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Key Takeaways
- Lennox shares fell 8% today after it cut its 2026 adjusted EPS guidance to $21.00–$21.50, from $23.00–$24.00.
- Its home business cut prices to win back share, and its margin fell 490 bps.
- Watsco grew residential unit volumes 5% last quarter, which points to a share problem at Lennox.
- Carrier and Trane report Thursday, which should show whether the price pressure spreads.
Lennox International (LII) stock fell 8% today after a weak third quarter and a cut to its full-year adjusted EPS guidance, to $21.00-$21.50 from $23.00-$24.00.
Its home business is cutting prices to win back share against rivals Carrier Global (CARR) and Trane Technologies (TT), which both report on Thursday. Watsco (WSO), North America’s largest HVAC distributor, fell 5%.
The home business is paying to win back share
Revenue rose 10% to $1.57 billion, but adjusted EPS fell 7% to $6.84. CEO Alok Maskara said “our margins and results fell short of our expectations, reflecting heightened competitive pressure and the impact of persistent inflation on our costs.”
Home Comfort Solutions, its bigger segment, grew revenue just 3% to $937 million, and its margin fell 490 bps to 18.7%. Lennox cut prices in some markets “to defend and recapture share.”
For context – Watsco’s residential equipment sales grew 7% last quarter, on 5% more units and 2% higher prices. Its gross margin slipped to 26.4% from 27.5%, partly because manufacturers raised prices less this year. If manufacturers start cutting prices, can Watsco keep its price gains?
Wall Street’s numbers have to come down
For Lennox, analysts had expected $23.38 a share this year and $25.73 in 2027…
This quarter gives analysts every reason to cut both.
TIKR tracks 18 analysts on Lennox International. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Lennox International, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Lennox International’s Analyst Ratings
Carrier and Trane are up next
Carrier’s Americas residential sales grew 9% in the second quarter. But its Americas margin still fell 260 bps to 24.4%, because input costs and mix outran its price gains. Does Carrier match Lennox’s price cuts, or give up volume?
Trane’s Americas commercial HVAC bookings rose 50% in the second quarter, but CEO Dave Regnery also pointed to “improving residential and transport dynamics” in July. Thursday will show if that held.
Cheap for a reason
Before today, Lennox traded at 15.3x forward earnings, against a 21.3x five-year average…
After the drop, it’s closer to 14x, near its 13.1x low from June 2022. (And that’s on estimates that are about to fall.)
My take: The stock looks cheap, but I’d wait for Home Comfort Solutions’ margin to recover first.
Of course, if the price cuts win back share by the fourth-quarter report, today’s price could look like a bargain.
So what is Lennox stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
