What were the key takeaways from Lennox's earnings call?

Did Lennox beat or miss consensus estimates last quarter?

What were the key takeaways from Lennox’s earnings call?

What guidance did Lennox's management provide for the next earnings period?

What does Lennox do and what are its main business segments?

What is Lennox's latest dividend and current dividend yield?

What is the revenue and EPS growth rate for Lennox year over year?

What is Lennox's gross profit margin?

- **2025 Record Performance**: 20.4% segment margin (vs 18.8% 2024), $23.16 EPS (+2%)
- **2026 Growth Outlook**: 6-7% revenue growth, $23.5-25 EPS, 20-25% EBIT ROS expansion
- **Strategic Investments**: $300M 2022-25 in AI, e-commerce, distribution; $250M 2026 capex
- **Key Drivers**: 
  - 2026 housing recovery, R-454B adoption, parts & services growth
  - 1-step destocking complete Q1, 2-step Q2
- **Risk Management**: 
  - 2.5% 2026 inflation, $75M productivity savings
  - 35% decremental margin, 200M+ inventory reduction
- **M&A Momentum**: 2025 M&A spend $545M, 2026 pipeline focused on >20% ROIC

**【CEO Summary Section】**
- Full year 2025 revenue down 3% to $4.2B, driven by channel destocking and softer end markets.
- Record segment margin of 20.4%, up 120bps vs 2024, despite $100M+ tariff impacts.
- 2025 EPS of $23.16, +2% vs 2024, with Q4 EPS of $4.45.
- 2026 outlook: 6-7% revenue growth, 20-25% EPS guidance, 2026 capex of $250M.
- Key initiatives: 
  - 2022-25: $300M invested in AI, e-commerce, distribution, manufacturing
  - 2026: new training centers, digital tech, distribution optimization
  - 2026+ focus on electrification, heat pump expansion
- 2026 end market trends: 
  - 1-step destocking complete by Q1, 2-step by Q2
  - Housing recovery, lower rates, R-454B adoption
  - Parts & services growth, emergency replacement acceleration

**【CFO Financial Commentary】**
- Q4 2025 results: 
  - Revenue $935M (-11% YoY)
  - Segment margin 17.7% (vs 19.5% 2024)
  - Adj EPS $4.45 (+2% YoY)
  - Free cash flow $406M
- 2025 full year: 
  - Revenue $4.2B (-3%)
  - Segment margin 20.4% (vs 18.8% 2024)
  - Adj EPS $23.16 (+2%)
  - Free cash flow $758M
- 2026 guidance: 
  - Revenue +6-7% (HCS -3%, BCS +15%)
  - Adj EPS $23.5-25.0
  - Free cash flow $750-850M
  - Capex $250M (150M recurring, 100M strategic)
- Key financial metrics: 
  - 2026 inflation 2.5%, productivity savings $75M
  - 2026 M&A contribution mid-single digits
  - 2026 tax rate ~20%
- Inventory: 
  - Q4 2025: $1.2B (up 25% YoY)
  - 200M+ above seasonal norms, to be reduced by Q2 2026
  - 90M SG&A savings in 2025, 35% decremental margin

**【Q&A Highlights】**
- **Volume trends**: 
  - HCS volumes -3% 2026, BCS +15%
  - 1-step up low single digits, 2-step down mid-single digits
  - Q1 2026 volumes down more than full year
- **Pricing**: 
  - 2026 price/mix +mid-single digits
  - 2025 R-410A to R-454B transition complete
- **Margins**: 
  - 2026 EBIT ROS +20bps
  - BCS margin expansion, HCS flat
- **Inventory management**: 
  - Q1 2026 absorption headwinds ~$90M
  - 200M+ excess inventory to be reduced by Q2 2026
- **M&A**: 
  - 2025 M&A spend $545M (Duradyne, Saco, Samsung)
  - 2026 pipeline focused on bolt-ons with >20% ROIC


Lennox International Inc.(LII)-20260128-2025 Q4 Earnings call transcript

- **Resilient Margins Despite Revenue Decline**: 21.7% segment margin record in Q3, driven by cost control and pricing, despite 5% revenue drop.
- **Strategic Acquisitions Paying Dividends**: DuroDyne/Supco acquisition to add $0.30-$0.40 EPS in 2026, with $225M annual run rate and cost synergies.
- **2026 Growth Catalysts**: Inventory normalization by Q2 2026, Samsung JV ductless product launch, and commercial services expansion.
- **Key Risks**: Ongoing repair vs. replace trend, macroeconomic weakness, and inventory destocking headwinds expected through mid-2026.

