A.O. Smith Stock Sinks After Lennox’s Entry Into Water Heater Market, Retail’s Still Bullish

A.O. Smith Corp (AOS) stock fell 6.3% on Wednesday on concerns over a new water heater joint venture between Lennox and Ariston Group.

The stock logged its worst day in over 10 months after air conditioner maker Lennox announced it would start selling water heaters under its own branding from 2026.

Lennox said on Tuesday that it would own 49.9% of the joint venture, with Italian water heater maker Aristone owning the remaining 50.1%.

“This strategic partnership brings the trusted brands, distribution channels, and expansive customer network of Lennox with Ariston Group's advanced global and regional expertise in water heating technology, R&D, and manufacturing,” the companies said.

Brokerage Jefferies saw risks to A.O. Smith, the top seller of water heaters in North America, with the joint venture focusing on rapid expansion in the U.S. and Canada. Aristone would continue to sell its heaters under its branding.  

According to TheFly, Jefferies analysts noted that the joint venture will leverage Lennox's robust distribution network, an obstacle previously faced by GE and Haier when entering the market.

“While we don't foresee this joint venture resulting in a major competitive shift in the North American water heater market, we've slightly tempered our long-term growth outlook for A.O. Smith to account for a now more competitive, albeit still small, player in the space,” Morningstar analysts said in a note.

Retail sentiment on Stocktwits was in the ‘bullish’ (65/100) territory, while retail chatter was ‘high.’

A.O. Smith stock has fallen over 6% this year.

The company in April reiterated its annual earnings forecast but warned of tariff-related costs.

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