GET DAILY SIGNALSLennox International (LII) Q3 2026: +10% Sales Rise but EPS Miss Prompts Guidance Cut
Key Takeaways
- Lennox International (LII) reported third quarter 2026 net sales of $1.57 billion, up 10% year over year, driven by strength in Building Climate Solutions.
- Adjusted earnings per share (EPS) fell 7% to $6.84, missing Wall Street's consensus estimate as pricing failed to fully offset tariffs and inflation.
- Home Comfort Solutions revenue rose 3% while Building Climate Solutions revenue surged 24%, reflecting a two-speed business environment.
- Management lowered its full-year 2026 adjusted EPS guidance to $21.00–$21.50 from a prior $23.00–$24.00 range.
- Operating cash flow climbed to $395 million, and the company repurchased roughly $151 million of shares during the quarter.
Why These Earnings Matter
Lennox International's third quarter report matters because it captures a pivotal moment for the heating, ventilation, and air conditioning (HVAC) leader. The company is navigating softer residential demand tied to homeowner affordability and elevated mortgage rates, while its commercial segment continues to gain momentum. Investors were watching whether pricing actions could offset persistent tariff and inflation headwinds. The results revealed that revenue growth held up, but profitability fell short of the company's own expectations, prompting a full-year guidance cut. The quarter also marked early steps in a new "recovery plan" aimed at regaining residential market share and restoring margins heading into 2027.
The Quarter in Numbers
Lennox International reported third quarter 2026 net sales of $1.57 billion, an increase of 10% from $1.43 billion a year earlier. Net income was $221.2 million, down from $259.9 million in the prior-year quarter, while diluted earnings per share (EPS) came in at $6.41 versus $7.38 a year ago. On an adjusted basis, EPS declined 7% to $6.84, missing analyst consensus estimates. I also checked this using Tickeron’s AI Screener to see how the stock compares to others in the industry.
Segment results were mixed. Home Comfort Solutions revenue rose 3% to $937.2 million, though organic revenue was down 1% as competition limited price realization. Building Climate Solutions delivered revenue growth of 24% to $635.3 million, including 15% organic growth. Total segment profit declined about 2% to $323 million. Operating cash flow reached $395 million, up $95 million from the prior year, with trailing twelve-month free cash flow conversion of 108%.
Management updated full-year 2026 guidance, lowering adjusted EPS expectations to $21.00–$21.50 from $23.00–$24.00 and reducing revenue growth guidance to approximately 6% from roughly 8%.
How the Market Responded
The market reacted negatively to the earnings report, with LII shares falling about 4.6% to roughly $355.00 immediately after the announcement. The decline reflected investor disappointment over the profit miss and the lowered full-year guidance. While the double-digit revenue growth was welcomed, the contraction in operating margin—down to 19.8% from 23% a year earlier—underscored concerns that competitive pricing pressure and cost inflation are weighing on profitability. Management's candid acknowledgment that results "fell short of our expectations" and the introduction of a recovery plan signaled to investors that margin repair may take several quarters. The stock had already underperformed the broader market year to date, adding to the cautious sentiment heading into the report.
What to Watch Going Forward
Looking ahead, investors should focus on several key factors as Lennox works to reset its business. Management has outlined a recovery plan centered on more dynamic pricing, accelerated cost productivity, an expanded entry-tier product portfolio, and deeper customer relationships. The near-term objective is to stabilize residential market share and improve profitability without relying on a broad end-market recovery.
Cost trends will be critical to watch. Lennox expects inflationary pressures from tariffs and commodities to persist, and the first half of 2027 is expected to be more challenging as year-over-year tariff headwinds flow through. Productivity initiatives across manufacturing, distribution, and selling, general, and administrative (SG&A) expenses are intended to narrow the price-cost gap.
Demand signals also matter. Home Comfort Solutions sales trends improved sequentially, but a broad residential recovery has not yet materialized. In contrast, Building Climate Solutions continues to grow strongly, supported by national accounts and emergency replacement business. The company will provide detailed 2027 guidance with its fourth quarter results, making that update a key upcoming catalyst for investors.
Using AI Tools in My Research
I often turn to Tickeron’s AI Screener when analyzing earnings like these. It helps me quickly filter stocks by fundamentals, technical patterns, and industry trends, giving a clearer picture of how LII stacks up against peers without spending hours on manual checks. This kind of tool fits naturally into my routine for spotting opportunities and risks.
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Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
LII in upward trend: price may ascend as a result of having broken its lower Bollinger Band on October 28, 2026
LII may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options. In 24 of 35 cases where LII's price broke its lower Bollinger Band, its price rose further in the following month. The odds of a continued upward trend are 69%.
Technical Analysis (Indicators)
Bullish Trend Analysis
Following a +4.11% 3-day Advance, the price is estimated to grow further. Considering data from situations where LII advanced for three days, in 217 of 331 cases, the price rose further within the following month. The odds of a continued upward trend are 66%.
Bearish Trend Analysis
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In 34 of 53 cases where LII's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are 64%.
The Momentum Indicator moved below the 0 level on October 28, 2026. You may want to consider selling the stock, shorting the stock, or exploring put options on LII as a result. In 59 of 88 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are 67%.
The Moving Average Convergence Divergence Histogram (MACD) for LII turned negative on October 29, 2026. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 55 similar instances when the indicator turned negative. In 34 of the 55 cases the stock turned lower in the days that followed. This puts the odds of success at 62%.
LII moved below its 50-day moving average on October 28, 2026 date and that indicates a change from an upward trend to a downward trend.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where LII declined for three days, the price rose further in 50 of 62 cases within the following month. The odds of a continued downward trend are 69%.
The Aroon Indicator for LII entered a downward trend on October 16, 2026. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Fundamental Analysis (Ratings)
The Tickeron SMR rating for this company is 17 (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Seasonality Score of 50 (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Price Growth Rating for this company is 74 (best 1 - 100 worst), indicating slightly worse than average price growth. LII’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is 77 (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Valuation Rating of 78 (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (9.167) is normal, around the industry mean (2.982). P/E Ratio (15.218) is within average values for comparable stocks, (25.210). Projected Growth (PEG Ratio) (0.934) is also within normal values, averaging (1.215). Dividend Yield (0.016) settles around the average of (0.074) among similar stocks. P/S Ratio (2.387) is also within normal values, averaging (1.867).
The Tickeron Profit vs. Risk Rating rating for this company is 85 (best 1 - 100 worst), indicating that the returns do not compensate for the risks. LII’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 76, placing this stock worse than average.
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General Information
a manufacturer of broad range of products for the heating, ventilation, air conditioning and refrigeration markets
Industry BuildingProducts