Lennox's Jan 28 Catalyst: Guidance Levels That Could Move the Stock

The stock's 14.4% slide over the past 120 days has created a clear tactical question ahead of the next catalyst. Lennox International will report its fourth-quarter and full-year 2025 results before the market opens on Wednesday, January 28, 2026. This event is the specific trigger that will determine if the underperformance is a buying opportunity or a warning sign for the stock's immediate trajectory.

The setup is straightforward. The company's shares are trading around $530.43, having fallen sharply from their 52-week high. The market has been pricing in a slowdown, with analysts expecting Q4 EPS of $4.81, a 14.1% decline from the year-ago quarter. Yet Lennox has a recent track record of beating expectations, having topped estimates in each of the last four quarters. The key will be whether the guidance for fiscal 2026 can re-establish growth momentum and justify the current valuation.

For now, the stock's performance suggests investors are waiting for a clear signal. The upcoming report and forward outlook will provide that signal, resolving near-term uncertainty in a single day.

The Guidance Trigger: What Levels Matter

The immediate risk/reward setup hinges on the 2026 EPS guidance. The consensus expects EPS to grow 8.2% year over year to $24.87 next fiscal year. This is the baseline. Guidance that meets or exceeds this target would signal the cyclical residential weakness is indeed a temporary blip, as Lennox's CEO suggests. In that scenario, the stock could close the gap to its $566.47 mean price target, which implies nearly 10% upside from current levels.

Conversely, guidance below the 8.2% growth expectation would confirm the market's fears of a prolonged residential slowdown. It would validate the concerns raised by both Lennox's CEO about consumer and contractor confidence, and Carrier's CEO about ongoing uncertainty. Such a miss would likely pressure the stock further, as it would undermine the narrative that the 15-year replacement cycle is re-accelerating. The guidance number is the catalyst that will decide which story investors believe.

The Industry Context: Headwinds and the CEO's Counter-Narrative

The guidance Lennox provides will be judged against a backdrop of conflicting signals in the residential HVAC market. The core narrative is one of a 15-year replacement business, where the cycle should be re-accelerating as units from 2010-2015 reach end-of-life. Yet this long-term trend is being temporarily distorted by a specific industry-wide event: a refrigerant changeover. Historically, such transitions bias dealers toward component repairs over full system replacements, as they lack training and familiarity with new refrigerants. This is a key headwind that has suppressed shipments this year.

CEO David Gitlin of Carrier frames this as a temporary friction. He argues that as dealers become trained and the cost of old refrigerants rises, the bias toward repairs will fade, allowing the underlying replacement cycle to kick in. Lennox's CEO, Alok Maskara, echoes this, stating the contractor confidence problem around the refrigerant change is nearly resolved, with nearly all units now compatible with the new R-454B standard. The real uncertainty, he notes, is consumer confidence and broader economic anxiety.

This is where the stock's reaction will hinge. The market is pricing in a cyclical slowdown, but Lennox's leadership is pushing a counter-narrative. They argue that fears of a permanent shift to repairs are overblown, pointing to the nondiscretionary nature of HVAC spending. In other words, when a system breaks, it gets fixed or replaced, regardless of the economy. Their focus on energy-efficient solutions is a core strength, but it may not immediately offset the cyclical residential weakness if consumer hesitation persists.

The bottom line is that the guidance must reconcile these forces. It needs to acknowledge the near-term repair bias from the refrigerant transition while confidently projecting a return to the long-term replacement trend. Any guidance that seems to accept a prolonged period of repair-driven sales would validate the market's current pessimism. Conversely, guidance that signals the cycle is turning, despite the lingering consumer uncertainty, would support the CEO's argument and likely move the stock higher.

The Risk/Reward Setup

The immediate investment case is a classic battle between conflicting signals. On one hand, the stock has shown pre-earnings optimism, with a 5.265% gain over the past five days. On the other, the broader trend is one of deep skepticism, as the shares have fallen 14.44% over the past 120 days. This creates a tactical setup where the Jan. 28 report must resolve whether the recent pop is a sign of a turnaround or merely a temporary bid before a deeper correction.

The company's size and recent underperformance add context. With a market cap of $18.6 billion, Lennox is a significant player. Yet it has struggled, dipping 17.4% over the past 52 weeks while the broader market and its industrial peers have rallied. This underperformance relative to the S&P 500 Index and the Industrial Select Sector SPDR Fund highlights the market's specific concerns about its residential business.

The risk here is straightforward. Guidance that confirms ongoing residential pressure would validate the stock's decline and likely trigger further selling. The opportunity, conversely, is a positive outlook that discounts the cyclical trough. If management projects a return to the long-term replacement cycle, it could re-rate the stock. The current mean price target of $566.47 implies nearly 10% upside, a gap that hinges entirely on the guidance narrative. For now, the stock's conflicting moves show investors are waiting for that catalyst to tip the scales.