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On Thursday, RBC Capital Markets adjusted its price target for Lennox International (NYSE:LII) shares, increasing it slightly from $580.00 to $582.00, while keeping a Sector Perform rating on the stock. According to InvestingPro data, the stock is currently trading near its Fair Value, though it has experienced a significant 8.52% decline over the past week. Analyst targets for the stock range from $430 to $700, reflecting mixed market sentiment. The move follows Lennox International’s first-quarter earnings for the year 2025, which RBC Capital described as having "low earnings quality." The earnings were reportedly bolstered by a 21-cent benefit due to reduced Corporate expenses. InvestingPro analysis reveals that 9 analysts have recently revised their earnings expectations downward for the upcoming period, though the company maintains a strong financial health score of "GREAT" with robust profitability metrics.
Lennox’s Building Comfort Solutions (BCS) division, accounting for approximately one-third of its revenues, performed significantly below expectations. The shortfall in both revenue and margins was attributed to a range of factors including the aftermath of a pre-buy in the fourth quarter of 2024, inefficiencies associated with the startup of a new factory, and ongoing tariff-related cost pressures.
Despite these challenges, RBC Capital expressed approval of Lennox’s management approach to the tariff issues and the company’s strategy to mitigate these headwinds. Analysts were particularly impressed by the company’s efforts to decrease reliance on sourcing from China by three to four times since the last major tariff imposition. Additionally, Lennox’s plan to implement price increases and targeted surcharges was seen as a positive step in maintaining the company’s full-year financial outlook. The company’s financial strength is evident in its 7.78% revenue growth and consistent dividend payments, which it has maintained for 27 consecutive years. For deeper insights into Lennox’s financial health and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US equities.
In light of these developments, RBC Capital has revised its earnings estimate for Lennox in 2025 upward by 20 cents, setting it at $23.35. The firm’s analysts believe that the risk/reward profile for Lennox International appears balanced at this time. The modest increase in the price target to $582 reflects these updated expectations and the company’s strategic responses to current market challenges.
In other recent news, Lennox International reported its earnings for the first quarter of 2025, surpassing Wall Street expectations with an adjusted earnings per share (EPS) of $3.37, compared to the forecasted $3.20. The company experienced a 2% increase in revenue year-over-year, totaling $1.1 billion, although segment margins decreased by 140 basis points to 14.5%. Despite the positive earnings surprise, Lennox’s stock fell, reflecting investor concerns over margin declines and broader economic uncertainties. Oppenheimer analyst Noah Kaye upgraded Lennox’s stock rating to Outperform from Perform, setting a new price target of $600, citing temporary setbacks in the Building Comfort Solutions (BCS) segment as opportunities for future growth. Kaye anticipates that Lennox will overcome current challenges, with potential market share gains in fiscal year 2026. The company has also adjusted its full-year EPS guidance to a range of $22.25 to $23.50 and plans to implement two price increases to counteract anticipated cost inflation. These developments highlight Lennox’s strategy to navigate short-term challenges while focusing on long-term growth opportunities.
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