A.O. Smith reported second-quarter results that beat profit expectations but saw margins compress and China sales drop sharply, offsetting strong North America growth. Revenue was flat year on year at $1.00 billion, slightly above analyst estimates of $990.2 million, while adjusted earnings per share of $1.03 beat the consensus of $0.92 by 11.5%. Operating margin fell to 16.7% from 20.4% a year ago, as higher input costs and a 28% local-currency sales decline in China weighed on performance. The company lowered its full-year revenue guidance to $3.93 billion and adjusted EPS guidance to $3.78, citing continued softness in North America residential water heaters and inflationary pressures. Management highlighted a 21% surge in the North America boiler business and progress in stabilizing residential water heater market share, but noted that a strategic review of the China operations is underway with an outcome expected next quarter.
Smith AO CorporationQ2 margins compressed and full-year guidance lowered due to China weakness and input costs.