Home > Comparison > Industrials > PH vs AOS
The strategic rivalry between Parker-Hannifin Corporation and A. O. Smith Corporation shapes the industrial machinery sector’s competitive landscape. Parker-Hannifin operates as a diversified industrial and aerospace systems manufacturer with a broad product portfolio. In contrast, A. O. Smith focuses on residential and commercial water heating and treatment solutions. This analysis evaluates which company’s operational model offers the superior risk-adjusted return potential for a balanced, diversified portfolio.
Table of contents
Companies Overview
Parker-Hannifin and A. O. Smith are pivotal players in industrial machinery, shaping diverse markets globally.
Parker-Hannifin Corporation: Leader in Motion and Control Technologies
Parker-Hannifin commands the industrial machinery sector with a focus on motion and control systems. It generates revenue by supplying sealing, hydraulic, pneumatic, and electromechanical components to OEMs and distributors. In 2026, its strategic emphasis remains on expanding aerospace and diversified industrial segments, targeting innovation in fluid control and thermal management solutions.
A. O. Smith Corporation: Specialist in Water Heating and Treatment
A. O. Smith dominates residential and commercial water heating and treatment. Its core revenue stems from gas, electric, and solar water heaters, boilers, and water filtration systems sold across North America, China, and Europe. The 2026 strategy centers on broadening its global footprint and enhancing product lines through brands like State and Lochinvar, leveraging e-commerce and wholesale distribution.
Strategic Collision: Similarities & Divergences
Both companies excel in industrial machinery, yet Parker-Hannifin pursues a diversified, component-driven model, while A. O. Smith focuses on end-user water solutions. Their competitive battleground lies in industrial innovation versus consumer-centric utility products. Investors encounter distinct profiles: Parker-Hannifin offers broad industrial exposure, whereas A. O. Smith delivers niche market specialization with steady consumer demand.
Income Statement Comparison
This data dissects the core profitability and scalability of both corporate engines to reveal who dominates the bottom line:
| Metric | Parker-Hannifin Corporation (PH) | A. O. Smith Corporation (AOS) |
|---|---|---|
| Revenue | 19.85B | 3.83B |
| Cost of Revenue | 12.54B | 2.34B |
| Operating Expenses | 3.26B | 759M |
| Gross Profit | 7.32B | 1.49B |
| EBITDA | 5.42B | 792M |
| EBIT | 4.52B | 729M |
| Interest Expense | 409M | 13.5M |
| Net Income | 3.53B | 546M |
| EPS | 27.52 | 3.86 |
| Fiscal Year | 2025 | 2025 |
Income Statement Analysis: The Bottom-Line Duel
This income statement comparison reveals the true operational efficiency and profitability dynamics of Parker-Hannifin Corporation and A. O. Smith Corporation.
Parker-Hannifin Corporation Analysis
Parker-Hannifin sustains robust revenue near $19.85B in 2025, slightly down from $19.93B in 2024, yet net income surges 24.1% to $3.53B. Gross margin holds steady at 36.85%, indicating efficient cost control. EBIT margin of 22.75% and a net margin of 17.79% demonstrate strong bottom-line momentum, with EPS up 24.18% reflecting operational leverage.
A. O. Smith Corporation Analysis
A. O. Smith posts modest revenue growth to $3.83B in 2025, up from $3.82B in 2024, with net income increasing 2.4% to $546M. The firm maintains a higher gross margin at 38.83%, but a lower EBIT margin near 19.04% signals tighter operating expenses. Net margin at 14.26% and EPS growth of 6.34% suggest stable but less dynamic profitability compared to Parker-Hannifin.
Margin Power vs. Revenue Scale
Parker-Hannifin’s larger scale and superior EBIT and net margin growth outpace A. O. Smith’s steadier, smaller-scale earnings expansion. Parker’s ability to convert revenue into profit more efficiently makes it the fundamental winner in operational strength. Investors seeking growth in profitability might favor Parker’s demonstrated momentum and margin expansion.
Financial Ratios Comparison
These vital ratios act as a diagnostic tool to expose the underlying fiscal health, valuation premiums, and capital efficiency of the companies compared below:
| Ratios | Parker-Hannifin (PH) | A. O. Smith (AOS) |
|---|---|---|
| ROE | 25.8% | 25.6% |
| ROIC | 13.7% | 23.9% |
| P/E | 25.4 | 17.1 |
| P/B | 6.55 | 4.39 |
| Current Ratio | 1.19 | 1.50 |
| Quick Ratio | 0.71 | 0.94 |
| D/E | 0.69 | 0.09 |
| Debt-to-Assets | 32.2% | 6.1% |
| Interest Coverage | 9.93 | 53.9 |
| Asset Turnover | 0.67 | 1.22 |
| Fixed Asset Turnover | 6.76 | 5.62 |
| Payout Ratio | 24.4% | 35.8% |
| Dividend Yield | 0.96% | 2.09% |
| Fiscal Year | 2025 | 2025 |
Efficiency & Valuation Duel: The Vital Signs
Financial ratios act as the company’s DNA, revealing hidden risks and operational excellence essential for discerning investors.
