A. O. Smith (AOS) faces near-term earnings risk, but its replacement-driven revenue base, relatively easy comparisons, self-help initiatives, capital deployment optionality, and discounted valuation remain supportive, Oppenheimer said Monday.

Given H1 results and incremental softness in US residential water heater demand, management now expects 2026 revenue of $3.90 billion to $3.95 billion, compared with its previous guidance of $3.90 billion to $4.00 billion. It also updated its adjusted EPS guidance to $3.70 to $3.85, versus the prior outlook of $3.70 to $4.00, according to the note.

For 2026, the company maintained its projection for China sales, excluding foreign exchange, to decline by low-double-digits year-over-year, citing ongoing macro headwinds including weak premium consumer demand and a challenging appliance market, as management nears the completion of its strategic China assessment, the note added.

The brokerage maintained its 2026 EPS estimate at $3.75 and revised its 2027 EPS estimate to $4.20 from $4.15.

Oppenheimer kept an outperform rating on A. O. Smith with a price target of $75.

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