By JOHN SCHMID

A.O. Smith Corp. on Friday reported a six-fold jump in third- quarter earnings while sales in the period slumped almost 17%.

The Milwaukee-based maker of water heaters and electric motors said its earnings included a gain of $3 million from the sale of a motor-manufacturing plant in China and a $1.5 million tax benefit. Company officials also cited robust growth in China, cost cuts and a temporary decline in raw material costs.

Net income totaled $34.6 million, or $1.14 a share, compared with $5.8 million, or 61 cents, a year ago. Analysts had expected earnings of about 69 cents. Sales fell to $501.5 million.

Paul Jones, chairman and chief executive, increased the company's 2009 per-share earnings outlook to a range of $2.95 to $3.10. Earlier estimates had put earnings at $2.05 to $2.25 a share.

The company last month announced that it had acquired a major Chinese maker of residential and light commercial water filtration systems, Tianlong Holding Co., effectively adding a third division to the company. Within 12 months of the close of the transaction, which is expected before the end of the year, A.O. Smith plans to introduce a line of water-filtration products in China under the A.O. Smith brand.

"We expect the new venture will earn in excess of its cost of capital in its first full year of operation under A.O. Smith ownership," Jones said.

After the announcement, shares of A.O. Smith closed down $1.11, or 2.5%, to $42.45 on trading volume that was more than three times the recent daily average.

A.O. Smith Corp.

3d quarter %

09/30 2009 2008 change

Sales $501.5 $602.7 -16.8%

Net income 34.6 5.8 497

EPS (diluted) 1.14 0.61 86.9

9 months

Sales $1,481.9 $1,796.3 -17.5%

Net income 58.6 21.7 170

EPS (diluted) 2.69 2.29 17.5

Figures in millions except for earnings per share. Percentages are based on unrounded sales and income figures.

The 2008 and 2009 nine-month and third-quarter 2008 results were affected by an accounting charge related to a transaction with Smith Investment Co. that closed April 22, 2009.

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