment, which includes China, reported sales of $192.8 million, a 7% year-over-year decline. According to the filing, China sales decreased 17% in local currency, "reflecting continued weak consumer demand and disruption related to the recently concluded strategic assessment process." Rest of World segment earnings fell to $10.5 million from $15.4 million in the prior year period, with segment margin declining to 5.4% from 7.4%.

On the balance sheet, the filing reported cash of $234.5 million and debt of $673.1 million as of September 30, 2026, producing a total debt-to-total capitalization leverage ratio of 27.0%. The company deployed $260.6 million to repurchase 4.2 million shares in the first nine months of 2026 and projected full-year 2026 share repurchases of approximately $300 million. The filing also noted that approximately $80 million in cash currently held in China is expected to be repatriated following the close of the CPE transaction, which is subject to regulatory approvals and expected to close in the first half of 2027. Beginning in Q4 2026, the company disclosed it expects to classify the China business as held for sale and report it as discontinued operations, with prior periods recast accordingly.

What Was Disclosed

A. O. Smith filed its Q3 2026 earnings disclosing quarterly net sales of $940.5 million, diluted EPS of $0.93, and definitive agreements to sell an 81% interest in its China business to CPE for a base valuation of approximately $400 million, with total value including licensing economics expected to exceed $500 million.