Air Conditioning And Heating Solutions Provider Lennox Stock Slips After Q4 Beat - What's Going On?

Lennox International Inc LII reported fourth-quarter sales growth of 16% year-on-year to $1.34 billion, beating the analyst consensus estimate of $1.24 billion.

Revenue in the Home Comfort Solutions business segment increased 25% to $887 million and Building Climate Solutions business climbed 17% to $458 million.

Gross profit rose 28.3% to $455.3 million, and the margin expanded 310 basis points to 33.8%. Adjusted EPS of $5.60 beat the analyst consensus of $3.72.

Selling, general and administrative expenses rose 16.4% to $207 million. The operating margin for the quarter expanded 220 basis points to 18.2%, with an operating income of $245 million.

The company held $422.4 million in cash and equivalents as of December 2024. Operating cash flow was $332 million in the quarter.

“Our significant progress in cash conversion reflects a relentless focus on operational excellence. We successfully navigated the complex product transition to the new refrigerant while maintaining a disciplined approach to M&A,” said CEO Alok Maskara.

Outlook: Lennox sees FY25 core sales to grow 2%, primarily driven by the mix of new refrigerant products, along with low single-digit increases in price and volume. 

The company’s volume expectations were tempered by the effects of the pre-buy for legacy refrigerant products in 2024.

The company expects FY25 adjusted EPS of $22.00 – $23.50 against the consensus of $23.22.

Lennox expects FY25 capital expenditure of $150 million and a free cash flow of $650 million – $800 million.

Price Action: LII shares are trading lower by 6.36% at $620.43 at the last check Wednesday.