LII

Industrials

Lennox International

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Market Data

Financials

XBRL · SEC EDGAR

2008–2025(18yr)

Revenue

Net Income

Free CF

Metric	FY 2008	FY 2009	FY 2010	FY 2011	FY 2012	FY 2013	FY 2014	FY 2015	FY 2016	FY 2017	FY 2018	FY 2019	FY 2020	FY 2021	FY 2022	FY 2023	FY 2024	FY 2025Latest	YoY
Revenue	$3.4B	$2.8B	$3.1B	$3.3B	$2.9B	$3.2B	$3.4B	$3.5B	$3.6B	$3.8B	$3.9B	$3.8B	$3.6B	$4.2B	$4.7B	$5.0B	$5.3B	$5.2B	-2.7%
Gross Profit	$934.5M	$788.1M	$891.8M	$833.6M	$722.3M	$861.2M	$903.3M	$947.4M	$1.1B	$1.1B	$1.1B	$1.1B	$1.0B	$1.2B	$1.3B	$1.5B	$1.8B	$1.7B	-2.1%
Gross Margin	27.2%	27.7%	28.8%	25.2%	24.5%	26.9%	26.8%	27.3%	29.6%	29.3%	28.6%	28.4%	28.6%	28.3%	27.2%	31.1%	33.2%	33.4%	+0.2pp
Operating Income	$218.6M	$109.2M	$190.4M	$147.7M	$219.1M	$289.0M	$334.7M	$305.4M	$429.4M	$494.5M	$509.5M	$656.9M	$478.5M	$590.3M	$656.2M	$790.1M	$1.0B	$1.0B	+0.6%
Operating Margin	6.4%	3.8%	6.1%	4.5%	7.4%	9.0%	9.9%	8.8%	11.8%	12.9%	13.1%	17.3%	13.2%	14.1%	13.9%	15.9%	19.4%	20.0%	+0.7pp
Net Income	$122.8M	$51.1M	$116.2M	$88.3M	$90.0M	$171.8M	$205.8M	$186.6M	$277.8M	$305.7M	$359.0M	$408.7M	$356.3M	$464.0M	$497.1M	$590.1M	$806.9M	$805.8M	-0.1%
Net Margin	3.6%	1.8%	3.8%	2.7%	3.1%	5.4%	6.1%	5.4%	7.6%	8.0%	9.2%	10.7%	9.8%	11.1%	10.5%	11.8%	15.1%	15.5%	+0.4pp
Free Cash Flow	$121.1M	$166.7M	$140.0M	$33.0M	$171.2M	$132.0M	$96.4M	$261.3M	$270.2M	$226.8M	$400.3M	$290.5M	$533.9M	$408.7M	$201.2M	$486.0M	$782.1M	$638.8M	-18.3%
FCF Margin	3.5%	5.9%	4.5%	1.0%	5.8%	4.1%	2.9%	7.5%	7.4%	5.9%	10.3%	7.6%	14.7%	9.7%	4.3%	9.8%	14.6%	12.3%	-2.3pp
EPS (Diluted)	$2.11	$0.90	$2.08	$1.65	$1.75	$3.39	$4.23	$4.09	$6.32	$7.14	$8.74	$10.38	$9.24	$12.39	$13.88	$16.54	$22.54	$22.79	+1.1%

Total Debt$1.1B

Cash & Equiv.$34.2M

Net Debt$1.1B

4 min read

1. THE BIG PICTURE

Lennox is currently prioritizing internal efficiency and pricing power to offset a sharp downturn in residential construction and cooling demand. While Lennox International is trailing almost all peers in revenue growth, its "self-help" transformation plan has successfully converted a shrinking top line into the highest operating and net margins in its peer group.

2. WHERE THE RISKS HIT HARDEST

Lennox’s primary strength—its "Broad Distribution" through company-owned stores and a direct-to-dealer network—is directly threatened by its "Operational Concentration" (10-K Item 1). Because many products are manufactured at single-location facilities, any localized disruption would leave its proprietary stores with no inventory, effectively turning a fixed-cost distribution advantage into a financial liability. Furthermore, the strategic push into "Heat Pump Growth" is vulnerable to "Environmental Regulation" regarding refrigerants; failure to adapt to these shifting standards could force massive capital expenditures that would undermine the record 20% annual margins management recently achieved (8-K, Risks).

3. WHAT THE NUMBERS SAY TOGETHER

The financial data reveals a company that is structurally more profitable than its larger competitors, despite its smaller scale. Lennox leads its peer group with a 19.5% operating margin and a 15.1% net margin, outperforming Trane (14.3% net margin) and Carrier (8.2% net margin). This profitability persists even though Lennox reported a TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter revenue decline of 2.7%, ranking 5th of 6 peers in growth (XBRL).

The 11% revenue drop in the fourth quarter of 2025 was largely a residential issue, as Home Comfort Solutions revenue fell 21% due to "channel destocking" and "softness in new construction" (8-K). This divergence from the 2026 growth guidance of 6% to 7% suggests management views the current slump as a mean-reverting cycle rather than a structural decline. Sentiment remains mixed, however, with short interest at 6.5% of the float, suggesting some investors doubt the sustainability of these margins as Lennox International transitions its accounting from LIFO to FIFO (8-K, Supplemental Signals).