**【CEO Summary Section】**
- **Revenue and Margins**: Despite a 5% year-over-year revenue decline, the company achieved a record third-quarter segment margin of 21.7%, driven by disciplined cost management and pricing strategies. Adjusted EPS reached $6.98, a 4% increase from the prior year.
- **Market Challenges**: Residential and commercial end markets faced weakness due to inventory destocking, dealer caution post-refrigerant transition, and macroeconomic headwinds. HCS revenue declined 12%, while BCS revenue grew 10% through share gains in emergency replacements and refrigeration.
- **Strategic Acquisitions**: The acquisition of DuroDyne and Supco, valued at $225 million annually, is expected to be accretive in 2026, enhancing parts and services attachment rates. Integration efforts are already identifying cost synergies and operational improvements.
- **2026 Outlook**: Management anticipates channel inventory normalization by mid-2026, supported by lower interest rates, housing recovery, and resolution of refrigerant-related supply chain issues. Growth initiatives include ductless products (via Samsung JV) and commercial services expansion.

**【CFO Financial Commentary】**
- **Financial Performance**: GAAP net income was $420 million, with non-GAAP EPS of $6.98. Segment profit grew 2% despite a 5% revenue decline, driven by favorable product mix (R-454B adoption), cost reductions, and BCS growth. Free cash flow guidance was revised to $550 million due to elevated inventory levels.
- **Segment Breakdown**: HCS faced a 12% revenue decline due to unit volume drops (23%), while BCS grew 10% through share gains in emergency replacements and refrigeration. Both segments saw margin expansion (30 and 330 basis points, respectively).
- **Cost Management**: Tariff mitigation and operational efficiency improvements offset inflationary pressures. SG&A expenses were reduced, partially offsetting volume declines.

**【Q&A Highlights】**
- **Inventory and Destocking**: Dealer destocking, particularly in residential, reduced sell-through by 10-20%. Inventory levels are expected to normalize by Q2 2026. The company reduced production in Q4 to avoid overstocking, impacting margins temporarily.
- **Repair vs. Replace Trend**: Higher repair activity (parts and services growth) reflects consumer caution amid high interest rates and housing market weakness. This trend may persist as federal energy incentives sunset.
- **Strategic Investments**: Expansion of the Saltillo commercial factory and digital tools for dealers are key to 2026 growth. The Samsung JV ductless product launch is expected to add 0.5-1% annual growth starting in 2026.
- **Margin Resilience**: Despite headwinds, the company maintained margins through pricing, mix improvement (R-454B adoption), and cost productivity. 2026 margin stability is expected with customary pricing actions and operational efficiency.


Lennox International Inc. (LII) Q3 2025 Earnings Call Transcript

- **Revenue Growth**: Q2 up 3% YoY, driven by R-454B product mix (70% HCS, 40% BCS) and pricing. Full-year EPS guidance raised to $23.25-$24.25.
- **Margin Expansion**: Record 23.6% segment margin, 170 bps YoY. 50 bps YoY margin growth expected, with HCS leading.
- **Strategic Partnerships**: Samsung (ductless mini splits) and Ariston (heat pump water heaters) to launch in 2026/2027, targeting dealer one-stop shopping.
- **Cost Control**: 6% YoY cost inflation (prev. 9%), offset by tariff mitigation and factory productivity gains.
- **Share Buybacks & Dividends**: $300M YTD buybacks; 15% dividend increase Q2.

**【CEO Summary Section】**
- Q2 revenue grew 3% YoY, driven by favorable product mix (70% R-454B in HCS, 40% in BCS) and pricing. Segment margin reached a record 23.6%, up 170 bps YoY.
- HCS benefited from R-454B transition, despite 9% volume decline due to destocking and canister shortages. BCS saw 5% revenue growth from emergency replacement and service growth, offsetting light commercial weakness.
- Full-year guidance raised to EPS $23.25-$24.25 (prev. $22.25-$23.50) and 3% revenue growth, reflecting improved visibility on volumes and mix.
- Strategic partnerships with Samsung (ductless mini splits) and Ariston (heat pump water heaters) to launch in 2026 and 2027, targeting one-stop shopping convenience for dealers.

**【CFO Financial Commentary】**
- Q2 GAAP net income: $420M; Non-GAAP EPS: $7.82 (vs. $7.20 prev. guidance). Free cash flow on track for $650M-$800M, with inventory investments to support R-454B transition and Samsung product launches.
- Cost inflation moderated to 6% YoY (prev. 9%), driven by tariff mitigation. Operating expenses up 5% YoY due to distribution network investments.
- Share buybacks: $300M YTD; $1B authorized for future repurchases. Dividend increased 15% Q2.

**【Q&A Key Highlights】**
- **Margin Expansion**: 50 bps YoY margin growth expected, with HCS leading (680 bps expansion over 3 years). BCS factory productivity gains offsetting material inflation.
- **Volume Outlook**: HCS volumes down 8% in H2 (vs. 6% YTD), BCS down 4% (vs. 6% YTD). Price/mix to remain strong (10% HCS, 6% BCS).
- **Tariffs & Costs**: 2025 cost inflation now 6% (prev. 9%), with tariffs increasing slightly in H2 but offset by pricing excellence.
- **Market Share**: Partial reversal of 2024 share gains due to canister shortages, but 2025 share expected to remain near record levels.
- **Inventory Management**: Q2 inventory build intentional for R-454B transition; normalization expected in H2 with Samsung product launches.


