A. O. Smith Corporation reported QQ1 2025 revenue of $963.9 million, with a gross margin of 38.95% and an operating margin of 18.96%, resulting in net income of $136.6 million and EPS of $0.95. The year-over-year (YoY) revenue declined 1.52%, while the quarter-over-quarter (QoQ) improvement was +5.64%, reflecting a cautious demand backdrop offset by ongoing cost discipline and price realization. Net income and EPS benefited from a favorable operating leverage dynamic as volumes stabilized from the prior quarter.
The company generated $38.7 million of net cash from operating activities, invested $21.3 million in property, plant and equipment, and delivered free cash flow of $17.4 million. Cash and equivalents stood at $173.0 million at period end, with a net debt position of approximately $122 million (total debt $295 million; interest coverage ~63x). The balance sheet remains solid, supported by strong equity (~$1.856 billion) and a favorable current ratio (~1.61). While the business demonstrates robust profitability and liquidity, the revenue trajectory remains modestly challenged versus a prior-year period, underscoring the importance of cost control, mix, and potential growth in Rest of World markets.
Overall, AO Smith presents a defensible earnings profile within the Industrials space, characterized by durable margins, solid cash conversion, and a conservatively leveraged balance sheet. The key questions for investors are the trajectory of demand across regions, the pace of Rest of World expansion, and the sustainability of margin expansion given input costs and competitive dynamics.
Key Performance Indicators
Revenue
Decreasing
963.90M
QoQ: 5.64% | YoY: -1.52%
Gross Profit
Decreasing
375.40M
38.95% margin
QoQ: 11.03% | YoY: -2.27%
Operating Income
Decreasing
182.80M
QoQ: 17.10% | YoY: -5.04%
Net Income
Decreasing
136.60M
QoQ: 24.52% | YoY: -7.45%
EPS
Decreasing
0.95
QoQ: 26.67% | YoY: -5.00%
Revenue Trend
Margin Analysis
Financial Highlights
Revenue:
- QQ1 2025 revenue: $963.9 million; YoY change: -1.52%; QoQ change: +5.64%. The modest YoY decline reflects a softer demand environment, while the QoQ uptick indicates stabilization entering the year.
Gross Profit: $375.4 million; Gross Margin: 38.95%; YoY gross profit change: -2.27%; QoQ change: +11.03%. Margin resilience suggests favorable pricing, mix benefits, and some operating discipline.
Operating Income: $182.8 million; Operating Margin: 18.96%; YoY change: -5.04%; QoQ change: +17.10%. Margin pressure YoY partially offset by cost control and leverage as volumes improved QoQ.
Net Income: $136.6 million; Net Margin: 14.17%; YoY change: -7.45%; QoQ change: +24.52%. Net results benefited from operating leverage and lower tax or one-time effects not disclosed in the provided data.
EPS: $0.95; EPS Diluted: $0.95; YoY EPS change: -5.00%; QoQ change: +26.67%. Diluted share count remained flat (weighted average shares ~144.4 million).
Liquidity and Cash Flow:
- Net cash provided by operating activities: $38.7 million; Capex: $21.3 million; Free cash flow: $17.4 million.
- Cash at end of period: $173.0 million; Beginning cash: $239.6 million; Net change in cash: -$66.6 million.
- Net income: $136.6 million; Depreciation/Amortization: $20.7 million; Changes in working capital: -$119.7 million; Other working capital effects: -$119.7 million; Free cash flow yield modest given capex and working capital dynamics.
Balance Sheet:
- Total assets: $3.268 billion; Total liabilities: $1.4126 billion; Total stockholders’ equity: $1.8551 billion.
- Cash and cash equivalents: $173.0 million; Accounts receivable: $641.5 million; Inventory: $532.6 million.
- Current assets: $1.4221 billion; Current liabilities: $882.1 million; Quick/Current ratios: 1.008 and 1.612 respectively; Debt: Total debt $295.0 million; Net debt: $122.0 million; Long-term debt: $285.0 million.
- Margins and efficiency metrics: Gross margin 38.9%; Operating margin 19.0%; Net margin 14.2%; ROA 4.18%; ROE 7.36%; ROCE 7.66%; Interest coverage 63.0x; Payout ratio 36.0%.
- Leverage indicators: Debt-to-capitalization 13.7%; Debt-to-Equity 0.159; Cash conversion cycle 58.6 days; DSO 59.9 days; DIO 81.5 days; DPO 82.7 days. These figures indicate a balanced working capital profile with moderate leverage.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
963.90M
-1.52%
5.64%
Gross Profit
375.40M
-2.27%
11.03%
Operating Income
182.80M
-5.04%
17.10%
Net Income
136.60M
-7.45%
24.52%
EPS
0.95
-5.00%
26.67%
Key Financial Ratios
Gross Profit Margin
Fair
38.90%
Gross profit margin is moderate, room for improvement in cost management
Operating Profit Margin
Good
19.00%
Operating margin is healthy and competitive within industry standards
Net Profit Margin
Good
14.20%
Net profit margin is healthy and competitive within industry standards
Return on Assets
Fair
4.18%
Return on assets is acceptable but below top-tier companies
Return on Equity
Fair
7.36%
Return on equity is acceptable but below top-tier companies
Current Ratio
Healthy
1.61
Current ratio shows adequate liquidity to meet short-term obligations
Debt to Equity
Conservative
0.16
Debt-to-equity shows conservative leverage and low financial risk
P/E Ratio
Fair Value
17.27x
P/E ratio in line with market averages
Price to Book
Premium
5.09x
Trading at premium to book value, reflects strong intangibles or growth
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