Key Points
Lennox stock missed on both sales and earnings this morning.
Management warns that the residential market for HVAC remains soft.
Lennox International (NYSE: LII) stock tumbled 19.9% through 11 a.m. ET Wednesday after reporting merely mixed earnings this morning.
Analysts had forecast that the HVAC manufacturer would earn $7.61 per share on nearly $1.6 billion in Q2 sales. In fact, Lennox earned $7.72 per share, but sales fell short of expectations at $1.5 billion.
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Lennox Q2 earnings
Lennox grew its Q2 sales 3% year over year, but operating profit was up only 2%, and earnings calculated under generally accepted accounting principles (GAAP) were nearly flat at $7.72 per share.
Lennox blamed "continued softness in the residential end market" for the weak results, noting that 24% sales growth in Building Climate Solutions (i.e., sales to businesses) helped to "mitigate" this. Still, despite raising prices on its products, Lennox saw Home Comfort Solutions (i.e., residential sales) decline by 7% due to lower volumes.
Lennox's sales proportions are roughly 60-40 residential versus commercial, so the big bump in commercial sales was the main reason revenue grew at all.
What's next for Lennox
That's the bad news. The worse news is that things don't seem likely to improve much this year. While management was able to reaffirm its 2026 sales growth forecast -- 8%, of which 5% comes from acquisitions, and only 3% is organic -- Lennox lowered its earnings forecast by about 3% to a range of $23 to $24 per share.
Unfortunately, the entirety of that range falls short of the $24.52 that Wall Street was expecting Lennox to report this year. While Lennox stock doesn't look horribly expensive at 18.4 times the new forecast, the lack of any earnings growth and the weak forecast for the year explain why investors seem supremely unenthusiastic about owning Lennox stock today.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.