Lennox International (LII) AI Stock Analysis

• Market Cap: $16.28B
• Dividend Yield: 0.96%
• Average Volume (3M): 441.64K
• Price to Earnings (P/E): 21.6
• Beta (1Y): 1.02
• Revenue Growth: 3.77%
• EPS Growth: 12.46%
• Country: US
• Employees: 5,400
• Sector: Industrials
• Sector Strength: 72
• Industry: Construction
• EPS (TTM): 4.45
• Shares Outstanding: 34,802,910
• 10 Day Avg. Volume: 384,768
• 30 Day Avg. Volume: 441,636
• PEG Ratio: -13.57
• Price to Book (P/B): 14.57
• Price to Sales (P/S): 3.26
• P/FCF Ratio: 26.53
• Enterprise Value/Market Cap: 1.13
• Enterprise Value/Revenue: 3.55
• Enterprise Value/Gross Profit: 10.75
• Enterprise Value/Ebitda: 16.51
• 1Y Price Target: $565.55
• Price Target Upside: 20.88% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 13
• EPS Forecast (FY): 24.14
• Revenue Forecast (FY): $5.49B

• Rating: 67 Neutral
• Price Target: $597.00 ▲(27.60% Upside)
• Action: Downgraded Date: 01/29/26
• Date: Action: Downgraded 01/29/26

The score is driven primarily by strong underlying profitability and solid free-cash-flow generation, supported by constructive 2026 EPS/FCF guidance. These positives are tempered by weak technical conditions (price below key moving averages with soft momentum) and ongoing near-term operational headwinds from destocking, inventory, and market softness, while valuation and dividend support are only moderate.

Positive Factors

Margin Sustainability

Sustained high operating (≈19–20%) and net (~15%) margins reflect structural pricing power, manufacturing efficiency and improved cost control. Persistent margin expansion provides durable earnings resilience across demand cycles and supports reinvestment, dividends and strategic actions.

Free Cash Flow Strength

Consistently strong FCF and high conversion (~84% of net income in 2025) indicate quality earnings and robust cash generation. This durability funds M&A, buybacks and capex without relying solely on equity markets, improving financial optionality over multi-quarter horizons.

Business Diversification & M&A

Growth in Building Climate Solutions and bolt-on acquisitions (≈7% revenue contribution) diversify mix away from cyclical residential exposure. Expanding national accounts, emergency replacement and M&A-driven scale creates durable revenue channels and cross-sell opportunities.

Negative Factors

Channel Destocking & Volume Shock

Extreme dealer/distributor destocking inflicted sharp, multi-quarter volume declines and depressed sell-in. Such inventory-driven shocks can persist through supply-chain and working-capital cycles, reducing near-term revenue visibility and pressuring absorption and operating cash flow.

Balance-Sheet / Leverage Risk

Although leverage has improved, total debt rose in 2025 and prior years showed negative equity, leaving a still-tilted capital structure. Elevated leverage reduces flexibility for large cyclic shocks, constrains optionality for big investments, and raises refinancing vulnerability.

Industry Demand Weakness

Prolonged weakness in light commercial HVAC (17 months) signals structural softness in new-construction and replacement markets. Coupled with tariff and inflation cost pressures, multi-quarter demand weakness can limit top-line recovery and compress relative absorption economics.

Lennox International Business Overview & Revenue Model

Company Description

Lennox International Inc., together with its subsidiaries, designs, manufactures, and markets a range of products for the heating, ventilation, air conditioning, and refrigeration markets in the United States, Canada, and internationally. It operates through three segments: Residential Heating & Cooling, Commercial Heating & Cooling, and Refrigeration. The Residential Heating & Cooling segment provides furnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment and accessories, comfort control products, and replacement parts and supplies for residential replacement and new construction markets. The Commercial Heating & Cooling segment offers unitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, and variable refrigerant flow commercial products for light commercial markets. The Refrigeration segment offers condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, and refrigeration rack systems for preserving food and other perishables in supermarkets, convenience stores, restaurants, warehouses, and distribution centers, as well as for data centers, machine tooling, and other cooling applications; and compressor racks and industrial process chillers. The company sells its products and services through direct sales, distributors, and company-owned parts and supplies stores. Lennox International Inc. was founded in 1895 and is headquartered in Richardson, Texas.