Parker-Hannifin Corporation
Parker-Hannifin shows a strong ROE of 25.8% and solid net margins at 17.8%, indicating robust profitability. However, its P/E of 25.4 suggests the stock trades at a premium, possibly stretched. Dividend yield is modest at 0.96%, reflecting a cautious shareholder return strategy amid balanced reinvestment in growth.
A. O. Smith Corporation
A. O. Smith delivers comparable ROE at 25.6% with a respectable net margin of 14.3%. Its P/E of 17.1 signals a more reasonable valuation, supporting efficiency. The company offers a healthier dividend yield of 2.09%, highlighting a stronger commitment to returning cash while maintaining favorable leverage and operational metrics.
Premium Valuation vs. Operational Safety
Parker-Hannifin commands a premium valuation with excellent profitability but limited yield. A. O. Smith balances attractive returns and valuation with stronger dividend payouts and lower leverage. Investors seeking growth with income might prefer A. O. Smith’s profile, while those favoring operational strength at a premium may lean toward Parker-Hannifin.
Which one offers the Superior Shareholder Reward?
I compare Parker-Hannifin (PH) and A. O. Smith (AOS) on dividends, payout ratios, and buybacks for 2026. PH yields 0.96% with a 24.4% payout, backed by strong free cash flow coverage (2.91x). AOS pays a higher 2.09% yield with a 35.8% payout but has lower free cash flow coverage (2.31x). Both maintain consistent buyback programs enhancing total returns; PH’s capital allocation balances dividends and buybacks prudently, while AOS’s lower debt and stronger solvency support sustained distributions. I see PH’s model as more sustainable over cycles, but AOS offers a more attractive total return profile in 2026 due to its higher yield and robust financial health.
Comparative Score Analysis: The Strategic Profile
The radar chart reveals the fundamental DNA and strategic trade-offs of Parker-Hannifin and A. O. Smith Corporation:
Parker-Hannifin shows very strong profitability with top ROE and ROA scores but lags in valuation metrics, reflecting potential overvaluation risks. A. O. Smith balances solid profitability with superior debt management and fairer valuation scores, presenting a more rounded profile. I see A. O. Smith relying less on a single strength and offering a steadier investment foundation.
Bankruptcy Risk: Solvency Showdown
The Altman Z-Score gap confirms both firms are comfortably in the safe zone, with A. O. Smith scoring higher, indicating a marginally stronger financial fortress for enduring market stress:
Financial Health: Quality of Operations
Parker-Hannifin posts a very strong Piotroski F-Score of 8, signaling excellent financial health and operational quality. A. O. Smith’s score of 7 is strong but slightly behind, suggesting minor internal metric weaknesses relative to Parker-Hannifin:
How are the two companies positioned?
This section dissects the operational DNA of PH and AOS by comparing revenue distribution by segment and their internal strengths and weaknesses. The goal is to confront their economic moats to reveal which business model offers the most resilient and sustainable advantage today.
Revenue Segmentation: The Strategic Mix
This visual comparison dissects how Parker-Hannifin Corporation and A. O. Smith Corporation diversify their income streams and where their primary sector bets lie:
Parker-Hannifin anchors its revenue in two main segments: Diversified Industrial at $13.7B and Aerospace Systems at $6.2B in 2025. This mix shows a solid but slightly concentrated industrial focus, limiting exposure to cyclical risks. A. O. Smith lacks available data, preventing segmentation comparison. Parker-Hannifin’s diversified industrial dominance suggests strong infrastructure positioning, while aerospace adds resilience through sector specialization.
