A. O. Smith reported second quarter 2025 sales of $1 billion, a 1% decrease year-over-year, with earnings per share of $1.07, a 1% increase compared to the prior period.
China sales declined 11% in local currency due to economic challenges and limited government subsidies, but operating margin was maintained through restructuring and cost controls.
North America segment sales decreased 1% to $779 million, driven by lower water heater volumes but offset by higher boiler sales; segment operating margin expanded by 30 basis points to 25.4%.
Operating cash flow for the first half of 2025 was $178 million, with free cash flow of $140 million, both higher than the prior year period.
Rest of the World segment sales decreased 2% to $240 million, including $16 million from the Pureit acquisition; earnings remained flat at $25 million with a slight margin decline to 10.5%.
Share repurchases totaled approximately 3.8 million shares for $251 million in the first half of 2025, with full-year repurchase plans increased to approximately $400 million.
The company ended June with $178 million in cash and a net debt position of $126 million, with a leverage ratio of 14.1%.
Adjusted EBITDA increased 9% year-over-year with margin expansion of 80 basis points to 20.7%, the highest quarterly margin in two years.
Adjusted EPS grew 12% year-over-year to $0.25, driven by revenue growth, cost discipline, and a 2% reduction in average diluted share count.
Adjusted gross margin was 68%, down 230 basis points year-over-year due to industry mix and tariffs.
Free cash flow was strong at $40 million for the quarter, including a one-time $16 million transition tax payment, with trailing 12-month free cash flow up 138% to $180 million and a conversion rate of 130%.
Geographically, Europe revenue grew 13% (partly due to procurement changes), Americas grew 8%, Other Asia grew 5%, and Greater China declined 18% due to supply chain shifts.
Adjusted EPS of $0.92 in Q2 was better than expected due to higher sales and stronger productivity.
Adjusted operating margin expanded by 130 basis points, about half due to the absence of commercial refrigeration and the rest from productivity, mix up, and price.
Adjusted operating margins expanded by 130 basis points to 19.1%, and adjusted EPS increased by 26%.
Carrier delivered 6% organic growth in Q2 2025 with 45% growth in commercial HVAC in the Americas and 13% total company aftermarket growth.
Free cash flow for the first half was about $1 billion, with a plan for $3 billion in share buybacks for the year.
Free cash flow of $568 million in Q2 was stronger than expected.
Q2 adjusted operating profit was $1.2 billion, up 10% year-over-year, driven by organic sales growth and strong productivity.
Reported sales were $6.1 billion with a 1 point tailwind from foreign currency translation and a 4% net headwind from acquisitions and divestitures.
Segment highlights: CSA segment had 14% organic sales growth with 27% adjusted operating margin, CSE segment was flat with strong heat pump growth in Germany, CS Asia Pacific segment had a 4% organic sales decline, and CST segment had a 1% organic sales decline but margin expansion of 340 basis points.
Total company organic orders were down high teens due to tough comparisons, but excluding CSA residential, orders were up mid-single digits.
Adjusted EBITDA margins declined year-over-year across segments, with Arcadia at 10.9%, DynaEnergetics at 13.4%, and NobelClad at 16.5%.
Arcadia sales totaled $62 million, down 5% sequentially and 11% year-over-year due to weakness in high-end residential and commercial exterior markets.
DynaEnergetics sales were $66.9 million, up 2% sequentially but down 12% year-over-year, impacted by pricing pressure and weak U.S. unconventional market demand.
NobelClad sales were $26.6 million, down 5% sequentially but up 6% year-over-year, with a declining order backlog due to tariff-related customer hesitancy.
Second quarter adjusted net income attributable to DMC was $2.5 million, with adjusted EPS of $0.12.
Second quarter consolidated sales were $155.5 million, with adjusted EBITDA attributable to DMC at $13.5 million, exceeding guidance.
Total debt was reduced by 17% sequentially to approximately $59 million, improving the balance sheet.
Dafinchi