Core Insights - Lennox and Ariston Group have formed a joint venture to launch a new line of residential water heaters in the U.S. and Canada, combining Lennox's distribution strength with Ariston's advanced technology [1][4][5] Company Overview - Lennox is a leader in energy-efficient climate-control solutions, focusing on sustainability and innovation in HVACR systems [7] - Ariston Group is a global leader in sustainable climate and water comfort, with 2024 revenues of €2.6 billion, over 10,000 employees, and a presence in 40 countries [8] Joint Venture Details - The joint venture, named Ariston Lennox Water Heating North America, will be operational after customary closing conditions are met, with Ariston USA owning 50.1% and Lennox owning 49.9% [6] - The partnership aims to enhance market presence and drive innovation in the North American residential water heater market [4][5] Strategic Goals - The joint venture aligns with Lennox's strategy for accelerated growth by expanding product offerings in the residential market and strengthening customer relationships [5] - Ariston Group views the North American market as a strategic priority for profitable growth, having entered the region in 2016 through acquisitions [6]

Core Insights - Lennox has appointed Tracy Embree to its board of directors, effective May 22, 2025, bringing significant experience from her previous role as President of Otis Americas [1][2] - The board believes Ms. Embree's background in industrial strategy, emerging technologies, and sustainable solutions will enhance Lennox's strategic growth initiatives [2] - Ms. Embree has a strong history in complex manufacturing environments and has held various leadership roles, including a 23-year tenure at Cummins Inc. [3] Company Background - Lennox is a leader in energy-efficient climate-control solutions, focusing on sustainability and reducing carbon footprints for residential and commercial customers [5] - The company is recognized for its innovation in cooling, heating, indoor air quality, and refrigeration systems [5] Educational Background - Tracy Embree holds a bachelor's degree in chemical engineering from the Massachusetts Institute of Technology and an MBA from Harvard Business School [4]

Core Points - Lennox's board of directors approved a 13% increase in the quarterly dividend from $1.15 to $1.30 per share, payable on July 15, 2025, to stockholders of record as of June 30, 2025 [1] - The board also approved a $1 billion increase to its existing stock repurchase authorization, in addition to approximately $290 million remaining under prior authorizations as of May 12, 2025 [2] - The CFO of Lennox stated that the increase in dividend and share repurchase authorization reflects confidence in the company's performance and ability to generate strong cash flow, while maintaining a disciplined leverage profile and flexibility for strategic M&A opportunities [3] Company Overview - Lennox is a leader in energy-efficient climate-control solutions, focusing on sustainability and creating comfortable environments for residential and commercial customers while reducing their carbon footprint [4]

Summary of Lennox International (LII) FY Conference Call - May 06, 2025 Company Overview - **Company**: Lennox International (LII) - **Event**: Oppenheimer's 20th Annual Industrial Growth Conference - **Speakers**: CEO Alok Mascarra, CFO Michael Krenser Key Industry Insights - **Transformation Focus**: 2025 is viewed as a transition year from recovery to growth, emphasizing four key pillars: digital customer experience, Samsung joint venture, increasing parts attachment rate, and growing emergency replacement in the commercial business [2][3][4] - **Market Share**: Currently, Lennox holds a low single-digit market share in the ductless product category, which is now 10% of the market [5][6] - **Emergency Replacement**: Successful pilots have led to broader rollouts, with expectations of significant revenue growth in the coming years [6][9] - **Digital Customer Experience**: Achieved record market share in residential by improving fulfillment rates and digital experiences, with further investments planned [6][7][8] Financial Performance and Projections - **2025 Volume Decline**: Projected mid-single-digit volume decline for 2025 due to economic slowdown, but long-term growth of 4% to 6% CAGR in residential unit growth is expected [29][30][31] - **Pricing Strategy**: Price increases have been implemented to counteract tariff impacts, with retention rates being high for the first increase [46][58] - **Growth Drivers for 2026**: Anticipated growth from no pre-buy headwinds, improved efficiencies, and a full year of new product offerings [69][70][72] Strategic Initiatives - **Samsung Joint Venture**: Seen as a significant opportunity for market share gain, especially against competitors from China [78][79] - **Distribution Network Investments**: Focus on enhancing distribution infrastructure with shorter payback periods compared to manufacturing investments [92][93] - **M&A Strategy**: Interest in acquiring services and technology-related companies, although the current market is described as "frozen" due to valuation disagreements [94][95][97] Additional Considerations - **Succession Planning**: New leadership in Home Comfort Solutions with Sarah Martin, who brings experience from Honeywell [23][24] - **Supply Chain Dynamics**: Ongoing adjustments to supply chains in response to tariffs and market conditions, with a focus on maintaining flexibility [52][56] - **Market Trends**: Increasing demand for air conditioning due to climate changes and population shifts towards warmer regions [33][34] Conclusion - **Outlook**: Despite short-term challenges, Lennox International remains optimistic about long-term growth driven by strategic initiatives, market demand, and operational improvements [72][75][76]

