Lennox International Q2 Earnings Call Highlights

Lennox International Q2 revenue rose 3% to $1.5 billion , while adjusted EPS was flat at $7.72. Strong 24% growth in the commercial Building Climate Solutions segment offset a 7% decline in residential Home Comfort Solutions revenue. Residential demand remains pressured by weak new construction, elevated mortgage rates and consumers delaying replacements. Lennox said the recovery is progressing more slowly than expected, with meaningful benefits now anticipated in 2027. Lennox lowered its full-year adjusted EPS guidance to $23–$24 and reduced its residential growth outlook, while raising its commercial growth forecast to approximately 20%. The company maintained its 8% enterprise revenue-growth target and $750 million–$850 million free-cash-flow outlook.

Lennox International NYSE: LII reported second-quarter revenue growth of 3% to $1.5 billion, while total segment profit increased 2% to $355 million and adjusted earnings per share was flat at $7.72. The company said strong performance in its commercial-focused Building Climate Solutions segment helped offset continued weakness in residential markets. Chief Executive Officer Alok Maskara said the quarter reflected the benefits of Lennox’s direct-to-dealer model, investments in digital and distribution capabilities, and actions to manage a changing operating environment. However, he said residential demand recovery has progressed more slowly than expected, leading the company to shift expectations for the most meaningful recovery benefits into 2027 rather than the second half of 2026.

Home Comfort Solutions revenue declined 7% from the prior-year period, led by a 12% decline in unit volumes. Favorable pricing and mix added 3% growth, while acquisitions contributed another 2%. The volume decline nevertheless improved from the 21% drop reported in the first quarter. Residential new-construction weakness was a major factor, with revenue in that market down about 30% during the quarter. One-step channel volumes declined by the mid-teens, while two-step volumes were relatively flat year over year.

Maskara said much of the one-step decline was tied to residential new-construction business that Lennox chose to leave because margins were too low. He said the company’s exit from that business occurred faster than expected amid competitive pricing, but added that Lennox is nearly complete with its effort to move away from lower-margin accounts. “We don’t want to do that again,” Maskara said, referring to shipping units at negative margins. “We feel good about where we are to protect our margins and make smart business choices.” The company said replacement-market share has increased modestly over the past 12 months, even as it has lost significant share in new construction. Maskara cited elevated mortgage rates, inflation, low consumer confidence and subdued housing construction as constraints on residential demand. He said Lennox believes replacement demand has been deferred rather than eliminated, as consumers choose repair over replacement.

Home Comfort Solutions segment profit fell $30 million. Lower sales volume represented roughly $50 million of EBIT headwinds, including about $10 million of factory absorption pressure as the company adjusted production and inventories to match market conditions. The segment also received approximately $25 million of tariff refunds during the quarter, earlier than initially expected.

Building Climate Solutions revenue rose 24%, including 12% organic growth. Acqu...