Financial Data and Key Metrics Changes - Revenue for Q2 2025 grew by 3%, with a segment margin reaching a record 23.6%, an increase of 170 basis points [5][11] - Operating cash flow was reported at $87 million, and adjusted earnings per share (EPS) for the quarter was $7.82 [5][11] - The full-year adjusted EPS outlook has been raised to a range of $23.25 to $24.25, up from the previous range of $22.25 to $23.50 [19][21] Business Line Data and Key Metrics Changes - Home Comfort Solutions (HCS) segment revenue increased by 3%, driven by a favorable product mix and a 12% increase in pricing, despite a decline in sales volume due to inventory destocking and construction softness [12][13] - Building Climate Solutions (BCS) segment achieved a 5% revenue increase, supported by an 8% benefit from favorable product mix and pricing, while sales volumes declined by only 3% [15][16] Market Data and Key Metrics Changes - The overall market remains challenging, with ongoing softness in new construction demand and industry-wide refrigerant shortages impacting sales [5][22] - The company is beginning to see early signs of demand stabilization in the BCS segment, with healthy order rates and backlog due to steady replacement demand [24] Company Strategy and Development Direction - The company is focused on executing its transformation strategy introduced in 2022, with an emphasis on digital customer experience, ductless technology, and expanding its product and service portfolio [26] - Strategic partnerships with Samsung and Ariston are aimed at enhancing the product portfolio and customer experience, with expectations for meaningful growth contributions starting in 2026 and 2027 respectively [10][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the challenging environment, citing improved factory productivity and effective cost management as key factors [4][24] - The transition to low GWP refrigerants is progressing well, although concerns about canister availability have impacted dealer confidence [22][23] Other Important Information - The company has authorized an additional $1 billion in share repurchases and increased its quarterly dividend by approximately 15% [16][17] - Free cash flow guidance remains on track for $650 million to $800 million for the year [16] Q&A Session Summary Question: Insights on A2L manufacturing costs and tariffs - Management indicated that both cost and price expectations for A2L conversion are on track, with productivity improvements driving margin expansion [31][33] Question: Volume assumptions for the second half - HCS segment volumes are expected to decline by about 8% in the second half, while BCS volumes are projected to decline by about 4% [34][35] Question: Margin outlook and operating margin expansion - Full-year EPS guidance includes an expected 50 basis points of operating margin expansion, with both segments showing margin improvement [39][40] Question: Feedback on the Ariston partnership - Early dealer feedback on the water heater business has been positive, with expectations for meaningful growth starting in 2027 [50] Question: Impact of weather on sales - Management acknowledged that weather patterns have influenced sales, with stronger performance noted in June compared to May [62] Question: Inventory build and reduction expectations - The company plans to normalize inventory levels in the second half of the year, with a focus on transitioning to the new R454B products [88][89]

Financial Highlights - Revenue reached $1.5 billion, a 3% year-over-year increase[8] - Segment profit increased by 11% year-over-year, totaling $354 million[8] - Adjusted Earnings Per Share (EPS) rose by 14% to $7.82[8, 16] - Operating cash flow was $87 million, a decrease of $97 million year-over-year[8] - Segment profit margin improved by 170 basis points to 23.6%[8] Segment Performance - Home Comfort Solutions revenue increased by 3% to $1.009 billion, with a segment profit of $255 million[18, 19] - Building Climate Solutions revenue increased by 5% to $492 million, with a segment profit of $123 million[23, 24] Financial Guidance - The company anticipates full-year adjusted EPS between $23.25 and $24.25[8] - The company expects approximately 3% total revenue growth[35] - The company projects free cash flow between $650 million and $800 million[35] Cash Flow and Capital Deployment - The company is targeting a full-year 2025 cash conversion rate of approximately 90%[29] - Capital expenditures for 2025 are estimated to be around $150 million[34] - Share repurchases amounted to approximately $300 million year-to-date[33]

