Lennox International Inc (NYSE:LII) reported upbeat earnings for the third quarter, but lowered its FY25 forecast on Wednesday.The company posted quarterly earnings of $6.98 per share which beat the analyst consensus estimate of $6.86 per share. The company reported quarterly sales of $1.426 billion which missed the analyst consensus estimate of $1.490 billion.Lennox lowered its FY2025 adjusted EPS guidance from $23.25-$24.25 to $22.75-$23.25 and sees revenue to be down by 1%.“As anticipated, 2025 is provin ...

Lennox International (NYSE:LII) Q3 2025 Earnings Call October 22, 2025 09:30 AM ET Company ParticipantsBrett Linzey - Managing DirectorMichael Quenzer - CFOJeff Hammond - Managing DirectorJoe O'Dea - Managing DirectorSteve Tusa - Managing DirectorAlok Maskara - CEOChris Snyder - Executive DirectorNigel Coe - Managing DirectorChelsey Pulcheon - Director of Investor RelationsJeff Sprague - Managing PartnerDeane Dray - Managing DirectorJoe Ritchie - Managing DirectorConference Call ParticipantsRyan Merkel - Re ...

Financial Data and Key Metrics Changes - Revenue for Q3 2025 declined by 5% due to weak residential and commercial end markets, despite growth initiatives [5][11] - Operating cash flow was $301 million, lower than the previous year due to elevated finished goods inventory levels [6][14] - Adjusted EPS reached a record of $6.98, marking a 4% year-over-year increase [6][11] - Full-year revenue outlook adjusted to a decline of 1%, with adjusted EPS expected in the range of $22.75 to $23.25 [7][17] Business Line Data and Key Metrics Changes - Home Comfort Solutions (HCS) segment revenue declined by 12%, with a 23% drop in unit sales volumes attributed to a weak summer selling season and inventory rebalancing [6][12] - Building Climate Solutions (BCS) segment saw a 10% revenue growth and a 330 basis point expansion in profit margins, driven by share gains in emergency replacement and business development in refrigeration [6][13] Market Data and Key Metrics Changes - The residential market faced significant challenges, with total sales down approximately 10% in sell-through and 20% in sell-in [25][26] - The company anticipates that channel inventory will normalize by Q2 2026, as contractors reduce excess inventory [34][39] Company Strategy and Development Direction - The company is focusing on four growth vectors: heat pump penetration, emergency replacement share gains, higher attachment rates for parts and services, and market expansion through joint ventures [7][9] - Recent acquisitions, including Durodyne and SUPCO, are expected to enhance the parts and accessories portfolio and provide cost synergies [8][9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment due to destocking, higher interest rates, and shifting consumer patterns but expressed confidence in a rebound in 2026 [19][20] - The company expects to gain market share through new product introductions and joint ventures, despite some anticipated headwinds [20][21] Other Important Information - Free cash flow guidance for 2025 revised to approximately $550 million, reflecting elevated inventory levels [14][17] - The company has repurchased approximately $350 million in shares year-to-date, with $1 billion remaining under the current authorization [14] Q&A Session Summary Question: Can you provide more context on residential volume declines? - Total sales in Q3 saw a 10% decline in sell-through and 20% in sell-in, with destocking occurring on both contractor and dealer sides [25][26] Question: What are the expectations for fourth quarter margins? - The primary factor for margin decline in Q4 is the pullback on manufacturing to right-size inventory levels [29] Question: When will inventory levels normalize? - Destocking is expected to continue into Q2 of next year, with contractors reducing excess inventory [34][39] Question: What is the outlook for the BCS segment? - Emergency replacement market share is expected to grow significantly, with nearly 100% growth observed in the quarter [35] Question: How will pricing be approached moving into next year? - The company expects pricing to offset inflation, similar to past trends, with a focus on maintaining pricing discipline [47][48] Question: What is the expected impact of the new commercial plant on productivity? - The new Saltillo plant is expected to deliver $10 million in productivity, contributing positively to the bottom line [91]

Lennox International (NYSE:LII) Q3 2025 Earnings Call October 22, 2025 09:30 AM ET Speaker0Welcome to the Lennox Third Quarter Earnings Conference Call. All lines are currently in a listen only mode and there will be a question and answer session at the end of the presentation. As a reminder, this call is being recorded. I would now like to turn the conference over to Chelsea Poulton from Lennox Investor Relations. Chelsea, please go ahead.Thank you, Katie. Good morning, everyone. Thank you for joining us a ...

Financial Data and Key Metrics Changes - Total net sales increased by 22.9% year over year to $322.1 million, up from $262.1 million in Q1 2024 [16][10] - Gross profit decreased by 6.4% to $86.4 million, with gross margin at 26.8% compared to 35.2% in Q1 2024 [18][12] - Diluted earnings per share was $0.35, down 23.9% from a year ago, while adjusted earnings were $0.37, down 20% [22][18] - Cash flow used in operations was $9.2 million compared to cash flows provided by operations of $92.4 million in the same period last year [23] Business Line Data and Key Metrics Changes - Sales of Basics branded equipment surged by 374.8%, driven by strong demand for airside and liquid cooling solutions for data centers [11][25] - Aon branded equipment sales declined by 19.1%, primarily due to weak bookings and production issues related to rooftop units [11][17] - Gross margin at the Aon Oklahoma segment decreased by 1380 basis points to 23.5%, while gross margins at the Basics and Aon Coil Products segments improved by 350 and 100 basis points, respectively [19][26] Market Data and Key Metrics Changes - Total backlog reached a record level of $1 billion, up 83.9% year over year and 18.4% quarter over quarter [13][29] - Backlog of Aon branded equipment increased by 44.9% year over year and 23.4% quarter over quarter, indicating strong demand [29][14] - Backlog of Basics branded equipment rose by 122.7% year over year and 15.4% quarter over quarter, driven by robust bookings [33][14] Company Strategy and Development Direction - The company focuses on three strategic pillars: leading in innovation and custom solutions, driving sustainable organic growth, and being a best-in-class operator [7][9] - The development of heat pumps and liquid cooling solutions is a key part of the company's strategy to drive market share gains [10][8] - The company aims to enhance operational efficiencies and expand production capacity, particularly in the Basics and Aon Coil Products segments [34][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of production volumes and profitability in the second quarter, despite ongoing macroeconomic uncertainties [31][31] - The sentiment across the sales channel remains upbeat, with expectations of continued market share gains [32][31] - Management anticipates full-year sales growth in the mid to high teens, with gross margins similar to those realized in 2024 [36][36] Other Important Information - The company plans to host an Investor Day on June 10 in New York City [38] - Capital expenditures for 2025 are expected to be approximately $220 million [24] Q&A Session Summary Question: What does K to 12 public bid data indicate about industry pricing? - Management noted that the Aon price premium has contracted, allowing for increased competitiveness and market share [46] Question: What is the current market share in national accounts? - Management indicated that while current market share is low, there is significant acceleration in national account activity, particularly with the Alpha Class product line [48] Question: How did the rooftop business perform in terms of orders? - Management confirmed that pushouts from the previous quarter have rebounded, and there is a traditional strengthening of orders [60] Question: What is the outlook for the Oklahoma business? - Management stated that the guidance remains unchanged, with uncertainty primarily in Q4 due to macroeconomic factors [100] Question: How is the company positioned regarding tariffs? - Management expressed confidence in their vertical integration and reliance on US partners, which mitigates tariff impacts compared to competitors [92] Question: What is the diversification of customers within the Basics branded products? - Management emphasized ongoing efforts to diversify the customer base and reduce reliance on any single customer [95]