Lennox International Lowers 2026 Earnings Outlook as Margins Tighten

Lennox International Inc. has reduced its full-year adjusted earnings guidance following its third-quarter financial results. The heating, ventilation, and air conditioning manufacturer raised revenue by 10.2% to $1.6 billion, but adjusted earnings per share declined 7% to $6.84. Total segment profit fell approximately 2% to $323 million, as rising costs and pricing adjustments squeezed profitability.

Management lowered its 2026 adjusted earnings per share target to a band between $21 and $21.50, representing a midpoint of $21.25 down from the previous $23.50. The company cited reduced realized prices, an increased expected tax rate of 21%, and cost inflation tied to tariffs as key reasons for the downgrade. Full-year revenue growth is now projected at approximately 6%, compared to the earlier expectation of 8%, while free cash flow guidance was reduced to between $700 million and $750 million.

Performance diverged sharply between the company's operating divisions. The Home Comfort Solutions residential unit posted a 3% revenue rise, but organic revenue declined 1%, and organic segment profit dropped by $46 million. Management pointed to tariff costs, raw material inflation, lower factory absorption, and targeted pricing cuts made to protect market share. Net of productivity, tariffs and inflation caused a $47 million cost headwind in the residential segment.

Conversely, the commercial-focused Building Climate Solutions division delivered 24% revenue expansion, with organic growth reaching 15%. Segment results were lifted by strong demand for commercial HVAC, refrigeration systems, and data center cooling needs, alongside recent acquisitions. Business acquisitions contributed approximately $20 million in quarterly operating profit accretion across the company, including the $200 million third-quarter purchase of the Comfort-Aire and Century brands.

Cash generation remained steady through the quarter, as operating cash flow advanced by $95 million year over year to reach $395 million. Lennox also allocated approximately $151 million toward share repurchases. To counter continued input cost pressures, the company is adjusting its processes to better pass along cost increases and plans an additional price hike for 2027.