A fixed rule set over this filing's XBRL figures and the number of high-severity risks found in it — no model judgement.
Not investment advice and not a price target: it scores the quarter's fundamentals, not the stock. Full methodology →
AI Takeaway
In Q2 FY2026, AOS net sales slipped 0.7% to $1.00B as strong North American boiler demand and inorganic contribution from the Leonard Valve acquisition were offset by a 28% local-currency sales decline in China and a $22.6M restructuring charge.
Revenue
$1B
-0.69% YoY
EPS (Diluted)
$0.91
-14.95% YoY
Gross Margin
38.6%
-0.7 pts YoY
Operating Income
$166.1M
-19.45% YoY
Filed · Source: SEC EDGAR 10-Q filing
Smith A O (AOS) reported Q2 FY2026 revenue of $1B, down 0.7% year over year. The company posted net income of $124.9M, down 17.9% from a year earlier, with diluted EPS of $0.91. Gross margin was 38.6%. Operating income was $166.1M, down 19.4% year over year. AOS's fiscal Q2 FY2026 corresponds to calendar Q2 2026.
AOS posted Q2 FY2026 sales of $1.00B (-0.7% YoY) and net income of $124.9M (-17.9% YoY), impacted by weakness in China and restructuring expenses despite solid North American boiler sales.
Last 4 quarters: 3 beats, 1 miss
Adjusted (non-GAAP) EPS of $1.03 versus the $0.93 analyst consensus — a +10.4% beat for Jun 2026. Analyst consensus is quoted on the adjusted (non-GAAP) basis the street uses. GAAP diluted EPS for this quarter was $0.91.
AOS completed the acquisition of Leonard Valve in January 2026 for $470M, funded via a new term loan. The business contributed $16M to Q2 FY2026 sales in North America and is projected to deliver $70M in full-year sales.
Source: 10-Q Item 2, p.20
AOS recorded a $22.6M pretax restructuring and impairment charge in Q2 FY2026 within its North America water treatment business for footprint optimization and brand rationalization, with expected annual savings of $6M to $8M starting in 2027.
Source: 10-Q Item 2, p.20
North America segment sales grew 5% to $820.5M due to 2025 pricing actions, Leonard Valve contributions, and a 21% jump in boiler sales. Conversely, Rest of World sales fell 19% to $194.9M due to persistent weak consumer demand in China.
Source: 10-Q Item 2, p.22-23
AOS narrowed its full-year sales growth outlook to 2%-3% (from 2%-4%) and diluted EPS to $3.60-$3.75 (adjusted EPS to $3.70-$3.85) due to persistent softness in North American residential water heater volumes.
Source: 10-Q Item 2, p.23
Third-party sales in China declined 28% in local currency during Q2 FY2026, reflecting persistent weak consumer demand and the cessation of government appliance subsidies, which drags on international segment earnings.
Source: 10-Q Income Statement (XBRL)
Long-term debt increased to $598.0M (+110.4% YoY) to fund the $470M acquisition of Leonard Valve, causing quarterly interest expense to rise from $4.6M to $8.1M.
Source: 10-Q Balance Sheet (XBRL)
Operating margin contracted by 3.9 percentage points to 16.54% due to lower North American residential water heater volumes, elevated steel material costs, and non-cash restructuring charges.
Source: 10-Q Income Statement (XBRL)
This analysis does not extract a guidance section. Companies issue revenue and EPS outlook in the 8-K press release and on the earnings call rather than in the 10-Q itself — though the filing's management discussion can contain forward-looking statements, which appear in the highlights above where they were material.
See the AOS earnings preview — expected date, analyst estimates and what to watch →
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $1B | $1.01B | -0.69% |
Cost of Revenue | $616.5M | $614.2M | +0.37% |
Gross Profit | $387.8M | $397.1M | -2.34% |
Operating Income | $166.1M | $206.2M | -19.45% |
Net Income | $124.9M | $152.2M | -17.94% |
EPS (Basic) | $0.91 | $1.07 | -14.95% |
EPS (Diluted) | $0.91 | $1.07 | -14.95% |
SG&A Expense | $197.7M | $191.3M | +3.35% |
AOS generated $1.00B in revenue (-0.7% YoY) and $124.9M in net income (-17.9% YoY) during Q2 FY2026. Growth in North American boiler volume and the Leonard Valve acquisition were offset by a 28% sales drop in China and a $22.6M restructuring charge.
North America segment sales increased 5% to $820.5M in Q2 FY2026, supported by 2025 price realization, $16M in sales from Leonard Valve, and 21% growth in boiler sales, which offset residential water heater volume declines.
AOS narrowed its full-year sales guidance to 2%-3% growth and diluted EPS guidance to $3.60-$3.75 due to persistent weakness in North American residential water heater demand and ongoing market softness in China.
For the first six months of FY2026, AOS generated $253.8M in operating cash flow and $233.3M in free cash flow. Cash and cash equivalents stood at $181.3M, supported by $460.0M of available borrowing capacity on its revolving credit facility.
Expected release date, analyst estimates & what to watch
AOS reported a challenging Q1 FY2026 with revenue declining 1.9% YoY to $945.6M and net income falling 13.6% to $118.0M, pressured by rising SG&A costs and higher long-term debt from a significant acquisition-related investment.
AOS delivered steady FY2025 growth with revenue up 0.3% to $3.83B, net income rising 2.4% to $546.2M, and EPS climbing 6.0% to $3.87, supported by margin expansion and strong operating cash flow of $616.8M.
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