4. IS IT WORTH IT AT THIS PRICE?

At 19.3x Forward P/EP/EPrice-to-Earnings ratio — share price divided by annual earnings per share; how much investors pay per dollar of profit. Higher P/E = higher growth expectations, Lennox trades at a 21% discount to the peer median of 24.4x. This discount is justified by Lennox International's negative TTMTTMTrailing Twelve Months — the most recent full year of financial data, updated on a rolling basis each quarter growth (-2.7%) compared to the positive growth seen at Trane (+7.5%) and Johnson Controls (+2.8%).

At the current price, the market is pricing in approximately 5.6% long-term growth (CAPM analysis). This expectation is well-supported by management’s 2026 outlook for 6% to 7% revenue growth and a 2.7% buyback yield that provides a consistent lift to earnings per share. However, the valuation is sensitive to execution: if growth slows to a 5.0% "base case," the justified multiple would fall to 17.3x, implying roughly 10% downside from current levels. The current price is "fair" only if Lennox successfully navigates the transition to its new Mexico manufacturing facility to support its Building Climate segment, which grew 8% in the most recent quarter (8-K).

5. WHAT WOULD CHANGE THIS VIEW?

Cautious if Home Comfort Solutions revenue fails to stabilize in early 2026, signaling that "channel destocking" is more persistent than management anticipates.
Constructive if the Building Climate Solutions segment maintains its 11% profit growth, proving the Mexico factory can drive margin expansion in the commercial sector.
Cautious if free cash flow falls below the projected $750 million to $850 million range, which would limit Lennox International's ability to maintain its 2.7% buyback yield.

6. BOTTOM LINE

Structural Advantage: A high-margin, direct-to-dealer distribution model that bypasses independent wholesalers to capture higher pricing and customer loyalty.

Bottom Line: Lennox is an elite margin operator priced at a discount due to temporary residential headwinds; it is a compelling pick for investors who prioritize profitability and capital return over raw revenue scale.

Source: Synthesis · LLM Analysis

3 min read

1. Top 5 Material Risks

Competitive Pressure: Lennox International operates in highly competitive markets where factors like product reliability, energy efficiency, and price are critical. Lennox International risks losing market share or being forced to reduce prices if it cannot adapt to market changes or compete with entities that possess greater financial resources.
Operational Concentration: Many products are manufactured at single-location facilities, and Lennox International relies on a limited number of suppliers for key components. Any disruption at these specific sites could prevent Lennox International from meeting customer demand, thereby impacting results of operations.
New Product Development: Future success depends on the ability to commercialize new HVACR technologies. Failure to innovate or integrate new products into the existing direct-to-dealer network could lead to a decline in revenue and reduced product pull-through.
Environmental Regulation: Legislation targeting global warming potential, refrigerants, and energy efficiency standards may require increased capital expenditures. Inability to meet these standards or match customer demand for compliant products could negatively impact the financial condition of all segments.
Product Liability and Warranty: Lennox International faces risks from warranty claims, which range from one to 20 years for certain components. As of December 31, 2025, the product warranty liability stood at $167.2 million, and actual future costs may exceed current estimates, requiring material adjustments to accruals.

2. Company-Specific Risks

Direct-to-Dealer Network: Lennox International relies on a direct sales channel to independent home service companies; failure to execute this strategy or anticipate changing customer needs could lead to a decline in revenue and long-term service opportunities.
Labor Relations: Approximately 26% of the core workforce locations were unionized as of December 31, 2025, and future labor negotiations or potential strikes could materially impact results of operations.
Seasonal Weather Sensitivity: Sales are strongly affected by weather patterns; cooler than normal summers depress demand for air conditioning and refrigeration, while warmer than normal winters depress demand for heating products.
AI Integration: Lennox International has begun incorporating artificial intelligence into its operations, which introduces risks related to data privacy, cybersecurity, intellectual property loss, and potential regulatory scrutiny.

3. Regulatory/Legal Risks

Global Tax Reform: Lennox International is subject to the OECD’s Pillar Two framework, which aims for a 15% global minimum corporate tax rate. Lennox International’s 2025 effective tax rate incorporates an estimated Pillar Two liability, and future legislative adoption by individual countries could further increase this rate.
Trade Policy: Changes in U.S. trade policy, including the USMCA review in 2026 and tariffs on imports from Canada and Mexico, could increase the cost of doing business and negatively affect segment profitability.
Litigation: Lennox International is involved in various legal matters, including claims related to asbestos-containing materials, intellectual property infringement, and labor relations, which involve significant uncertainties and potential for material adverse impacts on financial condition.

4. Financial Impact Map

Competitive Pressure → Cash Flow → Potential reduction in prices or loss of market share could negatively affect cash flow. Operational Concentration → Profitability → Interruptions at single-location facilities or key supplier sites could negatively impact profitability and the ability to deliver products. New Product Development → Revenue → Failure to commercialize new technologies could lead to a decline in revenue and product pull-through. Environmental Regulation → Capital Expenditures → Compliance with new climate-related legislation may require increased capital expenditures and impact segment profitability. Product Liability and Warranty → Product Warranty Liability → Actual costs exceeding the $167.2 million liability (as of December 31, 2025) would require material adjustments to accruals and expense.

Source: 10-K Item 1A · LLM Analysis

Recent Filings

Form	Filed	Period
10-K	Feb 2026	Dec 2025
8-K	Jan 2026	—
10-Q	Oct 2025	Sep 2025
14A	Apr 2025	—