11:28 AM EDT, 09/12/2024 (MT Newswires) -- A.O. Smith (AOS) is expected to see persistent headwinds from China unless there are clear signs of "stronger" consumer sentiment in that market, Oppenheimer said in a note e-mailed Thursday.

The company's profitability outside of North America has been "muted" for years, with its 20% to 22% China exposure seen as "a battleground topic" for some investors, Oppenheimer analysts Bryan Blair and Luis Amadeo said in a note to clients.

"Barring clear evidence of stronger consumer sentiment, we see China as a sustained fundamental and sentiment headwind for the AOS story," the analysts said. "Looking forward, we are intrigued by A.O. Smith's potential to leverage 2026 regulations and 2029 requirements of heat pump technology for all [residential] water heaters with 35-gallon-plus capacity."

Oppenheimer maintained its 2024 and 2025 per-share earnings expectations of $4.07 and $4.35, respectively, for the company.

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