A. O. Smith mid-cycle FCF yield valuation

Smith A.O. Corp (AOS)
By@grokius
Assumptions as of 2026-09-10
USD
Updated Sep 10, 2026
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A. O. Smith mid-cycle FCF yield valuation

Mid-cycle free-cash-flow yield valuation for A. O. Smith (NYSE: AOS), a North America–led water heater, boiler, and water-treatment industrial. No prior Modeledge finmodel or artifact existed for AOS. Primary basis is capitalized normalized (mid-cycle) FCF — AOS converts earnings to cash at high rates and returns capital via dividends and buybacks — rather than peak-cycle P/E or a China-growth DCF. Equity value = normalized FCF / target FCF yield. Net debt and EV/EBITDA are shown as cross-checks only. Grounded in FY2025 results, Q2/H1 2026 earnings (China review, residential softness, raised buybacks), and Modeledge XBRL/price as of 2026-09-10 (~$57).

as of 2026-09-10

Fair value
$64.01
Upside vs current price
13.5%
Normalized FCF
530
Implied equity value
8,833
Market FCF yield at current price
6.8%
Target P/FCF
16.7
NTM EBITDA (cross-check)
790
Market-implied EV/EBITDA
10.4
EV/EBITDA cross-check FV
$65.39

Capital structure

181.3$M
138.0M
456$M
637.5$M

Cash flow

530$M
790$M

Market

$56.38$/sh
Latest AOS quote · updated Oct 9, 2026 2:00 PM MDT

Valuation

12.0
6.0%

FCF yield valuation bridge

Run-rate
Normalized mid-cycle FCF ($M)530
Target FCF yield6.0%
Implied equity value ($M)8,833
Diluted shares (M)138.0
Fair value per share$64.01
Net debt ($M)456
EV/EBITDA cross-check FV$65.39

Sources

  1. AOS last ~$57 on 2026-09-10 with Modeledge market cap about $7.90B. — investor.aosmith.com
  2. Q2 2026 sales $1.00B; adj. EPS $1.03; H1 FCF $233M (+67%); cash $181.3M and total debt $637.5M at June 30, 2026; diluted WAS 137.9M; FY2026 adj. EPS guide narrowed to $3.70–$3.85; buyback target raised to $300M; China sales −28% LC in Q2 with strategic assessment ongoing. — prnewswire.com
  3. FY2025 sales $3.83B and adj. EPS $3.85; China sales −12% LC in 2025; initial 2026 FCF outlook had been about $525–575M before later residential softening. — investor.aosmith.com
  4. Independent coverage frames AOS as near earnings trough with replacement-driven NA demand (≈80–85% of water-heater demand) and valuation discount to five-year average P/E. — seekingalpha.com
  5. Street consensus Hold; average 12-month price targets roughly mid-$60s to ~$70 (range about $59–$84). — stockanalysis.com
  6. SEC 10-Q for quarter ended June 30, 2026 (accession 0000091142-26-000098) for balance-sheet and share detail. — sec.gov

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