Lennox's Earnings Forecast Looms: Analysts Cautious Ahead

Lennox International prepares for Q1 results release, but analysts forecast an 8.4% drop in EPS. While the company has a strong history of beating estimates, concerns over modest revenue growth and declining free cash flow cast shadows on its outlook.

Date: 10-04-2025

AI Rating: 5

Investment Outlook for Lennox International Inc.

Lennox International Inc. is poised to announce its first-quarter financial results, with analysts anticipating a non-GAAP earnings per share (EPS) of $3.18. This is a notable decrease of 8.4% from the prior year's $3.47 per share, which raises concerns about the company's profitability in the short term. Despite this projected drop in EPS, it is essential to highlight that Lennox has shown resilience in past quarters, consistently surpassing market expectations.

The company is projecting a slightly positive growth trajectory, with expected fiscal 2025 non-GAAP EPS rising to $22.95, signaling a modest 1.6% increase from $22.58 in fiscal 2024. Additionally, the anticipated 12.1% growth in EPS to $25.72 in fiscal 2026 offers a more optimistic long-term perspective that investors might consider when evaluating the stock.

In fiscal 2024, Lennox's core revenues showcased a robust increase of 22% year-over-year, contributing to an overall revenue surge of 16.5% to reach $1.35 billion. This performance exceeded analysts' expectations by a significant margin of 8.7%. However, forecasts for fiscal 2025 suggest a more modest core revenue growth of only 2%, which may raise concerns about the company's ability to sustain its growth momentum.

Further impacting investor sentiment is the company's expectation of a 7.6% decline in free cash flow to $725 million, which could raise flags among investors. A drop in free cash flow is often perceived as a sign of underlying challenges in maintaining liquidity and funding ongoing operations or investment opportunities.

Analysts have taken a cautious stance on Lennox, assigning an overall consensus rating of 'Hold.' The mixed ratings, which range from 'Strong Buy' to 'Strong Sell' among those covering LII, indicate a divided perspective on the company's future prospects. The mean price target of $626.07 also reflects a potential upside of 11.6%, but uncertainties regarding revenue growth and free cash flow could hinder investor enthusiasm in the near term.

Stocks: LII