Core Viewpoint - Lennox International (NYSE: LII) is well-positioned to navigate the current market environment, benefiting from strong replacement demand in its Home Comfort Solutions (HCS) and Building Climate Solutions (BCS) segments [1] Group 1: Company Performance - The company is expected to benefit from positive price/mix as it implements pricing increases in response to market conditions [1] Group 2: Investment Strategy - The focus is on GARP (Growth at Reasonable Price) opportunities within the industrial, consumer, and technology sectors [1]

Financial Data and Key Metrics Changes - Revenue for the quarter grew by 2% with a segment margin of 14.5%, a decrease of 140 basis points [7][10] - Adjusted earnings per share were $3.37, with full-year adjusted EPS guidance narrowed to a range of $22.25 to $23.50 [8][10] - Operating cash usage was $36 million, typical for the seasonality of the business [7] Business Line Data and Key Metrics Changes - Home Comfort Solutions (HCS) segment saw a 7% increase in sales, driven by a positive mix with approximately 50% of equipment sales being the new R-454B product [20] - Building Climate Solutions (BCS) segment experienced a 6% decline in revenue, with sales volumes down 9% due to expected destocking and delays in customer orders [22][23] Market Data and Key Metrics Changes - Current order rates in both HCS and BCS segments remain healthy, with replacement demand providing a solid foundation [8][16] - Monthly order rates in BCS improved sequentially as destocking ended during the quarter [16] Company Strategy and Development Direction - The company is focused on navigating the current global trade landscape and is positioned to deliver differentiated growth despite uncertainties [11][12] - Investments in supply chain and manufacturing capacity are ongoing, with a focus on dual sourcing key components [14] - The company aims to enhance customer experience through digital initiatives and improve distribution efficiency [25][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to macroeconomic factors affecting both segments, including consumer confidence and mortgage interest rates [15][31] - The company is prepared for potential macroeconomic slowdowns and has implemented pricing adjustments to offset tariff impacts [28][46] Other Important Information - The company is actively pursuing long-term tariff mitigation strategies, including production shifts and leveraging US-based components [12][13] - The transition to new low GWP products is progressing as expected, with inventory levels of R-410A nearly depleted [20] Q&A Session Summary Question: Discussion on commercial order delays - Management acknowledged a slow start due to destocking and transitioning to new products, but order rates have improved sequentially [41][42] Question: Outlook on residential and commercial volume changes - Management indicated that the adjustments were made to prepare for potential slowdowns, although no current slowdown has been observed [44][46] Question: Details on pricing increases - Two price increases were implemented, one to offset tariff impacts and another for volume declines, both in the mid-single-digit range [51][54] Question: Impact of inflation guidance increase - The inflation guidance was raised from 3% to 9%, with a significant portion attributed to costs from China and tariffs on metals [74][76] Question: Building Climate Solutions margins outlook - Management expects short-term inefficiencies to continue but anticipates sequential margin improvements as the year progresses [90][96] Question: Consumer elasticity in repair versus replace decisions - Management believes the risk of homeowner price elasticity on replacement remains low, as the products are considered nondiscretionary [145][148]

