A. O. Smith earns almost all its profit in North America and has agreed to sell most of its China business. So far in 2026, fewer home heaters sold and costlier steel and freight squeezed that core's margin.
When a water heater in a basement or garage gives out, it usually gets replaced quickly. The new one may well come from A. O. Smith, which believes it is North America's largest water heater maker. It sells under the A. O. Smith and State names and also makes boilers, which heat water for radiators, and pool heaters. Much of its North American business comes from such replacements, and that region earns almost all its profit.
It reaches customers through independent wholesale plumbing distributors and large hardware and home center chains, including a long-standing exclusive relationship with Lowe's. Because many purchases replace a broken unit, demand follows the heaters already installed more than new building, and favours brands that distributors and stores already stock. What remains depends on how many units run through the plants, whether prices keep pace with costs such as steel and freight, and selling and administrative costs, which have grown faster than sales. China, India and Europe add revenue but little profit. The company has agreed to sell 81% of its China business, a deal still awaiting approvals, and borrowed to buy Leonard Valve, a maker of water temperature and flow products.
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