Strengths and Weaknesses Comparison
This table compares the Strengths and Weaknesses of Parker-Hannifin Corporation (PH) and A. O. Smith Corporation (AOS):
PH Strengths
- Strong profitability with 17.79% net margin and 25.81% ROE
- Favorable fixed asset turnover at 6.76
- Diversified industrial and aerospace segments generating 20B+ revenue
- Significant global presence with 13.4B North America and 6B Europe/Asia revenue
- Interest coverage at 11.04 indicates solid debt servicing
AOS Strengths
- Higher ROIC at 23.94% versus WACC at 10.08%
- Excellent interest coverage at 54.03 and low debt-to-assets of 6.11%
- Strong asset turnover at 1.22 and fixed asset turnover at 5.62
- Balanced geographic exposure with 2.57B North America and 1.24B Rest of World revenue
- Favorable dividend yield at 2.09% supports income investors
PH Weaknesses
- Elevated P/E (25.38) and P/B (6.55) ratios suggest premium valuation
- Quick ratio at 0.71 signals potential liquidity concerns
- Dividend yield under 1% may deter income-focused investors
- Neutral current ratio and moderate debt-to-assets (32.16%) require monitoring
AOS Weaknesses
- WACC of 10.08% is unfavorable compared to ROIC, indicating higher capital costs
- P/B ratio at 4.39 is unfavorable
- Neutral quick ratio at 0.94 implies moderate liquidity risk
- Lower net margin (14.26%) than PH may limit profitability
Both companies show robust profitability and asset efficiency but differ in valuation and capital structure risk profiles. PH’s diversification and global scale contrast with AOS’s stronger capital efficiency and income appeal. These factors shape their strategic focus on growth versus financial prudence.
The Moat Duel: Analyzing Competitive Defensibility
A structural moat is the only reliable shield preventing long-term profits from relentless competitive erosion:
Parker-Hannifin Corporation: Engineering Precision & Diversification Moat
Parker-Hannifin leverages intangible assets and complex engineering to secure switching costs, reflected in a strong 22.75% EBIT margin and growing ROIC. Its aerospace and industrial diversification deepen its moat in 2026 despite slight revenue headwinds.
A. O. Smith Corporation: Market Niche & Operational Efficiency Moat
A. O. Smith’s cost advantage and brand loyalty anchor its moat, with a 38.83% gross margin and a ROIC far exceeding WACC by nearly 14%. Its expanding global footprint and water technology innovation fuel sustainable profitability gains.
Engineering Complexity vs. Market Efficiency: The Moat Face-off
Both firms boast very favorable moats with growing ROIC trends. Yet, A. O. Smith’s wider margin cushion and higher ROIC spread grant it a deeper moat. I see A. O. Smith better positioned to defend market share amid evolving industry dynamics.
Which stock offers better returns?
Over the past year, Parker-Hannifin Corporation’s stock surged sharply, showing strong upward momentum, while A. O. Smith Corporation faced a notable decline with recent signs of recovery.
Trend Comparison
Parker-Hannifin’s stock rose 74.16% over the last 12 months, marking a bullish trend with accelerating gains and high volatility, peaking at 944.27 and bottoming at 503.3.
A. O. Smith’s stock fell 14.37% over the same period, indicating a bearish trend. However, recent months show a 13.52% rise with decelerated volatility, suggesting tentative recovery.
Parker-Hannifin outperformed A. O. Smith, delivering significantly higher market returns despite greater price fluctuations.
Target Prices
Analysts present a clear consensus on target prices for Parker-Hannifin Corporation and A. O. Smith Corporation.
| Company | Target Low | Target High | Consensus |
|---|---|---|---|
| Parker-Hannifin Corporation | 825 | 1139 | 995.46 |
| A. O. Smith Corporation | 75 | 85 | 79 |
The consensus target for Parker-Hannifin stands about 6% above its current price of 936, reflecting moderate upside potential. A. O. Smith’s consensus target is roughly 7% above its current 73.5 price, signaling cautious optimism among analysts.
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How do institutions grade them?
The following tables summarize recent institutional grades for Parker-Hannifin Corporation and A. O. Smith Corporation:
Parker-Hannifin Corporation Grades
This table shows the latest grades assigned by major financial institutions to Parker-Hannifin:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Wells Fargo | Maintain | Overweight | 2026-01-30 |
| JP Morgan | Maintain | Overweight | 2026-01-30 |
| Citigroup | Maintain | Buy | 2026-01-30 |
| Jefferies | Maintain | Buy | 2026-01-30 |
| Stifel | Maintain | Hold | 2026-01-30 |
| Barclays | Maintain | Overweight | 2026-01-30 |
| Stifel | Maintain | Hold | 2026-01-23 |
| JP Morgan | Maintain | Overweight | 2026-01-16 |
| Morgan Stanley | Maintain | Equal Weight | 2026-01-14 |
| Barclays | Maintain | Overweight | 2026-01-07 |
A. O. Smith Corporation Grades
This table presents recent grades from reputable institutions for A. O. Smith Corporation:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Stifel | Maintain | Buy | 2026-01-30 |
| Citigroup | Maintain | Neutral | 2026-01-30 |
| DA Davidson | Maintain | Neutral | 2025-11-13 |
| Stifel | Maintain | Buy | 2025-10-29 |
| Citigroup | Maintain | Neutral | 2025-10-29 |
| Oppenheimer | Maintain | Outperform | 2025-07-28 |
| UBS | Maintain | Neutral | 2025-07-28 |
| Baird | Maintain | Neutral | 2025-07-25 |
| Stifel | Maintain | Buy | 2025-07-25 |
| Stifel | Maintain | Buy | 2025-07-21 |
Which company has the best grades?
