Lennox International stock price target maintained by RBC amid residential weakness

Investing.com - Lennox International (NYSE:LII), currently trading at $527.51 and near its 52-week low, received a reiterated Sector Perform rating and $598.00 price target from RBC Capital, following the company’s latest earnings report. According to InvestingPro data, 13 analysts have recently revised their earnings expectations downward for the upcoming period.

The HVAC manufacturer reported operating results that were in line with expectations, though its headline EPS of $6.98 benefited from below-the-line items, including a lower tax rate that contributed $0.20 per share to earnings.

Home Comfort, Lennox’s residential segment, experienced a 12% year-over-year revenue decline, with organic sales falling 11.6% due to distributor and contractor destocking, weak new construction, and a shift toward repair rather than replacement purchases. Despite volume declining 23 percentage points, price/mix added 11 percentage points, helping segment margins expand slightly by 30 basis points to 22.2%.

The company’s Building Climate segment outperformed expectations with 10.4% organic sales growth and better margins, helping total company operating margins expand 150 basis points year-over-year to 21.7%.

Looking ahead, Lennox lowered its 2025 EPS guidance by $0.75 at the midpoint and reduced its free cash flow guidance from $650-$800 million to approximately $550 million, citing elevated inventory levels after a weak summer selling season, regulatory transition preparation, and investments in its Samsung joint venture. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value, with an EBITDA of $1.15 billion for the last twelve months.

In other recent news, Lennox reported its third-quarter earnings, surpassing expectations with adjusted earnings per share of $6.98, compared to analyst estimates of $6.93. However, the company’s revenue fell short, reaching $1.43 billion against a consensus estimate of $1.5 billion. This represents a 5% year-over-year decline, attributed to a "transitional year" due to the refrigerant transition and challenging macroeconomic conditions, according to CEO Alok Maskara. Despite the revenue shortfall, Lennox increased its segment profit by 2% to $310 million. Additionally, the company improved its segment margins by 150 basis points, reaching 21.7%. These developments provide insight into the company’s performance amid ongoing industry changes.

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