DA Davidson has reiterated a Neutral rating and a $75.00 price target on AO Smith (NYSE:AOS), the water heater and boiler manufacturer. The shares are trading near $74.30, and the company carries a market capitalization of about $10.34 billion. According to InvestingPro metrics cited in the analyst note, AO Smith appears modestly undervalued on a Fair Value basis.
The analyst highlighted that North America’s residential channel is experiencing sluggish demand amid what it termed a "stubborn housing environment." That softness in the core residential business is being partially offset by stronger performance in AO Smith’s commercial water heater and boiler businesses, but DA Davidson characterized the overall backdrop as muted.
In addition to North American headwinds, the firm pointed to ongoing challenges in China. Management has reported weak sell-through in that market, with sales declining by the high teens year-over-year. DA Davidson attributed the weakness there to an absence of stimulus measures and reduced consumer confidence, factors that have constrained demand for the company’s products in the region.
DA Davidson also noted that AO Smith is conducting a strategic evaluation of its China operations. The company recently completed the acquisition of Leonard Valve, and the analyst emphasized that the deal, along with the company’s balance-sheet position, provides optionality. Despite that flexibility, DA Davidson stated it does not currently see a near-term catalyst that would change its view on the stock, supporting the maintained Neutral rating and $75 target.
On the results front, AO Smith reported fourth-quarter 2025 earnings per share of $0.90, topping the analyst consensus of $0.84 and representing a 7.14% upside to expectations. Revenue for the quarter came in at $912.5 million, however, below the forecast of $928.11 million. The mixed nature of the results - better-than-expected EPS but a revenue shortfall - has produced differing reactions among other brokerages.
For example, Stifel responded to the quarter by raising its price target on AO Smith from $80 to $85 while keeping a Buy rating in place. That move suggests a degree of confidence from Stifel despite the revenue miss, even as DA Davidson retains a more cautious posture given the demand dynamics and lack of immediate catalysts.
Overall, the update paints a picture of a company with pockets of strength and balance-sheet flexibility but facing tangible demand pressures in its largest end markets. Investors will likely weigh the earnings beat and acquisition-driven optionality against persistent residential softness in North America and continued weakness in China when assessing the stock.
Key metrics referenced - Current share price: $74.30; Market capitalization: $10.34 billion; DA Davidson price target: $75.00; InvestingPro financial health score: 2.83 out of 5 (labeled GOOD); Q4 2025 EPS: $0.90 vs. $0.84 consensus; Q4 2025 revenue: $912.5 million vs. $928.11 million expected.