A. O. Smith (AOS) official guidance

Adjusted EPS1, excluding China, of between $3.42 and $3.52

As a result, we now expect full-year sales growth of approximately 2%-3% and adjusted EPS of $3.70-$3.85 per share, compared with our prior outlook of 2%-4% sales growth and adjusted EPS of $3.70-$4.00 per share.

◦Adjusted EPS of between $3.70 and $3.85

Our revised 2026 outlook includes an adjusted EPS range of $3.70-$4.00 per share.

The Company also lowered its full-year 2026 adjusted EPS outlook to be between $3.70 and $4.00, down from $3.85 to $4.15.

We continue to expect U.S. commercial water heater industry volumes to be approximately flat with last year.

We now project that U.S. commercial industry volumes will be similar to last year.

Our current projection assumes U.S. commercial water heater industry volumes will increase mid-single digits in 2026 due to a buy-ahead of lower-efficiency non-condensing commercial gas products that are scheduled to be eliminated as part of the October 2026 commercial regulatory change.

Within U.S. residential water heaters, we are narrowing our industry outlook to down low double digits for the year, compared to our prior expectation of flat to down low double digits.

While the residential water heater industry had a slower than expected start to the year, we maintain our view that full year 2026 industry shipments will be flat to down as softness in new construction persists and proactive replacement remains steady.

Based on those factors, we project that 2026 U.S. residential industry unit volumes will be flat to down compared to 2025.

In North America, we anticipate residential water heater industry unit volumes to be flat to down year-over-year.

We expect our North America segment margin to be approximately 24% and rest of world segment margin to be between 6% and 7%.

We project our year-over-year impact to our North America margins would be minimal as we continue to build a foundation in this category and gain scale over time.

We are maintaining our North America boiler sales growth of 6%-8%, North America water treatment sales growth of 5%-6%, and approximately $70 million of sales from Leonard Valve.

Our guidance that Leonard Valve will achieve double-digit growth and contribute approximately $70 million in sales in 2026 is unchanged.

We expect Leonard Valve to contribute approximately $70 million in sales in 2026.

Our outlook for 2026, which includes Leonard Valve sales of approximately $70 million, projects our consolidated sales to increase 2% to 5% compared to 2025.

We project our India business, inclusive of Pureit, will have top-line growth of approximately 10% and is unchanged.

We project our India business, inclusive of Pureit, will have top-line growth of approximately 10% as we continue to leverage brand synergies and introduce innovative new products to grow faster than the market.

We are maintaining our North America boiler sales growth of 6%-8%, North America water treatment sales growth of 5%-6%, and approximately $70 million of sales from Leonard Valve.

We continue to project our North America boiler sales to grow between 6%-8% in 2026 due to pricing benefits and a strengthening backlog in commercial and residential boilers.

We project our North America boiler sales will grow 6%-8% in 2026 due to the carryover of pricing benefits and from the continuation of the transition of energy-efficient boilers, particularly as commercial buildings look to improve their overall carbon footprint.

We are maintaining our North America boiler sales growth of 6%-8%, North America water treatment sales growth of 5%-6%, and approximately $70 million of sales from Leonard Valve.

We have reduced our 2026 sales guidance for North America water treatment to growth of 5%-6%.

We expect North America water treatment sales will grow 10%-12% due to tariff-related pricing benefits as we continue to grow faster than the market through the expansion of our dealer network.

While our full-year outlook still assumes steel costs will be approximately 15% higher than 2025 levels, we expect steel inflation in the second half to be somewhat higher than the first half.

Key assumptions within our outlook include steel costs have steadily risen throughout the first quarter, leading us to increase our full year 2026 steel cost assumption to be a year-over-year increase of approximately 15% compared to 2025.

Our guidance assumes that steel prices in the full year 2026 will increase approximately 10% compared to 2025.

Supported by that performance, we increased our 2026 share repurchase target by 50% to $300 million, reinforcing our commitment to disciplined capital deployment and returning cash to shareholders.

Supported by strong cash flow performance in the first half of the year, the Company increased its full-year 2026 share repurchase target by 50% to $300 million from $200 million.

We expect to repurchase $200 million of our shares during the full year 2026.

The Company projects that it will spend $200 million to repurchase shares in 2026.

Our board has approved 5 million additional shares of stock for repurchase, and we expect to repurchase approximately $200 million of our stock in 2026.

The Company expects to spend approximately $200 million to repurchase shares in 2026.

Beginning in 2027, annual savings associated with these restructuring actions are projected to be approximately $6 million to $8 million.

We expect to recognize a restructuring charge of approximately $20 million in the second quarter and a projected annual savings of between $6 million and $8 million beginning in 2027.