Company Performance - Lennox International (LII) reported quarterly earnings of $7.82 per share, exceeding the Zacks Consensus Estimate of $6.9 per share, and up from $6.83 per share a year ago [1] - The earnings surprise for this quarter was +13.33%, following a previous quarter where the company also surpassed expectations with earnings of $3.37 per share against an estimate of $3.25 per share, resulting in a surprise of +3.69% [2] - The company achieved revenues of $1.5 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.35% and increasing from $1.45 billion year-over-year [3] Market Outlook - Lennox shares have increased approximately 1.8% since the beginning of the year, while the S&P 500 has gained 7.3% [4] - The company's future stock performance will largely depend on management's commentary during the earnings call and the sustainability of the recent earnings numbers [4] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $7.12, with expected revenues of $1.56 billion, and for the current fiscal year, the estimate is $22.89 on revenues of $5.46 billion [8] - The estimate revisions trend for Lennox was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [7] Industry Context - The Building Products - Air Conditioner and Heating industry, to which Lennox belongs, is currently ranked in the bottom 20% of over 250 Zacks industries, suggesting potential challenges ahead [9] - The performance of Lennox's stock may be influenced by the overall outlook for the industry, as historical data shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [9]

[Overall Performance and Outlook](index=1&type=section&id=Overall%20Performance%20and%20Outlook) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Lennox reported strong second-quarter results with revenue growth of 3% to $1.5 billion, driven by favorable mix and pricing, segment profit increased by 11% to $354 million, with margin expansion of 170 basis points to 23.6%, and adjusted diluted EPS grew 14% to $7.82, though operating cash flow decreased significantly to $87 million from $184 million in the prior-year quarter, alongside a $210 million share repurchase Q2 2025 Financial Performance Overview | Financial Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $1.5 B | $1.45 B | +3% | | Segment Profit | $354 M | $318.5 M | +11% | | Segment Margin | 23.6% | 21.9% | +170 bps | | GAAP Diluted EPS | $7.82 | $6.87 | +14% | | Adjusted Diluted EPS | $7.82 | $6.83 | +14% | - The company's performance was driven by skillful navigation of turbulent external conditions, with productivity and cost actions offsetting inflation, and pricing remained aligned with the value delivered[3](index=3&type=chunk) - Operating cash flow decreased to **$87 million** from **$184 million** year-over-year, while the company repurchased **$210 million** of its shares during the quarter[8](index=8&type=chunk) [Business Segment Performance](index=1&type=section&id=Business%20Segment%20Performance) Both business segments demonstrated revenue growth and margin expansion, with Home Comfort Solutions revenue growing 3% and a 200 basis point margin expansion, and Building Climate Solutions revenue increasing 5% with a 60 basis point margin improvement, as both segments successfully used favorable mix and pricing to offset softer sales volumes and inflationary pressures [Home Comfort Solutions](index=1&type=section&id=Home%20Comfort%20Solutions) Home Comfort Solutions Q2 2025 Performance | Metric | Q2 2025 | Change (YoY) | | :--- | :--- | :--- | | Revenue | $1.0 B | +3% | | Segment Profit | $255 M | +12% | | Segment Margin | 25.3% | +200 bps | - Profit growth was driven by **$84 million in mix/price benefits**, which more than offset a **$36 million decrease from lower sales volumes** and **$11 million in product cost inflation**[9](index=9&type=chunk) [Building Climate Solutions](index=1&type=section&id=Building%20Climate%20Solutions) Building Climate Solutions Q2 2025 Performance | Metric | Q2 2025 | Change (YoY) | | :--- | :--- | :--- | | Revenue | $492 M | +5% | | Segment Profit | $123 M | +7% | | Segment Margin | 24.9% | +60 bps | - The segment's profit increase was driven by **$31 million in mix/price benefits**, partially offset by a **$6 million decrease from lower sales volumes** and other cost inflation[10](index=10&type=chunk) - Despite near-term challenges, the backlog remains strong and the emergency replacement growth initiative continues to gain traction[4](index=4&type=chunk) [Full Year 2025 Guidance](index=3&type=section&id=Full%20Year%202025%20Guidance) Reflecting strong Q2 results and continued momentum, Lennox has raised its full-year 2025 guidance, now expecting revenue to grow by approximately 3% and increasing its adjusted EPS forecast to a range of $23.25 to $24.25, while projections for capital expenditures and free cash flow