Lennox stock holds Perform rating after 4Q earnings beat

On Wednesday, Oppenheimer maintained a Perform rating for Lennox International (NYSE:LII) stock, following the company’s announcement of fourth-quarter results that exceeded expectations. According to InvestingPro data, nine analysts have recently revised their earnings estimates upward for the upcoming period, despite the stock experiencing a 9.39% decline over the past week. The report indicated a robust performance for the quarter, but the forecast for fiscal year 2025 (FY25) presented midpoints that were slightly below market predictions. The stock’s decline on Wednesday was largely attributed to the market’s reaction to the stronger-than-anticipated pre-buy activity in the fourth quarter of 2024.

Lennox International, which currently generates annual revenue of $5.15 billion and maintains a healthy gross profit margin of 32.45%, reported that it expects FY25 margins to remain relatively flat year-over-year. This outlook takes into account the impact of pre-buy activities, cost inflation, and planned investments. However, management expressed a positive outlook on the company’s potential to reach the higher end of its target margin range by fiscal year 2026 (FY26). This confidence is based on Lennox’s strategic initiatives aimed at driving growth through pricing strategies and distribution excellence. InvestingPro analysis indicates the company maintains strong financial health with excellent profitability metrics.

The company has demonstrated adept handling of regulatory changes in the past two years, successfully navigating transitions such as the Seasonal Energy Efficiency Ratio (SEER) updates and the switch to 410A refrigerant. With this track record, Lennox is expected to continue its agile and opportunistic approach in the face of potential tariffs and industry labor pressures.

Following the update, Oppenheimer has revised its estimates for Lennox International for FY25 and FY26. While the firm remains neutral on the stock’s valuation, it views the recent pullback in share price as a constructive development. Trading at a P/E ratio of 29.4, InvestingPro analysis suggests the stock is currently overvalued relative to its Fair Value. Despite the slight dip in guidance, the company’s solid performance and strategic positioning were highlighted as key factors in maintaining the Perform rating. For deeper insights into Lennox International’s valuation and 13 additional ProTips, investors can access the comprehensive Pro Research Report available on InvestingPro.

In other recent news, Morgan Stanley (NYSE:MS) has adjusted its price target for Lennox International from $595 to $585, maintaining an Underweight rating on the stock. This adjustment follows a review of the company’s fourth quarter performance in 2024 and subsequent updates to earnings estimates. The new price target is based on approximately 24 times the projected earnings per share of $24.21 for the year 2026, a premium over Lennox International’s industry peers.

Morgan Stanley’s analysis indicates the company may face a devaluation of its multiple due to an anticipated slowdown in organic growth and margin expansion. Lennox International reported fourth-quarter earnings that exceeded analyst projections, with adjusted earnings per share of $5.60 and revenue of $1.3 billion. The company’s core revenue grew 22% year-over-year to $1.3 billion in Q4, and the adjusted segment profit rose 41% to $248 million.

For the full year 2024, Lennox reported a 13% increase in revenue for core operations, totaling $5.3 billion, and a 26% rise in adjusted earnings per share to $22.58. However, the company provided a cautious outlook for 2025, forecasting adjusted earnings per share in the range of $22.00 to $23.50. These recent developments underscore Lennox’s performance and projections.

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