Parker-Hannifin consistently earns higher grades such as Buy and Overweight from multiple top-tier firms. A. O. Smith’s grades range mostly from Neutral to Buy, with fewer overweight or outperform ratings. Investors may perceive Parker-Hannifin as having stronger institutional endorsement, potentially influencing confidence and demand.
Risks specific to each company
The following categories identify the critical pressure points and systemic threats facing both firms in the 2026 market environment:
1. Market & Competition
Parker-Hannifin Corporation
- Faces intense competition in diversified industrial and aerospace markets; premium pricing pressures weigh on valuation multiples.
A. O. Smith Corporation
- Competes across residential and commercial water heating globally; exposure to emerging markets adds complexity and growth opportunity.
2. Capital Structure & Debt
Parker-Hannifin Corporation
- Moderate leverage with debt-to-assets at 32%; interest coverage is solid but debt level warrants monitoring.
A. O. Smith Corporation
- Very conservative debt profile with only 6% debt-to-assets and strong interest coverage of 54x; balance sheet is robust.
3. Stock Volatility
Parker-Hannifin Corporation
- Beta at 1.25 indicates moderate sensitivity to market swings; share price range wide but near all-time high recently.
A. O. Smith Corporation
- Slightly higher beta of 1.35 shows greater volatility; price range is narrower with recent upward price momentum.
4. Regulatory & Legal
Parker-Hannifin Corporation
- Aerospace exposure increases regulatory scrutiny risk, especially on export controls and defense contracts.
A. O. Smith Corporation
- Water treatment products face evolving environmental regulations, especially in Europe and Asia; compliance costs could rise.
5. Supply Chain & Operations
Parker-Hannifin Corporation
- Complex global supply chain for aerospace and industrial segments vulnerable to raw material inflation and logistics disruption.
A. O. Smith Corporation
- Operations span multiple continents; reliance on independent distributors could affect supply chain agility and inventory management.
6. ESG & Climate Transition
Parker-Hannifin Corporation
- Increasing pressure to reduce carbon footprint in aerospace products and manufacturing processes; ESG initiatives in early stages.
A. O. Smith Corporation
- Strong opportunity in energy-efficient water heating and filtration; climate transition strategy more advanced and investor-friendly.
7. Geopolitical Exposure
Parker-Hannifin Corporation
- Aerospace segment sensitive to U.S.-China tensions and defense budget fluctuations; global footprint adds risk of trade restrictions.
A. O. Smith Corporation
- Significant exposure to China and emerging markets; geopolitical tensions could disrupt sales and supply channels abroad.
Which company shows a better risk-adjusted profile?
A. O. Smith faces lower financial leverage and superior interest coverage, reflecting a safer capital structure. Parker-Hannifin’s valuation multiple and aerospace regulatory risks temper its profile. Both have volatility above market average, but Parker’s complex supply chain and geopolitical risks are more pronounced. A. O. Smith’s advanced climate transition and financial strength tilt the risk-adjusted profile in its favor for 2026.
Final Verdict: Which stock to choose?
Parker-Hannifin’s superpower lies in its durable competitive advantage and consistently growing profitability, reflected in a strong ROIC well above its cost of capital. Its point of vigilance is a relatively high valuation and moderate liquidity, which could pressure returns during market stress. It suits aggressive growth portfolios willing to navigate some volatility for quality.
A. O. Smith boasts a robust strategic moat driven by efficient capital allocation and a pristine balance sheet with minimal debt. It offers better financial stability and a safer income profile than Parker-Hannifin. This makes it a compelling option for GARP investors seeking steady returns with moderate growth prospects.
If you prioritize high-growth potential with a strong economic moat, Parker-Hannifin outshines as the compelling choice due to its superior return on invested capital and upward profitability trend. However, if you seek better stability and lower leverage, A. O. Smith offers a safer profile and attractive capital efficiency for more conservative growth investors. Each fits distinct investor appetites amid current market dynamics.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Parker-Hannifin Corporation and A. O. Smith Corporation to enhance your investment decisions:
