Return to Year-over-Year Revenue Growth
Revenue of $1.1 billion, up 6% year-over-year in Q1; management also increased full-year revenue guidance to approximately 8% (from 6%-7%).
Lennox International
· LII
April 29th, 2026
Summary
- Earnings Call Date:
- 2026-04-29
- Change Since:
- +6.59%
- Next Earnings Date:
- 2026-07-23
Earnings Call Sentiment
NeutralThe call balanced clear, tangible positives — return to company-wide revenue growth, an exceptionally strong and profitable quarter for Building Climate Solutions, successful product launches, on-track M&A integration, and maintained full-year adjusted EPS guidance — against persistent and meaningful near-term headwinds in Home Comfort Solutions, factory under-absorption pressures, and rising input costs and tariffs. Management emphasized mitigation actions (pricing, productivity, supply-chain moves) and expects much of the cost and price realization to fall in the second half, signaling cautious confidence but acknowledging ongoing uncertainty.
Company Guidance
Lennox reaffirmed full‑year adjusted EPS of $23.50–$25.00 while raising revenue guidance to about 8% (from 6–7%), with HCS revenue now expected to grow ~4% (vs. prior 2%) and BCS ~16%; management still expects organic volumes to decline low single digits (net of roughly 1 point of growth from parts & accessories, commercial emergency replacement, ducted heat pumps and Samsung ductless), cost inflation is now pegged at ~5% (vs. 2% prior), pricing is assumed to be mid‑single‑digit with roughly 90% drop‑through, FIFO accounting delays tariff income‑statement effects until Q3, free cash flow is targeted at $750–$850M, capital expenditures are expected to be ~ $250M, and inventory normalization/absorption headwinds should largely resolve by the end of Q2.
Building Climate Solutions (BCS) Record Performance
BCS delivered a record quarter: organic sales up 26%, M&A growth up 12%, sales volumes +17%, and profit margins expanded ~300 basis points; price and mix contributed ~9% revenue growth in the segment.
Full-Year Adjusted EPS Guidance Reaffirmed
Company reaffirmed full-year adjusted EPS guidance of $23.50 to $25.00 despite cost and tariff headwinds; management projects free cash flow of $750M to $850M for 2026.
Successful M&A and Integration Contributions
Acquisitions (DuroDyne and Subco closed Q4 2025) contributed ~6% to Q1 revenue; M&A profit contribution cited (~$2M in HCS, ~$7M in BCS) and integration of Subco and DuroDyne is on track to strengthen parts & supplies and commercial portfolio.
Product Innovation and New Launches
Introduced new commercial Stratagos rooftop heat pump, expanded residential heat pump portfolio (including cold-climate capability and compact air handlers), and launched Lennox-branded heat pump water heaters via Ariston JV — all expected to broaden addressable market and share of wallet.
Inventory and Cash Flow Improvement vs Prior Year
Q1 free cash flow was a $39M use of cash (improved from $61M use prior-year); inventory build was $60M this quarter versus $210M prior-year, and operating cash flow (adjusted) was $16M, signaling progress toward normalization.
Pricing Actions and Improved Drop-Through
Company announced price increases and expects better price drop-through (management cited a blended incremental, presented as ~90% effective) with most price realization and cost impacts expected to materialize in the second half.
Operator
Good morning, everyone. Welcome to the Lennox International Inc. 2026 First Quarter Earnings Conference Call. All lines are currently in a listen-only mode and there will be a question-and-answer session at the end of the presentation. As a reminder, this call is being recorded. I would now like to turn the call over to Chelsey Pulcheon from Lennox International Inc. Investor Relations. Chelsey, please go ahead.
Chelsey Pulcheon
Thank you. Good morning, everyone, and thank you for joining us as we share our 2026 first quarter results. Joining me today are CEO, Alok Maskara, and CFO, Michael P. Quenzer. Each will share their prepared remarks before we move to the Q&A session. Turning to Slide 2, a reminder that during today's call, we will be making certain forward-looking statements that are subject to numerous risks and uncertainties as outlined on this page. We may also refer to certain non-GAAP financial measures that management considers relevant indicators of underlying business performance. Please refer to our SEC filings available on our Investor Relations website for additional details, including a reconciliation of GAAP to non-GAAP measures.
The earnings release, today's presentation, and the webcast archive link for today's call are available on our Investor Relations website at investors.lennox.com. Now please turn to Slide 3 as I turn the call over to our CEO, Alok Maskara.
Alok Maskara
Good morning, everyone. Before turning to our quarterly performance, I want to recognize the exceptional adaptability and dedication of our team, as well as the trust and loyalty of our customers. While the ma...
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