A. O. Smith Corporation

A. O. Smith Corporation is an American manufacturer of residential and commercial water heaters, boilers, and water treatment products, operating in two segments — North America (78% of 2025 sales) and Rest of World (primarily China, India, and Europe) — and generating $3.83 billion in revenue in fiscal 2025. Founded in 1874 in Milwaukee, Wisconsin, the company is the largest water heater manufacturer in North America by volume and one of the market leaders in water heaters and reverse osmosis water treatment in China.

This is a story of two businesses living under one roof. The North America segment is a replacement-driven, cash-compounding franchise with durable competitive advantages in distribution, brand, and scale. The Rest of World segment — overwhelmingly China — is a once-promising growth engine that has become a structural headwind, with local-currency sales declining 28% in the second quarter of 2026. Between them sits a management team navigating a CEO transition, a $470 million acquisition, a strategic assessment of the China business, and a residential construction cycle that refuses to cooperate. The file turns on a single question: whether the North America franchise's cash flow generation is strong enough to fund capital returns and bolt-on M&A while the China situation resolves — one way or another.