Lennox International(US:LII)2025-04-23 19:23Financial 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]