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On Thursday, Morgan Stanley (NYSE:MS) adjusted its outlook on Lennox International (NYSE:LII), reducing the price target to $585 from the previous $595. The firm continues to hold an Underweight rating on the stock. The revision follows the evaluation of the company’s fourth quarter performance in 2024 and subsequent updates to earnings estimates. According to InvestingPro data, the stock has experienced a significant 9.39% decline over the past week, with shares currently trading at $604.33.
The new price target is based on approximately 24 times the projected earnings per share (EPS) of $24.21 for the year 2026. This valuation represents a roughly 4% premium over Lennox International’s industry peers. It is noted that this premium is lower than current levels and the average over the past year, yet it remains above the long-term average. InvestingPro analysis shows the stock currently trades at a P/E ratio of 29.4x and an EV/EBITDA multiple of 21.42x, suggesting rich valuations relative to historical norms.
Morgan Stanley’s analysis indicates that the company may face a devaluation of its multiple due to an anticipated slowdown in organic growth and margin expansion in a more challenging demand environment. This perspective takes into account the expected low single-digit organic growth in 2025, which could be somewhat balanced by a favorable product mix that may mitigate the impact of volume declines. The firm then anticipates a return to mid-single-digit growth in 2026.
The Underweight rating maintained by Morgan Stanley suggests that analysts at the firm believe the stock may underperform relative to the average returns of the stocks that Morgan Stanley covers. This rating decision is informed by the firm’s assessment of Lennox International’s future earnings potential and market positioning.
Lennox International’s performance and future prospects are being closely monitored by investors, with the company’s stock price and valuation subject to change based on market conditions and the company’s financial results.
In other recent news, Lennox International Inc. 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. CEO Alok Maskara praised the company’s progress in cash conversion and successful transition to new refrigerants.
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.
Lennox expects a 2% increase in core revenue in 2025, driven primarily by new refrigerant products and modest increases in price and volume. These recent developments show Lennox’s performance and projections, as reported by the company and analysts.
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