Lennox Reports 2026 Third Quarter Earnings Results
LENNOX INTERNATIONAL INC (LII) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Lennox Reports 2026 Third Quarter Earnings Results ____________________________________________________________________________ Highlights (All comparisons are year-over-year, unless otherwise noted) • Revenue of $1.6 billion, up 10% • GAAP Operating Income of $312 m
How this was made
The 30-second read
Why it matters
The EPS guidance reduction is the primary catalyst for price movement; other metrics (cash flow, repurchases) provide partial offset.
Market read
Guidance downgrade is likely to trigger a short‑term sell‑off in LII, with potential spill‑over to peers in the climate‑solutions and HVAC space.
What to watch
Share repurchases of $151 M and strong cash flow could support the stock despite lower EPS guidance.
Lennox Reports 2026 Third Quarter Earnings Results
Revenue grew 10% and Building Climate Solutions delivered 24% revenue growth, but GAAP operating income declined 5%, adjusted diluted EPS declined 7%, Home Comfort Solutions margin declined 490 basis points, and full-year adjusted EPS guidance was reduced to $21.00 to $21.50 from $23.00 to $24.00.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net sales, three months ended September 30, 2026GAAP | $1.57B | – | up 10% |
| Cost of goods sold, three months ended September 30, 2026GAAP | $1.08B | – | – |
| Gross profit, three months ended September 30, 2026GAAP | $497.2M | – | – |
| Selling, general and administrative expenses, three months ended September 30, 2026GAAP | $177.3M | – | – |
| Operating income, three months ended September 30, 2026GAAP | $312.1M | – | down 5% |
| Operating margin, three months ended September 30, 2026GAAP | 19.8% | – | down 320 basis points |
| Total segment profit including unallocated Corporate and other expenses, three months ended September 30, 2026non-GAAP | $323.3M | – | down 2% |
| Total segment profit margin, three months ended September 30, 2026non-GAAP | 20.6% | – | down 240 basis points |
| Net income, three months ended September 30, 2026GAAP | $221.2M | – | – |
| Diluted earnings per share, three months ended September 30, 2026GAAP | $6.41 | – | – |
| Adjusted net income, three months ended September 30, 2026non-GAAP | $235.9M | – | – |
| Adjusted diluted earnings per share, three months ended September 30, 2026non-GAAP | $6.84 | – | down 7% |
| Net cash provided by operating activities, three months ended September 30, 2026GAAP | $395.3M | – | – |
| Purchases of property, plant and equipment, three months ended September 30, 2026GAAP | $33.2M | – | – |
| Free cash flow, three months ended September 30, 2026non-GAAP | $362.7M | – | – |
| Net sales, nine months ended September 30, 2026GAAP | $4.25B | – | – |
| Gross profit, nine months ended September 30, 2026GAAP | $1.39B | – | – |
| Operating income, nine months ended September 30, 2026GAAP | $830.6M | – | – |
| Net income, nine months ended September 30, 2026GAAP | $607.4M | – | – |
| Diluted earnings per share, nine months ended September 30, 2026GAAP | $17.47 | – | – |
| Adjusted net income, nine months ended September 30, 2026non-GAAP | $622.1M | – | – |
| Adjusted diluted earnings per share, nine months ended September 30, 2026non-GAAP | $17.89 | – | – |
| Net cash provided by operating activities, nine months ended September 30, 2026GAAP | $583.4M | – | – |
| Purchases of property, plant and equipment, nine months ended September 30, 2026GAAP | $124.4M | – | – |
| Free cash flow, nine months ended September 30, 2026non-GAAP | $461M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Home Comfort Solutions, three months ended September 30, 2026Targeted price adjustments in select market segments were implemented to defend and recapture share. Inflation and tariff-related costs weighed on profitability. | $937.2M | – | up 3% |
| Building Climate Solutions, three months ended September 30, 2026Continued strength across commercial HVAC, refrigeration, and services, fueled by business development across the segment. | $635.3M | – | up 24%, including organic growth of 15% |
| Home Comfort Solutions, nine months ended September 30, 2026Not provided. | $2.52B | – | – |
| Building Climate Solutions, nine months ended September 30, 2026Not provided. | $1.73B | – | – |
full year 2026 outlook
- Revenueapproximately 6% growth, including 5% benefit from completed acquisitions
- NoteAdjusted earnings per share guidance of $21.00 to $21.50
- NoteFree cash flow guidance of $700 million to $750 million
Capital returns
- Share repurchases totaled $151 million.
- Repurchases of common stock were $301.9 million for the nine months ended September 30, 2026, compared to $331.8 million in the prior-year period.
- Cash dividends paid were $137.5 million for the nine months ended September 30, 2026, compared to $127.4 million in the prior-year period.
What drove it
- Third-quarter revenue growth was driven by organic growth in Building Climate Solutions and contributions from completed acquisitions.
- Higher sales volumes contributed $13 million, mix and price benefits contributed $21 million, and completed acquisitions contributed $20 million to third-quarter profitability.
- Building Climate Solutions profit increased $26 million or 19%, supported by $24 million from higher sales volumes, $8 million of mix and price benefits, and $13 million from completed acquisitions.
- Third-quarter operating cash flow was driven by reduced inventory levels.
Concerns
- Product cost inflation, including tariffs, and lower factory absorption created a $45 million third-quarter headwind.
- Higher fuel costs, inflation across SG&A and distribution, and ongoing investments created an additional $15 million of pressure.
- Home Comfort Solutions profit declined $40 million versus the prior-year quarter, including a $12 million headwind from lower sales volumes.
