A. O. Smith closed 2025 with record adjusted earnings per share of $3.85, a 6% increase over 2024, driven by margin expansion in both operating segments. Full-year North America segment earnings rose 2% to $728 million, with segment margin improving 20 basis points to 24.4%. In the Rest of World segment, earnings held steady at $76 million while margin expanded 40 basis points to 8.7%. Management cited pricing actions, higher commercial water heater and boiler volumes, and benefits from 2024 restructuring in China as key contributors to profitability gains.

In the fourth quarter, consolidated sales remained flat at $913 million, while adjusted EPS increased 6% to $0.90. North America fourth-quarter sales grew 3% to $714 million, raising segment earnings by 7% to $165 million and boosting margin by 70 basis points to 23.1%, as pricing benefits and improved water treatment profitability offset higher input costs. Rest of World sales declined 13% to $206 million, with segment earnings falling to $16 million and margin compressing to 7.8%, as cost controls and restructuring savings only partially offset lower China volumes.

China third-party sales fell 12% in local currency in 2025 due to subsidy program discontinuations and weak consumer demand, but late-2024 restructuring and expense management delivered a 130-basis-point margin improvement. For 2026, management expects mid-single-digit sales declines in China with a challenging first half against 2025 stimulus comparisons and a return to growth in the second half as remodel and refurbishment activity normalizes. In India, legacy business sales rose 13% and contributed $54 million in Pureit sales; management projects approximately 10% top-line growth in India for 2026, driven by new product innovation and brand synergies.

Free cash flow in 2025 reached $546 million, up 15% year-over-year, with conversion at 100%, supported by lower capital expenditures and a one-time tax adjustment. The company returned $597 million to shareholders through dividends—which have been increased for over 30 consecutive years—and share repurchases totaling $401 million. The recently completed Leonard Valve acquisition is expected to add about $70 million in sales in 2026, bringing digital mixing-valve capabilities and predictable repair-and-replacement demand. For 2026, A. O. Smith forecasts EPS of $3.85 to $4.15, assumes a 10% rise in steel costs, higher freight and material expenses, capital spending of $70 million to $80 million, and free cash flow of $525 million to $575 million.