Financial Performance - Net sales for the first quarter of 2025 increased by 2% to $1,072.6 million compared to $1,047.1 million in the same period in 2024[91] - Operating income decreased by $11 million to $156 million in the first quarter of 2025, primarily due to higher material costs and lower sales volumes[95] - Gross profit margins decreased by 190 basis points to 30.6% in the first quarter of 2025, impacted by higher product costs and freight costs[93] - Home Comfort Solutions segment net sales increased by 7% to $721.4 million, with segment profit rising by $4.7 million to $116.8 million[100] - Building Climate Solutions segment net sales decreased by 6% to $351.2 million, with segment profit declining by 32% to $53.5 million[103] Cash Flow and Capital Expenditures - Net cash used in operating activities increased to $35.8 million in the first quarter of 2025 from $22.8 million in the same period in 2024[107] - Capital expenditures were $26 million for the first quarter of 2025, down from $30 million in the same period in 2024[108] Debt and Financing - Total debt as of March 31, 2025, was $1,149.4 million, comprising current and long-term debt[110] - The company established a commercial paper program on October 25, 2023, allowing for the issuance of up to $500.0 million in short-term, unsecured notes[111] - As of March 31, 2025, the company had an existing $1.1 billion unsecured revolving credit facility, with $1,098.3 million available for future borrowings[112] - In September 2023, the company issued $500.0 million of senior unsecured notes maturing in September 2028, with an interest rate of 5.50%[113] - The company's debt-to-total-capital ratio remained unchanged at 57% as of March 31, 2025, compared to December 31, 2024[116] - The company had no outstanding borrowings under its commercial paper program as of March 31, 2025[111] - The credit agreement includes a subfacility for swingline loans up to $65.0 million[112] - The company believes it is in compliance with all covenant requirements as of March 31, 2025[115] Tax and Shareholder Returns - The effective tax rate for the first quarter of 2025 was 18.9%, a decrease from 19.4% in the same period in 2024[99] - The company returned $41 million to shareholders through dividend payments in the first quarter of 2025[95] Liquidity and Financial Condition - As of March 31, 2025, the company had cash and cash equivalents of $217.2 million, sufficient to fund operations and obligations, including the maturity of $300.0 million senior unsecured notes on August 1, 2025[118] - The company has no off-balance sheet arrangements that may materially affect its financial condition or results of operations[119] - The company's senior credit ratings were Baa2 with a positive outlook from Moody's and BBB with a stable outlook from S&P as of March 31, 2025[117]

APRIL 23, 2025 FIRST QUARTER 2025 EARNINGS RELEASE INTEGRITY | RESPECT | EXCELLENCE FORWARD-LOOKING STATEMENTS & NON-GAAP FINANCIAL MEASURES The statements in this presentation that are not historical statements, including statements regarding the 2025 full-year outlook and expected consolidated and segment financial results, as well as financial targets for future years, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statemen ...

Core Insights - Lennox International (LII) reported revenue of $1.07 billion for the quarter ended March 2025, reflecting a 2.4% increase year-over-year and exceeding the Zacks Consensus Estimate of $1.03 billion by 4.19% [1] - The company's EPS was $3.37, down from $3.47 in the same quarter last year, but above the consensus estimate of $3.25, resulting in a surprise of 3.69% [1] Financial Performance - Net Sales for Building Climate Solutions were $351.20 million, below the average estimate of $381.90 million from 14 analysts [4] - Net Sales for Home Comfort Solutions reached $721.40 million, surpassing the average estimate of $636.12 million based on 14 analysts [4] - Segment Profit for Home Comfort Solutions was $116.80 million, exceeding the average estimate of $99.09 million from 14 analysts [4] - Segment Profit for Corporate and other was -$14.70 million, better than the average estimate of -$26.11 million from 14 analysts [4] - Segment Profit for Building Climate Solutions was $53.50 million, below the average estimate of $77.66 million from 14 analysts [4] Market Performance - Shares of Lennox have returned -4.9% over the past month, compared to a -6.6% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Company Performance - Lennox International (LII) reported quarterly earnings of $3.37 per share, exceeding the Zacks Consensus Estimate of $3.25 per share, but down from $3.47 per share a year ago [1] - The earnings surprise for this quarter was 3.69%, following a previous quarter where the company reported earnings of $5.60 per share against an expectation of $4.23, resulting in a surprise of 32.39% [2] - The company achieved revenues of $1.07 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 4.19% and showing an increase from $1.05 billion year-over-year [3] Market Outlook - Lennox shares have declined approximately 8.3% since the beginning of the year, while the S&P 500 has seen a decline of 10.1% [4] - The current consensus EPS estimate for the upcoming quarter is $7.07 on revenues of $1.49 billion, and for the current fiscal year, it is $22.82 on revenues of $5.42 billion [8] Industry Context - The Building Products - Air Conditioner and Heating industry, to which Lennox belongs, is currently ranked in the bottom 34% of over 250 Zacks industries, indicating potential challenges ahead [9] - Another company in the same industry, Trane Technologies, is expected to report quarterly earnings of $2.19 per share, reflecting a year-over-year increase of 12.9% [10]