AO Smith (AOS) PT Raised to $76 at UBS

UBS analyst Damian Karas raised the price target on AO Smith (NYSE: AOS) to $76.00 (from $74.00) while maintaining a Neutral rating.

The analyst commented, "In our view, guidance remains conservative, particularly on NA margins: while 2H will see incremental costs from steel and tariffs (leading to sequential margin pressure), pricing and higher volumes should still support y/y margin expansion. Bear in mind that 2H of last year saw significant destocking headwinds in NA. In RoW, we were surprised by the magnitude of China weakness (down 11% y/y off a +2% '24 comp); we think it is clear that AOS is losing market share, and new product and branding initiatives have not been enough to compensate. Hence, the company's announcement that they are commencing a strategic review of the China business is fitting. Our analysis…does suggest that there is potential value to unlock if AOS can divest its China business; but there would also likely be some tax hurdles in doing this, considering ~2/3 of AOS cash is located overseas. We think the biggest question investors will likely be considering going forward is how to value the business excluding China, but in an environment in which NA competition could be intensifying as LII/Ariston partnership goes to market in 2026."

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