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Lennox International Inc LII

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Morningstar’s Analysis

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Supply Chain Issues Suppress Lennox's Q3 Performance; Our Long-Term Outlook Is Unchanged

Analyst Note

| Brian Bernard, CFA, CPA |

Narrow-moat Lennox International's third-quarter results were adversely affected by supply chain and other pandemic-related disruptions, which lowered the firm's revenue and operating income by $75 million and $25 million, respectively. Compared with the prior-year third quarter, revenue rose modestly (0.5%) but segment operating margin compressed 120 basis points to 15.5% and adjusted EPS declined 4% to $3.40. Management estimates that adjusted EPS would've been $0.55 higher if not for these disruptions. Inflation has been an issue, too, and the company continues to raise prices to help mitigate these headwinds. Lennox's strong brand equity affords the firm good pricing power, so we'd also expect to see solid price realization in 2022, especially as the demand backdrop should remain generally favorable.  

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Company Profile

Business Description

Lennox International manufactures and distributes heating, ventilating, air conditioning, and refrigeration products to replacement (75% of sales) and new construction (25% of sales) markets. In fiscal 2020, residential HVAC was 65% of sales, commercial HVAC was 22%, and refrigeration accounted for the remaining 13% of sales. The company goes to market with multiple brands, but Lennox is the company’s flagship HVAC brand. The Texas-based company generates most of its sales in North America.

2140 Lake Park Boulevard
Richardson, TX, 75080
T +1 972 497-5000
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 10,300