Lennox Int'l Shares Downgraded To Neutral, Removed From Buy List At Goldman

Goldman Sachs’ Samuel H. Eisner downgraded the rating for Lennox International Inc. LII from Buy to Neutral, with a price target of $136. The analyst mentioned that Lennox’s shares are currently trading within 2 percent of the price target.

Lennox’s shares have appreciated 49 percent since being added to the Americas Buy List on July 23, 2014. This compares with only a 4 percent increase in the SPX, analyst Samuel Eisner mentioned.

Lennox’s shares gained due to the company’s accelerating earnings and multiple expansion. “We continue to see cycle strength and opportunities to enhance profitability/ grow earnings; however, we believe the current valuation reflects those opportunities,” Eisner wrote.

Growth Likely To Moderate In Near Term

Lennox continues to be a strong operator in the Building Products segment and has been generating robust profit growth over the last seven years. The analyst believes that the company may, however, find it difficult to achieve incremental EBIT gains in the near future.

“While cycle strength remains, and LII has grown at a premium to this market, we believe following nearly six years of expansion, growth could see a moderation in the medium term,” Eisner added.

While growth may reaccelerate following a weak weather year in 2015, resi shipments are 6 percent above mid-cycle, mirroring levels witnessed in 2002/2003. “In our view, as pent-up demand is released, we believe a downshift in medium-term growth is possible,” the report added.