Lennox International Inc. (LII) Q2 2025 Earnings Call Transcript

- **Q1 Revenue Growth**: 2% driven by R-454B product mix, but margin pressured by 9% cost inflation.
- **Tariff Mitigation**: Two Q2 price surcharges (+7% price gains) offset direct/indirect tariff impacts.
- **Volume Risks**: HCS down mid-single digits, BCS down low single digits due to macroeconomic uncertainty.
- **Balance Sheet Strength**: Net debt/EBITDA improved to 0.8x, supporting share buybacks and M&A.

**【CEO Opening Remarks】**
- Q1 revenue grew 2% YoY, driven by favorable product mix from new R-454B products in Home Comfort Solutions (HCS). Segment margin declined 140bps to 14.5% due to tariff-related costs and BCS inefficiencies.
- Full year EPS guidance narrowed to $22.25-$23.50, reflecting higher cost inflation (9% vs. 3% prior) and volume headwinds from macroeconomic uncertainty.
- Key initiatives: emergency replacement product ramp-up, dual-sourcing to reduce China exposure (now ~5% of spend), and pricing actions to offset tariffs.

**【CFO Financial Breakdown】**
- **Home Comfort Solutions (HCS):** +7% revenue from R-454B mix, 10% price yield. Flat volumes due to 410A destocking offset by 454B stocking. Margins pressured by tariffs and distribution investments.
- **Building Climate Solutions (BCS):** -6% revenue (-9% volumes) due to 410A destocking and 454B transition delays. Segment profit down $25M from inefficiencies and SG&A investments.
- **Cash Flow:** Q1 operating outflow of $36M (vs. $23M prior) due to inventory builds. Net debt/EBITDA improved to 0.8x from 1.4x YoY.
- **Full Year Guidance Update:**
  - Cost inflation now 9% (vs. 3%) due to direct/indirect tariff impacts.
  - Price gains raised to 7% (from 1%) with two new Q2 surcharges.
  - Volume outlook revised: HCS down mid-single digits (vs. flat), BCS down low single digits (vs. +mid-single).

Lennox International (LII)-23 Apr 25-2025 Q1 Earnings call transcript

- **Record Financials**: 2024 revenue surpasses $5 billion, adjusted segment profit exceeds $1 billion, with 22% Q4 revenue growth.
- **Margin Expansion**: 250 basis points Q4 margin improvement, driven by pricing, productivity, and mix optimization.
- **Strategic Factory Impact**: New Mexico factory expected to deliver $50 million cost savings in 2025, supporting BCS growth.
- **Prebuy Headwinds**: $125 million Q4 prebuy creates $1 EPS uplift but $125 million Q1 2025 revenue headwind.
- **2025 Outlook**: 2% core revenue growth, $22-$23.50 EPS range, with focus on BCS segment expansion and disciplined capital deployment.

**【CEO Summary Section】**
- **Record Revenue and Profit**: Delivered $5.1 billion in revenue and $1.0 billion in adjusted segment profit for 2024, marking the first time both segments achieved double-digit revenue growth.
- **Strategic Investments**: Launched a new commercial factory in Mexico, completed AES integration ahead of schedule, and maintained disciplined M&A pipeline to safeguard long-term value.
- **Operational Excellence**: Achieved 250 basis points margin expansion in Q4 and 150 basis points for the full year, with $332 million in operating cash flow in Q4 and $946 million annually.
- **2025 Outlook**: Targets 2% core revenue growth, with focus on BCS segment growth and margin stabilization through pricing, productivity, and mix optimization.

**【CFO Financial Commentary】**
- **Q4 Financial Highlights**: Adjusted EPS of $5.60 (54% YoY growth), $125 million prebuy impact on revenue, and 97% free cash flow conversion rate.
- **Segment Performance**: Home Comfort Solutions (HCS) saw 25% revenue growth and 550 basis points margin expansion, while Building Climate Solutions (BCS) grew 17% with $8 million profit increase despite factory ramp-up inefficiencies.
- **2025 Guidance**: $22-$23.50 EPS range, $650-$800 million free cash flow, and $50 million cost productivity savings from factory ramp-up and material efficiencies.
- **Capital Deployment**: $150 million in high ROI capex, balanced with share buybacks to return excess cash.

**【Q&A Key Themes】**
- **Prebuy Impact**: $125 million Q4 prebuy driven by R-410A prepurchases, creating $1 EPS uplift but headwinds in Q1 2025.
- **Segment Growth Drivers**: BCS expected to lead with new factory ramp-up, while HCS faces cautious volume outlook due to macroeconomic headwinds.
- **Tariff and Labor Risks**: Potential U.S.-Mexico tariffs could benefit Lennox through reduced China reliance, but labor shortages may constrain dealer capacity.
- **Pricing Strategy**: 10% price increase on new R-454B products to offset inflation and support mid-single-digit mix benefit in HCS.
- **Share Repurchases**: Disciplined approach to returning cash, prioritizing inorganic growth with ROIC > WACC within 3 years.

LII

LII fundamentals

Earnings Call

You can ask Aime