Lennox's Free Cash Flow Under Pressure, Analysts Say

  • Barclays analyst Julian Mitchell reiterated an Equal-Weight rating on the shares of Lennox International Inc LII and raised the price target from $228 to $240.
  • The company had set its long-term financial targets for 2026 and guided FY23.
  • The analyst lowered the near-term EPS estimate amidst a more challenging Residential demand backdrop. The commentary on the 2024-2026 Outlook and the implied 2023 cash headwinds was more notable.
  • The analyst noted that the Residential heating, ventilation, air conditioning (HVAC) market now looks likely to re-couple lower with broader Residential products.
  • LII's guide implies free cash flow conversion remains ~60% in 2023, after ~60% in 2022, due to headwinds of higher capex and working capital.
  • The company emphasized that some cost items were bigger headwinds / smaller tailwinds in the 1H23 than in the 2H.
  • The analyst estimates Q1 is worth 15% of FY23 EPS, slightly lower than normal.
  • UBS analyst Damian Karas reiterated a Neutral rating on the company's shares and raised the price target from $255 to $265.
  • The analyst said the investor day, the first led by CEO Alok Maskara, saw the company initiate achievable guidance for 2023, shake up the financial targets, and introduce a bullish 10-year market outlook.
  • While the EPS guide was in-line with expectations, the analyst thinks inferred margin expansion fell short, and commercial growth beat. Also, free cash flow appeared lower for longer than expected, the analyst added.
  • Price Action: LII shares are trading lower by 4.66% at $246.69 on the last check Thursday.
  • Photo Via Company
Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorNewsPrice TargetReiterationMarketsAnalyst RatingsGeneralBriefsBuilding ProductsIndustrials
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!