remain unchanged Full Year 2025 Financial Guidance | Guidance Metric | Full Year 2025 Forecast | | :--- | :--- | | Revenue Growth | ~3% | | Adjusted EPS | $23.25 - $24.25 | | Capital Expenditures | ~$150 M | | Free Cash Flow | $650 M - $800 M | - The company continues to expect pricing actions to fully offset inflationary pressures for the year[12](index=12&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, net sales increased to $1.5 billion from $1.45 billion year-over-year, gross profit rose to $522.5 million, and operating income grew to $354.0 million, consequently, net income increased to $277.6 million, resulting in a diluted EPS of $7.82, up from $6.87 in the prior year Consolidated Statements of Operations (Q2 2025 vs Q2 2024) | (Amounts in millions, except per share data) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net sales | $1,500.9 | $1,451.1 | | Gross profit | $522.5 | $488.2 | | Operating income | $354.0 | $320.1 | | Net income | $277.6 | $245.9 | | Earnings per share – Diluted | $7.82 | $6.87 | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets stood at $3.65 billion, an increase from $3.47 billion at year-end 2024, primarily driven by increases in accounts receivable and inventories, while total liabilities also rose to $2.75 billion, and total stockholders' equity increased to $900.5 million Consolidated Balance Sheets (As of June 30, 2025) | (Amounts in millions) | As of June 30, 2025 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $49.2 | $415.1 | | Inventories, net | $1,001.9 | $704.8 | | Total current assets | $2,003.5 | $1,884.2 | | Total assets | $3,652.7 | $3,471.8 | | Total current liabilities | $1,417.9 | $1,313.3 | | Total liabilities | $2,752.2 | $2,621.6 | | Total stockholders' equity | $900.5 | $850.2 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash provided by operating activities was $51.0 million, a significant decrease from $161.2 million in the same period of 2024, mainly due to increases in inventories and accounts receivable, while net cash used in financing activities was $368.2 million, driven by $294.8 million in common stock repurchases, resulting in a decrease in cash and cash equivalents to $49.2 million Consolidated Statements of Cash Flows (Six Months Ended June 30, 2025) | (Amounts in millions) | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $51.0 | $161.2 | | Net cash used in investing activities | ($51.6) | ($57.2) | | Net cash used in financing activities | ($368.2) | ($118.3) | | Decrease in cash and cash equivalents | ($368.8) | ($14.3) | | Cash and cash equivalents, end of period | $49.2 | $47.6 | [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) The company provides reconciliations for non-GAAP measures to enhance investor understanding, with Q2 2025 GAAP Net Income of $277.6 million being the same as Adjusted Net Income, and free cash flow for the quarter at $58.7 million, derived from $86.8 million in operating cash flow less net capital expenditures - For the three months ended June 30, 2025, there were no adjustments between GAAP Net Income and Adjusted Net Income, with both reported at **$277.6 million**, or **$7.82 per diluted share**[28](index=28&type=chunk) Reconciliation to Free Cash Flow (Q2 2025) | Reconciliation to Free Cash Flow (Q2 2025) | Amount (in millions) | | :--- | :--- | | Net cash provided by operating activities | $86.8 | | Purchases of property, plant and equipment | ($28.5) | | Proceeds from disposal of property, plant and equipment | $0.4 | | **Free cash flow (Non-GAAP)** | **$58.7** | [Other Information](index=3&type=section&id=Other%20Information) [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) A conference call to discuss the second-quarter results was scheduled for 8:30 a.m. Central Time on the day of the release, with details for participation via phone and webcast provided, along with information for accessing a replay - The earnings conference call was held at **8:30 a.m. Central Time on July 23, 2025**[13](index=13&type=chunk) - A live webcast and replay are available on the company's investor relations website[13](index=13&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This report contains forward-looking statements, including the 2025 full-year outlook, which are based on current management assumptions and are subject to numerous risks and uncertainties, such as market performance, competition, supply chain issues, and general economic conditions, and the company disclaims any obligation to update these statements - Statements regarding the **2025 outlook** are forward-looking and subject to risks that could cause actual results to differ materially[15](index=15&type=chunk) - Key risks include HVACR market performance, competition, supply interruptions, and changes in legislation or economic conditions[15](index=15&type=chunk)

