NYSE:LII
LENNOX INTERNATIONAL INC
A leading North American provider of high-efficiency HVAC and refrigeration systems serving both residential and commercial sectors.
Key Metrics
Investment Thesis
Bull Case
Lennox offers exposure to the secular trend of energy efficiency upgrades as homeowners replace aging HVAC units with high-efficiency models. The company's diversified revenue streams across residential and commercial sectors provide stability against cyclical downturns in any single market segment. Consistent cash flow generation supports a robust dividend yield and ongoing capital returns through share repurchases, enhancing total shareholder return.
Bear Case
Valuation multiples may be stretched given the high cost of goods sold and potential margin compression from inflationary pressures on materials. The significant negative change in accounts payable and accrued expenses suggests working capital management challenges or delayed payments to suppliers. Heavy capital expenditures and investing cash outflows indicate a capital-intensive business model that requires sustained free cash flow to maintain growth.
About LENNOX INTERNATIONAL INC
Lennox International Inc. designs, manufactures, and distributes commercial heating, ventilation, air conditioning (HVAC), refrigeration, and water heating products primarily for North America. The company serves residential, light commercial, and heavy commercial markets with a focus on energy-efficient solutions that address rising utility costs and sustainability demands.
Analysis
Management Discussion
The company demonstrated resilient financial performance with revenue stabilizing at $5.20B in 2025 after a growth trajectory from $4.72B in 2022, while net income held steady at approximately $806M. Strong operating cash flow of $757.6M indicates healthy liquidity generation, though significant capital outflows for investing activities suggest ongoing heavy investment in infrastructure or acquisitions. The balance sheet shows a substantial retained earnings deficit and treasury stock, reflecting an aggressive share buyback program of $482.3M aimed at supporting shareholder value.
Industry Overview
The global HVAC market is transitioning toward low-carbon technologies and smart controls driven by environmental regulations and consumer demand for sustainability. Lennox operates in a competitive landscape dominated by large incumbents but retains differentiation through its proprietary high-efficiency product lines. Industry consolidation continues as smaller players exit due to margin pressures, potentially creating opportunities for strategic buyers like Lennox.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue | $4.72B | $4.98B | $5.34B | $5.20B |
| Cost of Revenue | $3.43B | $3.43B | $3.57B | $3.46B |
| Gross Profit | $1.28B | $1.55B | $1.77B | $1.73B |
| Operating Expenses | $628.5M | $757.7M | $737.1M | $693.3M |
| Operating Income | $656.2M | $790.1M | $1.03B | $1.04B |
| R&D | $80.3M | $94.0M | $93.6M | $103.4M |
| G&A | $627.2M | $705.5M | $730.6M | $681.4M |
| Stock-Based Comp | $21.8M | $30.1M | $28.5M | $29.1M |
| D&A | $77.9M | $86.0M | $95.1M | $112.5M |
| Other OpEx | $-79.0M | $-41.8M | $-87.1M | $-91.5M |
| Non-Operating Income | $-40.4M | $-52.6M | $-41.0M | $-44.7M |
| Interest Expense | $38.7M | $51.7M | $38.7M | $40.9M |
| Interest Income | $1.1M | $4.3M | $5.4M | $5.5M |
| Pre-Tax Income | $615.8M | $737.5M | $993.8M | $996.8M |
| Income Tax | $118.7M | $147.4M | $186.9M | $191.0M |
| Continuing Ops | $497.1M | $590.1M | $806.9M | $805.8M |
| Discontinued Ops | $0 | $0 | $0 | $0 |
| Net Income | $497.1M | $590.1M | $806.9M | $805.8M |
| Minority Interest | $0 | $0 | $0 | $0 |
| Net to Common | $497.1M | $590.1M | $806.9M | $805.8M |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Current Assets | $1.50B | $1.43B | $1.88B | $1.90B |
