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1. Company Snapshot

1.a. Company Description

Lennox International Inc., together with its subsidiaries, designs, manufactures, and markets a range of products for the heating, ventilation, air conditioning, and refrigeration markets in the United States, Canada, and internationally.It operates through three segments: Residential Heating & Cooling, Commercial Heating & Cooling, and Refrigeration.The Residential Heating & Cooling segment provides furnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment and accessories, comfort control products, and replacement parts and supplies for residential replacement and new construction markets.


The Commercial Heating & Cooling segment offers unitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, and variable refrigerant flow commercial products for light commercial markets.The Refrigeration segment offers condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, and refrigeration rack systems for preserving food and other perishables in supermarkets, convenience stores, restaurants, warehouses, and distribution centers, as well as for data centers, machine tooling, and other cooling applications; and compressor racks and industrial process chillers.The company sells its products and services through direct sales, distributors, and company-owned parts and supplies stores.


Lennox International Inc.was founded in 1895 and is headquartered in Richardson, Texas.

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1.b. Last Insights on LII

Lennox International's recent performance was buoyed by its strong segment profit margin of 17.7% and adjusted diluted EPS of $4.45. The company's Q4 earnings call highlighted its strategic optimism amidst market challenges. Additionally, Lennox's transition to FIFO accounting and its hosting of an Investor Day on March 4, 2026, demonstrate its commitment to transparency and growth. According to Marketbeat Ratings, the company has a consensus recommendation of "Hold" from 15 ratings firms.

1.c. Company Highlights

2. Lennox International Posts Mixed FY 2025 Results Amidst Challenging Market Conditions

Lennox International reported a revenue decline of 3% to $6.8 billion for the full-year 2025, while adjusted earnings per share (EPS) rose 2% to $23.16. The company's fourth-quarter revenue fell 11%, and segment margin was 17.7%. Operating cash flow was $758 million, down from the previous year due to temporarily inflated inventory levels. The actual EPS for the fourth quarter was $4.45, missing estimates of $4.76.

Publication Date: Feb -17

📋 Highlights
  • 2025 Full-Year Margin Milestone:: Achieved full-year margins above 20% (17.7% Q4 segment margin) for the first time in company history.
  • Revenue Decline & 2026 Outlook:: 2025 full-year revenue down 3% ($6.8B), but 2026 guidance forecasts 6-7% growth driven by end market stabilization and acquisitions.
  • EPS Growth Despite Revenue Drop:: Adjusted EPS rose 2% to $23.16 in 2025, with 2026 guidance of $23.50-$25, reflecting disciplined cost and pricing management.
  • Operating Cash Flow Decline:: 2025 operating cash flow fell to $758M (vs. prior year), impacted by temporarily inflated inventory levels ($200M above seasonal norms).
  • Productivity & Cost Actions:: $75M 2026 productivity target includes SG&A reductions, tech investments, and workforce efficiency (1,000 fewer employees since 2025).

Operational Performance and Challenges

The company's performance was impacted by challenging end market conditions, including the conversion of the product portfolio to meet low Global Warming Potential (GWP) requirements and channel destocking. CEO Alok Maskara noted that the team executed well on price, cost, and expense management, which helped mitigate the decline in earnings before interest and taxes (EBIT). The adoption of FIFO inventory accounting increased 2025 full-year EPS by approximately $0.55.

Guidance and Outlook for 2026

Lennox International expects revenue growth of 6% to 7% in 2026, driven by stabilizing end markets, normalized channel inventories, and contributions from recent acquisitions and joint venture investments. The company forecasts adjusted EPS of $23.5 to $25 and free cash flow of $750 million to $850 million. Management is cautiously optimistic about 2026, expecting to return to revenue growth and deliver the fourth consecutive year of EBIT margin expansion.

Valuation and Key Metrics

With a P/E Ratio of 25.15 and an EV/EBITDA of 19.62, the market appears to be pricing in a certain level of growth and profitability for Lennox International. The company's Return on Invested Capital (ROIC) is 25.51%, indicating a strong ability to generate returns on invested capital. Analysts estimate revenue growth of 5.0% for the next year, which is slightly lower than the company's guidance.

Segment Performance and Future Prospects

The company's Heating and Cooling Systems (HCS) segment saw a revenue decline of 21% in the fourth quarter, with residential new construction being a significant contributor to the weakness. However, management expects the repair-replace dynamic to stabilize, with contractors becoming more confident in new products and upselling to replacements. The company's focus on helping dealers position themselves for selling more replacements over repairs is expected to drive growth.

3. NewsRoom

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Lennox International (NYSE:LII) Stock Price Crosses Above Two Hundred Day Moving Average – What’s Next?