Core Insights - Lennox reported second quarter financial results with revenue of $1.5 billion, an increase of 3% year-over-year, and operating income of $354 million, up 11% [1][5][7] - The company raised its full-year guidance, now expecting revenue growth of approximately 3% and adjusted earnings per share in the range of $23.25 to $24.25 [3][11] Financial Performance - Revenue for the second quarter was $1.5 billion, reflecting a 3% increase driven by favorable mix and pricing benefits [2][5] - Operating income reached $354 million, with an operating profit margin of 23.6%, up 150 basis points from the previous year [5][6] - Net income was reported at $278 million, or $7.82 per share, compared to $246 million, or $6.87 per share, in the prior-year quarter [7][20] Segment Performance - Home Comfort Solutions segment revenue was $1.0 billion, up 3%, with segment profit of $255 million, an increase of 12% [8][19] - Building Climate Solutions segment revenue increased by 5% to $492 million, with segment profit rising to $123 million, up 7% [9][19] - Both segments experienced margin expansion, attributed to favorable product mix and pricing, which offset inflationary pressures and softer sales volumes [4][6] Cash Flow and Capital Expenditures - Operating cash flow for the quarter was $87 million, down from $184 million in the prior-year quarter [7][24] - Net capital expenditures were $28 million, slightly lower than $32 million in the previous year [7][24] Guidance and Future Outlook - For the full year 2025, the company anticipates earnings per share in the range of $23.25 to $24.25 and revenue growth of approximately 3% [11][12] - Capital expenditures are projected to be around $150 million, with free cash flow expected to be between $650 million and $800 million [11][12]

Core Viewpoint - Lennox International (LII) is positioned well to potentially beat earnings estimates in its upcoming quarterly report, supported by a strong history of exceeding expectations [1]. Group 1: Earnings Performance - Lennox has a solid track record of surpassing earnings estimates, with an average surprise of 18.04% over the last two quarters [2]. - In the last reported quarter, Lennox achieved earnings of $3.37 per share, exceeding the Zacks Consensus Estimate of $3.25 per share by 3.69% [3]. - For the previous quarter, the company reported earnings of $5.6 per share against an expectation of $4.23 per share, resulting in a surprise of 32.39% [3]. Group 2: Earnings Estimates and Predictions - Estimates for Lennox have been trending upward, aided by its history of earnings surprises, and the stock currently has a positive Zacks Earnings ESP of +2.03% [5][7]. - The combination of a positive Earnings ESP and a Zacks Rank of 3 (Hold) suggests a high likelihood of another earnings beat, with historical data indicating that nearly 70% of stocks with this combination exceed consensus estimates [6][7]. Group 3: Earnings Release Information - The next earnings report for Lennox is expected to be released on July 23, 2025 [7].

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for Lennox International (LII) due to higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2]. Earnings Expectations - Lennox is expected to report quarterly earnings of $6.90 per share, reflecting a +1% change year-over-year, with revenues projected at $1.48 billion, up 2.1% from the previous year [3]. - The consensus EPS estimate has been revised 0.17% higher in the last 30 days, indicating a collective reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows a positive Earnings ESP of +2.41% for Lennox, suggesting analysts are optimistic about the company's earnings prospects [12]. - A positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1, 2, or 3 [10]. Historical Performance - Lennox has consistently beaten consensus EPS estimates, achieving this in the last four quarters [14]. - In the last reported quarter, Lennox exceeded expectations by delivering earnings of $3.37 per share against an expected $3.25, resulting in a surprise of +3.69% [13]. Conclusion - Lennox is positioned as a compelling candidate for an earnings beat, but investors should consider other influencing factors before making investment decisions [17].

