RBC Capital has adjusted its price target for Lennox International Inc. (LII, Financial), moving it slightly upward from $580 to $582 while maintaining a Sector Perform rating on the stock. This decision comes in the wake of disappointing performance from Lennox's Building Climate Solutions segment, which did not meet revenue and margin expectations.
Despite this shortfall in earnings quality, RBC expresses confidence in the company's leadership. The bank lauds the management's insightful analysis of tariff challenges and their strategic approach to overcoming these hurdles. This positive outlook on management's capabilities influenced RBC’s decision to raise the price target, albeit modestly.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 15 analysts, the average target price for Lennox International Inc (LII, Financial) is $577.41 with a high estimate of $700.00 and a low estimate of $431.12. The average target implies an upside of 13.49% from the current price of $508.76. More detailed estimate data can be found on the Lennox International Inc (LII) Forecast page.
Based on the consensus recommendation from 21 brokerage firms, Lennox International Inc's (LII, Financial) average brokerage recommendation is currently 3.0, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Lennox International Inc (LII, Financial) in one year is $414.49, suggesting a downside of 18.53% from the current price of $508.76. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Lennox International Inc (LII) Summary page.
LII Key Business Developments
Release Date: April 23, 2025
- Revenue Growth: 2% increase in the first quarter.
- Segment Margin: 14.5%, a decrease of 140 basis points.
- Operating Cash Usage: $36 million.
- Adjusted Earnings Per Share (EPS): $3.37 for the quarter.
- Home Comfort Solutions Sales Increase: 7% driven by new R-454B product.
- Building Climate Solutions Revenue Decline: 6% decrease due to destocking and order delays.
- Operating Cash Outflow: $36 million compared to $23 million in the prior year.
- Net Debt to Adjusted EBITDA: 0.8x, improved from 1.4x in the prior year quarter.
- Full Year Revenue Growth Guidance: Confirmed at 2%.
- Full Year Adjusted EPS Guidance: Raised to a range of $22.25 to $23.50.
- Total Cost Inflation Expectation: Increased to 9% from previous 3% guidance.
- Price Increase: New price increases effective early in the second quarter, boosting price gains to 7%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lennox International Inc (LII, Financial) reported a 2% revenue growth in the first quarter, driven by favorable mix initiatives from new R-454B products.
- The company has successfully transitioned to new low GWP products, with approximately 50% of equipment sales in the quarter being the new R-454B product.
- Lennox International Inc (LII) has implemented two price increases to offset tariff impacts, which are expected to boost price gains to 7%.
- The company is actively pursuing tariff mitigation strategies, including production shifts and leveraging more U.S.-based components.
- Lennox International Inc (LII) maintains a strong balance sheet, with net debt to adjusted EBITDA at 0.8x, an improvement from 1.4x in the prior year quarter.
Negative Points
- Segment margin decreased by 140 basis points to 14.5%, primarily due to tariff-related costs and manufacturing inefficiencies.
- The Building Climate Solutions segment experienced a 6% decline in revenue, with sales volumes down 9% due to expected destocking and order delays.
- Operating cash outflow increased to $36 million compared to $23 million in the prior year, due to inventory investments.
- The company has revised its full-year volume assumptions downward, anticipating a decrease in sales volumes by 4% compared to previous guidance of a 2% increase.
- Lennox International Inc (LII) faces ongoing challenges from tariff impacts, with total cost inflation now expected to be 9%, up from previous guidance of 3%.