How the Company Makes Money

Lennox International generates revenue through the sale of a diverse array of HVACR products and services. The primary revenue streams include the sale of residential and commercial heating and cooling equipment, which encompasses air conditioners, furnaces, heat pumps, and related components. Additionally, the company offers aftermarket services and parts, which contribute significantly to its earnings by providing ongoing maintenance and support to customers. Strategic partnerships with contractors, distributors, and retailers enhance Lennox's market reach, allowing it to penetrate various geographical regions and customer segments. Furthermore, the company's investment in energy-efficient technologies and smart home solutions positions it well in a market increasingly focused on sustainability and innovation, driving customer demand and revenue growth.

Lennox International Financial Statement Overview

Summary

Strong profitability and improving operating performance (operating margin near ~19–20% in 2024–2025; net margin ~15%) and solid, consistently positive free cash flow with good cash conversion (~84% of net income in 2025). Offsetting this are weaker growth (revenue down ~2.8% in 2025) and a still debt-leaning capital structure despite leverage improvement versus 2023.

Income Statement

Profitability is a clear strength: gross margin held around ~31–33% since 2023, while operating margin improved materially versus 2022 and remained near ~19–20% in 2024–2025. Net margin is consistently strong (~15% in 2024–2025), showing good pricing and cost control. The key weakness is growth: revenue rose through 2024 but slipped in 2025 (down ~2.8%), indicating demand softness or tougher comps despite resilient margins.

Balance Sheet

Leverage has become more manageable versus 2023, with debt-to-equity improving meaningfully as equity rebuilt (from very high leverage in 2023 to ~1.5x in 2025). However, total debt increased in 2025, and the capital structure still leans debt-heavy for the industry. Earlier years showed negative equity (2020–2022), which highlights historical balance-sheet strain and keeps the risk profile higher than peers despite the recent repair.

Cash Flow

Cash generation is solid and supports earnings quality: free cash flow has been consistently positive and grew strongly in 2025 (~19.6%). Free cash flow also tracks well against net income (roughly ~66–87% across the period; ~84% in 2025), indicating profits are translating into cash. The main weakness is volatility—operating cash flow was notably weak in 2022 versus net income and remains less than net income in recent years, suggesting working-capital swings can meaningfully impact annual cash results.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	5.20B	5.34B	4.98B	4.72B	4.19B
Gross Profit	1.72B	1.77B	1.55B	1.28B	1.19B
EBITDA	1.12B	1.13B	879.50M	733.50M	658.50M
Net Income	786.20M	806.90M	590.10M	497.10M	464.00M
Balance Sheet
Total Assets	4.08B	3.47B	2.80B	2.57B	2.17B
Cash, Cash Equivalents and Short-Term Investments	34.70M	422.30M	69.10M	61.10M	36.50M
Total Debt	2.06B	1.49B	1.53B	1.75B	1.44B
Total Liabilities	2.92B	2.62B	2.51B	2.77B	2.44B
Stockholders Equity	1.16B	850.20M	285.30M	-203.10M	-269.00M
Cash Flow
Free Cash Flow	638.80M	782.10M	486.00M	201.20M	408.70M
Operating Cash Flow	757.60M	945.70M	736.20M	302.30M	515.50M
Investing Cash Flow	-655.60M	-174.40M	-319.70M	-103.00M	-106.40M
Financing Cash Flow	-465.70M	-418.60M	-406.20M	-174.10M	-498.70M

Lennox International Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 467.88
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LII, the sentiment is Negative. The current price of 467.88 is below the 20-day moving average (MA) of 518.48, below the 50-day MA of 523.24, and below the 200-day MA of 537.42, indicating a bearish trend. The MACD of -16.63 indicates Positive momentum. The RSI at 29.58 is Positive, neither overbought nor oversold. The STOCH value of 12.44 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LII.

Lennox International Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TT	78 Outperform	$90.83B	36.79	36.17%	0.95%	8.58%	20.37%
JCI	70 Outperform	$79.38B	36.04	23.52%	1.27%	-10.19%	100.65%
CARR	69 Neutral	$48.51B	29.70	10.50%	1.65%	-7.93%	-35.00%
LII	67 Neutral	$16.28B	21.56	78.89%	0.96%	3.77%	12.46%
MAS	64 Neutral	$11.98B	16.37	-537.31%	1.94%	-3.62%	3.41%
OC	64 Neutral	$8.04B	-17.89	-11.39%	2.43%	3.47%	-148.53%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%