- Price
- $358.50
- Fair value
- $560.00
- Discount
- 36.0%
- Uncertainty
- High
- LSEG rating
- 2.80
- Moat
- Narrow
- Next earnings
- 2026-10-28
- Next earnings is estimate
- No
- Company name
- Lennox
- Sector
- HVAC equipment
- About
- Lennox makes heating, air conditioning, refrigeration and water heating equipment, mostly for North America. It has two segments. Home Comfort Solutions sells furnaces, air conditioners, heat pumps, thermostats, parts and supplies for homes, both directly to contractors through its own stores and through independent distributors. Building Climate Solutions sells rooftop units and other equipment for commercial buildings, refrigeration equipment for food stores and cold storage, and installation and service. Most home sales replace old systems that break, but new home construction is also a market. In Q2 2026, Home Comfort Solutions had $936 million of revenue and Building Climate Solutions had $610 million. Lennox also buys smaller companies, such as Duro Dyne and Supco in 2025 and Heat Controller in 2026, to sell more parts and products to distributors.
- Thesis
- The market prices Lennox for a long fall in home HVAC sales. Home Comfort Solutions revenue fell 21% in Q4 2025, 10% in Q1 2026 and 7% in Q2 2026, because new home construction is weak and distributors bought less. Lower volumes cut segment margin by 130 basis points in Q2 2026, and Lennox lowered its 2026 EPS guidance to $23.00 to $24.00 from $23.50 to $25.00. Investors fear that home demand stays low while inflation and tariffs raise costs, and that the commercial growth cannot offset it. For the gap to close, home sales must stop falling and return to growth through 2027. Building Climate Solutions must keep its organic growth, which was 15% in Q2 2026, and its margin near 25%. Lennox must also meet its 2026 guidance of about 8% revenue growth and $750 million to $850 million of free cash flow while it integrates Heat Controller. The Q3 2026 report on October 28, 2026, shows the summer season, and the Q4 report with the 2027 guidance in about late January 2027 shows whether home demand recovers. If home sales stabilize, the gap can close over the next four to six quarters. If housing stays weak through 2027, it can stay open longer.
- Risks
- Home HVAC sales fell for several quarters. If new home construction and replacement demand stay weak, Home Comfort Solutions, the larger segment, loses volume and margin.
Steel, aluminum and copper prices and tariffs change product costs. Lennox raised prices to offset them, and tariff refunds of $30 million helped profit in Q2 2026, which may not repeat.
Lennox grows by buying companies such as Duro Dyne, Supco and Heat Controller. If it does not integrate them well, the expected sales and profits may not come.
HVAC sales depend on the weather. A cool summer lowers replacement demand for air conditioners.
- Balance sheet
- Cash: $52M
Debt: $1.5B
Net debt: $1.5B
Interest cover: 17×
Undrawn credit line: $586M, to May 2030
Debt due within 12 months: $412M
Last debt due: 2028
Ratings: Moody's Baa1 (stable outlook), S&P BBB (stable outlook)
Debt is the principal at June 30, 2026: $412.0 million of commercial paper, a $300 million term loan due October 16, 2027, $300 million of 1.70% notes due August 1, 2027 and $500 million of 5.50% notes due September 2028. It does not include $74.7 million of finance leases. Due within 12 months is the commercial paper. Debt is usually higher in the first half of the year because of seasonal working capital. Undrawn credit is the $586.3 million available under the $1.0 billion revolving credit facility after the commercial paper, and the facility matures in May 2030. Interest cover is operating income divided by net interest expense for the first half of 2026. The debt-to-total-capital ratio was 55%. After the quarter, in July 2026, Lennox paid about $205 million for Heat Controller. It bought back $151.3 million of shares in the first half of 2026 and expects $750 million to $850 million of free cash flow in 2026.
As of 2026-06-30.
- Checkpoints
- Oct 28, 2026: Q3 2026 results: home HVAC volumes. Pending. Watch: A smaller fall or growth in Home Comfort Solutions revenue and a kept 2026 EPS range pass; another guidance cut fails.
Jan 2027 (estimate): Q4 2026 results and 2027 guidance. Pending. Watch: 2026 free cash flow of $750 million to $850 million and 2027 guidance for home sales growth pass; guidance for another year of lower home sales fails.
- Recent events
- 2026-10-08: Lennox said that it will report Q3 2026 results before the market opens on October 28, 2026.
2026-07-29: Lennox reported Q2 2026 results. Revenue rose 3% to $1.5 billion, and diluted EPS was flat at $7.72. Home Comfort Solutions revenue fell 7%, and Building Climate Solutions revenue rose 24%, with 15% organic growth. Lennox lowered its 2026 EPS guidance to $23.00 to $24.00 and kept its guidance for about 8% revenue growth and $750 million to $850 million of free cash flow.
2026-07-13: Lennox completed the purchase of Heat Controller, which sells the Comfort-Aire and Century brands to small and mid-size HVAC distributors in North America, for about $205 million. Lennox had signed the agreement on June 18, 2026.
2026-05-21: Lennox increased its quarterly dividend from $1.30 to $1.36 per share.
2026-04-29: Lennox reported Q1 2026 results. Revenue rose 6% to $1.1 billion, and diluted EPS fell 8% to $3.35. Home Comfort Solutions revenue fell 10%, a smaller fall than the 21% of Q4 2025, and Building Climate Solutions had 26% organic growth.