Lennox Stock Upgraded at Goldman Sachs

• Lennox International Inc. (NYSE:LII) reported a significant beat on third-quarter earnings per share (EPS) and revenue forecasts.
• The company's revenue and operating income showed remarkable year-over-year growth, with revenue up by 9.7% and operating income reaching a record $303 million.
• Lennox raised its full-year guidance, reflecting confidence in continued financial growth and operational efficiency.

Lennox International Inc. (NYSE:LII), a leading name in the Building Products - Air Conditioner and Heating industry, is renowned for its energy-efficient climate-control solutions. On October 23, 2024, Lennox reported impressive third-quarter earnings, with earnings per share (EPS) of $6.68, surpassing the estimated $5.95. This performance highlights Lennox's ability to exceed Wall Street expectations.

The company's revenue for the quarter reached approximately $1.5 billion, exceeding the estimated $1.42 billion. This represents a 9.7% increase compared to the same period last year, as highlighted by Zacks. The revenue figure also surpassed the Zacks Consensus Estimate of $1.41 billion, resulting in a positive surprise of 6.16%. This consistent revenue growth underscores Lennox's strong market position.

Lennox's operating income reached a record $303 million, with adjusted segment profit rising 21% to the same amount. The adjusted segment margin improved by 90 basis points to a record 20.2%. These figures reflect the company's effective execution of its transformation plan, as noted by CEO Alok Maskara. The adjusted diluted earnings per share increased by 24% to $6.68, further demonstrating Lennox's financial strength.

The company reported net cash from operations at $452 million, while free cash flow surged by 50% to $412 million. In light of these strong results, Lennox has raised its full-year guidance, projecting a 10% revenue growth. Earnings per share are expected to be between $20.75 and $21.00, with cash flow anticipated to range from $575 million to $650 million.

Lennox's financial metrics provide additional insights into its performance. The company has a price-to-earnings (P/E) ratio of approximately 28.8, indicating investor confidence. The price-to-sales ratio stands at about 4.22, reflecting the value placed on each dollar of sales. With a debt-to-equity ratio of approximately 1.89, Lennox shows a balanced approach to financing its assets.

Goldman Sachs analysts upgraded the rating for Lennox (NYSE:LII) from Sell to Buy and set a new price target of $455 per share.

The bank's rationale for this upgrade is based on several factors. They believe that the residential HVAC (Heating, Ventilation, and Air Conditioning) volumes have likely reached their low point and that advantageous pricing trends related to an upcoming refrigerant change will contribute to stronger growth in 2024.

Furthermore, the analysts anticipate improvements in commercial margins, suggesting that the company's profitability in this segment is not yet fully realized. They expressed confidence in Lennox's ability to continue to outperform market expectations.