A.O. Smith's Earnings Fall Short of Expectations Due to Weak Water Heater Sales

A.O. Smith reported a decline in third-quarter revenue and profit due to reduced demand for water heaters in North America and China. For the quarter ending September 30, A.O. Smith's revenue fell about 4% to $902.6 million, missing the LSEG-compiled estimate of $904.73 million. The company’s net profit also declined to $120 million, or 82 cents per share, falling short of the expected 83 cents per share. In the same period last year, the company had reported a net profit of $135 million or 90 cents per share. The Milwaukee, Wisconsin-based company recently revised its full-year adjusted earnings forecast, lowering it from the previous estimate of $3.95 to $4.10 per share to a range of $3.70 to $3.85 per share. This adjustment was attributed to soft market conditions in China. The slump in China’s real estate sector was particularly impactful; international sales, which predominantly come from China and account for 25% of total 2023 sales, fell nearly 10% to $210.3 million. North American sales, representing 75% of annual total sales, also decreased by 1% to $703.3 million. A.O. Smith CEO Kevin J. Wheeler presented a cautious outlook, stating, "We expect consumer demand in China to remain challenged through the end of the year and remain cautious on residential and commercial water heater end-market demand in North America."