Core Viewpoint - Lennox, a leader in energy-efficient climate control solutions, is set to report its second quarter 2025 financial results on July 23, 2025, with a conference call scheduled for the same day [1]. Group 1: Financial Reporting - The second quarter 2025 financial results will be reported before the market opens on July 23, 2025 [1]. - An earnings conference call and webcast will take place at 8:30 a.m. Central Time on the same day, featuring CEO Alok Maskara and CFO Michael Quenzer [1]. Group 2: Participation Details - To participate in the earnings conference call, interested parties should call 800-245-3047 (U.S.) or +1 203-518-9765 (international) at least 10 minutes prior to the start time, using conference ID LIIQ225 [2]. - A replay of the conference call will be available until July 30, 2025, through a toll-free number [2]. Group 3: Company Overview - Lennox is recognized for its commitment to sustainability and innovation in energy-efficient climate control solutions, focusing on reducing carbon footprints while enhancing comfort and health for residential and commercial customers [3].

Core Insights - Lennox Residential HVAC has launched the Elite Series EL18KSLV Side Discharge Heat Pump, which emphasizes efficient performance and space-saving design [1][2] - The new heat pump is particularly suited for homeowners with zero-lot-line or narrow-lot homes, providing high-efficiency heating without requiring additional space [2] - The unit features a variable-capacity design with energy ratings of up to 19.00 SEER2 and 10.00 HSPF2, aimed at reducing energy consumption and potentially lowering utility costs [2] Product Features - The EL18KSLV Side Discharge Heat Pump has a narrow cabinet for easy installation in limited spaces [2] - It operates at sound levels as low as 54 decibels, comparable to an electric toothbrush, ensuring quiet operation [2] - The unit is compatible with multiple Lennox smart thermostat product lines, allowing for management through various smart home platforms [3] Incentives and Availability - The heat pump qualifies for the Energy Efficient Home Improvement Credit, a federal incentive for high-efficiency home upgrades, with additional regional incentives potentially available [3] - The EL18KSLV Side Discharge Heat Pump is available for purchase through local Lennox dealers [3] Company Overview - Lennox (NYSE: LII) is a leader in energy-efficient climate-control solutions, focusing on sustainability and innovation in cooling, heating, indoor air quality, and refrigeration systems [4]

Economic Overview - U.S. stocks have rebounded over the past month after a turbulent start to 2025, driven by concerns over tariffs and high inflation [1] - The recent market rebound has been volatile, influenced by ongoing uncertainties regarding tariffs and the Federal Reserve's rate cut plans [2] Tariff Impact - President Trump imposed significant tariffs in April, including a 145% duty on Chinese imports, which prompted China to retaliate with 125% tariffs on U.S. goods [3] - A recent trade truce between the U.S. and China has temporarily suspended tariffs for 90 days, but uncertainty remains regarding future trade agreements and their economic implications [4] Inflation and Federal Reserve - Inflation has shown signs of easing, with the Consumer Price Index (CPI) rising by only 0.2% in April, following a 0.1% decline in March [5] - The CPI increased by 2.3% year-over-year in April, marking the smallest annual gain since February 2021, indicating a gradual approach towards the Federal Reserve's 2% inflation target [6] Dividend-Paying Stocks - In light of economic uncertainty, investing in dividend-paying stocks is recommended as they tend to be more stable and reliable during market fluctuations [7] Company Highlights The Toronto-Dominion Bank (TD) - TD announced a dividend of $0.75 per share, with a dividend yield of 4.31% and a payout ratio of 53% of earnings [9] - The bank has increased its dividend 12 times over the past five years [9] Marriott International, Inc. (MAR) - Marriott declared a dividend of $0.67 per share, with a dividend yield of 1.04% and a payout ratio of 26% of earnings [12] - The company has increased its dividend five times in the last five years [12] Lennox International Inc. (LII) - Lennox announced a dividend of $1.30 per share, with a dividend yield of 0.81% and a payout ratio of 20% of earnings [14] - The company has increased its dividend five times over the past five years [14] Ralph Lauren Corporation (RL) - Ralph Lauren declared a dividend of $0.91 per share, with a dividend yield of 1.20% and a payout ratio of 27% of earnings [16] - The company has increased its dividend three times in the last five years [16]