Feb -21

Source: defenseworld.net

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Lennox International Inc. (LII) Presents at Barclays 43rd Annual Industrial Select Conference Transcript

Feb -17

Source: seekingalpha.com

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Lennox to Host 2026 Investor Day

Feb -10

Source: prnewswire.com

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Lennox International Inc. (LII) Q4 2025 Earnings Call Transcript

Jan -28

Source: seekingalpha.com

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Lennox International Inc (LII) Q4 2025 Earnings Call Highlights: Navigating Market Challenges with Strategic Optimism

Jan -28

Source: gurufocus.com

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Compared to Estimates, Lennox (LII) Q4 Earnings: A Look at Key Metrics

Jan -28

Source: zacks.com

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Lennox International (LII) Misses Q4 Earnings and Revenue Estimates

Jan -28

Source: zacks.com

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Lennox Reports Fourth Quarter and Full Year 2025 Results; Provides Full Year 2026 Guidance

Jan -28

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.73%)

6. Segments

Home Comfort Solutions

Expected Growth: 5.5%

Lennox International Inc.'s Home Comfort Solutions segment growth of 5.5% is driven by increasing demand for energy-efficient HVAC systems, rising homeownership rates, and growing consumer spending on home improvement. Additionally, the company's focus on innovative products, strategic acquisitions, and expanding distribution channels also contribute to the segment's growth.

Building Climate Solutions

Expected Growth: 6.2%

Lennox International's Building Climate Solutions segment growth of 6.2% is driven by increasing demand for energy-efficient HVAC systems, government incentives for sustainable infrastructure, and rising adoption of smart building technologies. Additionally, the company's strategic acquisitions and investments in digitalization and innovation are contributing to its growth momentum.

Corporate and Other

Expected Growth: 5.8%

The 5.8% growth in Corporate and Other segment of Lennox International Inc. is driven by strategic investments in digital transformation, operational efficiency initiatives, and a favorable mix of higher-margin businesses. Additionally, the company's focus on innovation, cost savings, and effective capital allocation have contributed to this growth.

7. Detailed Products

Heating and Cooling Systems

Lennox International Inc. offers a wide range of heating and cooling systems, including air conditioners, heat pumps, furnaces, and boilers, designed to provide comfort and efficiency to residential and commercial customers.

Indoor Air Quality Solutions

Lennox's indoor air quality solutions include air purifiers, humidifiers, and ventilation systems, designed to improve indoor air quality and promote healthier living.

Commercial HVAC Systems

Lennox provides commercial HVAC systems, including rooftop units, split systems, and chillers, designed to meet the unique needs of commercial buildings and institutions.

Refrigeration Systems

Lennox offers refrigeration systems, including walk-in coolers, freezers, and refrigeration units, designed for the foodservice and retail industries.

Building Automation Systems

Lennox's building automation systems integrate HVAC, lighting, and security systems, providing a single, intuitive interface for building management.

8. Lennox International Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Lennox International Inc. is medium due to the presence of alternative heating and cooling solutions, but the company's strong brand reputation and product offerings mitigate this threat.

Bargaining Power Of Customers

The bargaining power of customers is low for Lennox International Inc. due to the company's strong distribution network and customer relationships, which reduce the negotiating power of individual customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium for Lennox International Inc. due to the presence of multiple suppliers for raw materials, but the company's large scale of operations and long-term contracts mitigate this power.

Threat Of New Entrants

The threat of new entrants is low for Lennox International Inc. due to the high barriers to entry in the heating and cooling industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry is high for Lennox International Inc. due to the presence of several established competitors in the heating and cooling industry, leading to intense competition for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 82.34%
Debt Cost 4.58%
Equity Weight 17.66%
Equity Cost 9.12%
WACC 5.38%
Leverage 466.18%

11. Quality Control: Lennox International Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Armstrong World Industries

A-Score: 5.7/10

Value: 2.2

Growth: 5.8

Quality: 8.0

Yield: 2.0

Momentum: 7.5

Volatility: 9.0

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Simpson Manufacturing Co

A-Score: 5.2/10

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Growth: 7.8

Quality: 7.5

Yield: 1.0

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A-Score: 5.0/10

Value: 2.1

Growth: 9.0

Quality: 5.7

Yield: 2.0

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Growth: 5.2

Quality: 5.0

Yield: 0.0

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Volatility: 6.0

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Lennox International

A-Score: 4.6/10

Value: 2.5

Growth: 7.7

Quality: 6.6

Yield: 2.0

Momentum: 2.0

Volatility: 7.0

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A-Score: 4.5/10

Value: 6.1

Growth: 8.3

Quality: 6.2

Yield: 0.0

Momentum: 1.5

Volatility: 4.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

561.01$

Current Price

561.01$

Potential

-0.00%

Expected Cash-Flows