- Home Comfort Solutions segment margin declined 490 basis points.
- The company reduced full-year adjusted earnings per share guidance to $21.00 to $21.50 from $23.00 to $24.00.
What to watch
- Mitigation of share challenges and the effect of targeted price adjustments in Home Comfort Solutions.
- Productivity and tariff mitigation initiatives intended to improve cost pass-through.
- Entry-tier portfolio new-product introductions.
- Whether Building Climate Solutions can expand full-year margins despite inflation and tariff pressures.
- Delivery against full-year free cash flow guidance of $700 million to $750 million.
Balance sheet and cash flow
- Cash and cash equivalents were $43.3 million as of September 30, 2026, compared to $34.2 million as of December 31, 2025.
- Commercial paper was $455.1 million as of September 30, 2026, compared to $226.0 million as of December 31, 2025.
- Current maturities of long-term debt were $319.2 million as of September 30, 2026, compared to $18.3 million as of December 31, 2025.
- Long-term debt was $847.1 million as of September 30, 2026, compared to $1,144.1 million as of December 31, 2025.
- Accounts and notes receivable were $881.3 million as of September 30, 2026, compared to $578.8 million as of December 31, 2025.
- Inventories were $1,176.8 million as of September 30, 2026, compared to $1,152.6 million as of December 31, 2025.
- Net cash provided by operating activities was $583.4 million for the nine months ended September 30, 2026, compared to $351.7 million in the prior-year period.
- Acquisitions, net of cash, were $209.9 million for the nine months ended September 30, 2026.
Analysis
Lennox reported third-quarter net sales of $1,572.5 million, up 10%, led by Building Climate Solutions. Building Climate Solutions revenue rose 24%, including organic growth of 15%, on continued strength in commercial HVAC, refrigeration, and services. Home Comfort Solutions revenue grew 3%, while management said residential end-markets began stabilizing.
Profitability weakened despite the revenue growth. GAAP operating income was $312.1 million, down 5%, and operating margin was 19.8%, down 320 basis points. Total segment profit including corporate expenses was $323.3 million, down 2%, with total segment profit margin down 240 basis points to 20.6%. Adjusted diluted EPS was $6.84, down 7% from $7.38.
The primary pressure was in Home Comfort Solutions, where segment profit was $175.7 million versus $215.3 million and segment margin was 18.7%, down 490 basis points. The release cited lower sales volumes, product cost inflation including tariffs, lower factory absorption, higher fuel costs, SG&A and distribution inflation, and ongoing investments. Building Climate Solutions remained more resilient: its $166.5 million of segment profit was up $26 million or 19%, although its margin declined 110 basis points to 26.2%.
Cash generation improved. Third-quarter operating cash flow was $395.3 million versus $300.7 million, driven by reduced inventory levels, and free cash flow was $362.7 million versus $265.3 million. Lennox repurchased $151 million of shares in the quarter. For the first nine months, operating cash flow was $583.4 million and free cash flow was $461.0 million, while acquisitions, net of cash, were $209.9 million.
The outlook reset centers on profitability rather than top-line growth. Lennox now expects approximately 6% full-year revenue growth, including a 5% benefit from completed acquisitions, but reduced adjusted EPS guidance to $21.00 to $21.50 from $23.00 to $24.00. Full-year free cash flow guidance is $700 million to $750 million. Management's stated priorities are cost pass-through, productivity, tariff mitigation, share recovery in Home Comfort Solutions, and entry-tier product launches.
Management, verbatim
In the third-quarter, Building Climate Solutions continued to deliver strong revenue growth and residential end-markets began stabilizing. However, our margins and results fell short of our expectations, reflecting heightened competitive pressure and the impact of persistent inflation on our costs.
Alok Maskara, Chief Executive Officer
We are retooling our processes to more effectively pass through cost increases while accelerating productivity. Despite the near-term challenges, we remain confident in our strategy and the long-term resilience of our business model.
Alok Maskara, Chief Executive Officer
Not in the filing
stated, not guessed- Previous-release outlook was not provided, so comparisons of actual results with prior guidance are unavailable.
- Third-quarter gross margin was not reported.
- Nine-month gross margin was not reported.
- Prior-year operating margin and prior-year total segment profit margin were not reported as percentages.
- Quarterly dividend amount was not reported.
- Full-year GAAP earnings per share guidance was not reported.
- Full-year gross margin, operating expense, tax-rate, segment revenue, and segment-margin guidance were not reported.
- Prior-quarter comparisons were not reported for the presented metrics.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Lennox disclosed Q3 2026 financials via an SEC Form 8‑K, highlighting revenue growth, margin pressure, and a revised EPS outlook.
Ticker impact
Lennox (NYSE:LII) reported Q3 2026 results and updated full‑year adjusted EPS guidance to $21.00‑$21.50, down from the prior $23.00‑$24.00 range.
downward pressure as investors price in lower EPS expectations
The revised guidance reflects a 10% revenue growth but a significant EPS downgrade, which historically triggers a negative market reaction for mid‑cap industrial stocks.
Market effects
HVAC and building‑systems sector may see broader valuation pressure as Lennox signals margin compression from inflation and tariffs.
U.S. industrial and consumer‑discretionary indices could dip modestly in after‑hours trading.
Limited; impact confined to U.S. listed industrial peers.
Counterpoint
If the revenue beat expectations and segment growth remains strong, the EPS cut may be over‑reacted to, presenting a buying opportunity on a dip.
Key entities
- ExecutiveAlok Maskara
Chief Executive Officer of Lennox, provided commentary on results.