| Cash & Equivalents | $52.6M | $60.7M | $415.1M | $34.2M |
| Marketable Securities | $8.5M | $8.4M | $7.2M | $500.0K |
| Inventory | $753.0M | $699.1M | $704.8M | $1.15B |
| Other Current Assets | $682.4M | $665.3M | $757.1M | $716.5M |
| Long-Term Assets | $1.07B | $1.36B | $1.59B | $2.18B |
| PP&E (Net) | $548.9M | $720.4M | $800.1M | $887.2M |
| Goodwill | $186.3M | $222.1M | $220.0M | $497.2M |
| Operating Leases | $219.9M | $213.6M | $327.2M | $356.3M |
| Other LT Assets | $71.6M | $150.3M | $183.9M | $377.6M |
| Total Assets | $2.57B | $2.80B | $3.47B | $4.08B |
| Current Liabilities | $1.60B | $1.01B | $1.31B | $1.19B |
| Accounts Payable | $427.3M | $374.7M | $490.0M | $438.0M |
| Current Debt | $710.6M | $12.1M | $314.5M | $18.3M |
| Current Leases | $63.3M | $57.5M | $73.4M | $88.9M |
| Deferred Revenue | $9.6M | $4.7M | $5.0M | $10.5M |
| Taxes Payable | $17.6M | $4.2M | $0 | $46.4M |
| Other Current Liab | $-9.6M | $145.3M | $-5.0M | $215.5M |
| Long-Term Liabilities | $1.18B | $1.50B | $1.31B | $1.73B |
| LT Operating Leases | $161.8M | $164.6M | $267.6M | $293.4M |
| Other LT Liab | $1.01B | $1.18B | $1.03B | $1.20B |
| Total Liabilities | $2.77B | $2.51B | $2.62B | $2.92B |
| Shareholders' Equity | $-203.1M | $285.3M | $850.2M | $1.16B |
| Retained Earnings | $3.07B | $3.51B | $4.15B | $4.89B |
| AOCI | $-90.6M | $-56.9M | $-93.7M | $-48.5M |
| Treasury Stock | $4.34B | $4.35B | $4.42B | $4.92B |
| Total L&E | $2.57B | $2.80B | $3.47B | $4.08B |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Net Income (CFO) | $497.1M | $590.1M | $806.9M | $805.8M |
| Non-Cash Adjustments | $-661.0M | $128.4M | $-71.2M | $-102.3M |
| Working Capital Changes | $466.2M | $17.7M | $210.0M | $54.1M |
| Cash from Operations | $302.3M | $736.2M | $945.7M | $757.6M |
| Capital Expenditures | $101.1M | $250.2M | $163.6M | $118.8M |
| Cash from Investing | $-103.0M | $-319.7M | $-174.4M | $-655.6M |
| Share Buybacks | $300.0M | $0 | $53.6M | $482.3M |
| Dividends Paid | $142.0M | $153.4M | $160.3M | $173.0M |
| Cash from Financing | $-174.1M | $-406.2M | $-418.6M | $-465.7M |
| FX Effect | $-3.6M | $-2.2M | $1.7M | $1.3M |
| Net Change in Cash | $25.2M | $10.3M | $352.7M | $-363.7M |
| Beginning Cash | $31.0M | $52.6M | $60.7M | $415.1M |
| Ending Cash | $52.6M | $60.7M | $415.1M | $52.7M |
Frequently Asked Questions
How does LENNOX INTERNATIONAL INC make money?
The company's revenue is driven by four core segments: Residential Air Conditioning, Commercial Heating and Cooling, Refrigeration, and Water Heating. Financials reflect significant capital expenditures in manufacturing capacity alongside substantial R&D spending to maintain product leadership in efficiency technologies across these diversified streams.
What are the main risks for LII?
Rising raw material costs and supply chain disruptions could pressure gross margins given the high cost of revenue relative to sales. Intense competition from global manufacturers may lead to pricing pressures in both residential and commercial segments. Regulatory changes regarding refrigerant transitions (such as R-32 or natural gas adoption) require continuous innovation, impacting research and development budgets. Currency fluctuations pose a risk to international earnings and cash flow management.
What is LII's competitive advantage?
Lennox leverages a robust portfolio of energy-efficient products that appeal to cost-conscious consumers facing high utility rates. The company benefits from a strong brand reputation for reliability and durability, supported by extensive dealer networks that provide crucial after-sales service support. Strategic acquisitions allow Lennox to rapidly integrate new technologies and expand its product offerings without diluting existing core capabilities.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.