$LII · LENNOX INTERNATIONAL INC
Lennox International reported Q3 FY2026 results: revenue of $1.573B (+10% YoY), GAAP diluted EPS of $6.41, and adjusted EPS of $6.84 (down 7% YoY). Home Comfort Solutions segment profit fell 18% on $45M of cost inflation headwinds and price cuts to defend share. Full-year adjusted EPS guidance was slashed to $21.00-$21.50 from $23.00-$24.00, while free cash flow guidance was set at $700M-$750M.
- Q3 revenue $1.573B, up 10% YoY, driven by Building Climate Solutions +24% organic growth
- GAAP diluted EPS $6.41 vs $7.38 prior year; adjusted EPS $6.84 vs $7.38, down 7%
- Home Comfort Solutions segment margin collapsed 490 bps to 18.7% on price cuts and tariff-driven cost inflation
- Full-year adjusted EPS guidance cut to $21.00-$21.50 from prior $23.00-$24.00 — a ~9% reduction at midpoint
- Operating cash flow surged to $395M from $301M YoY; free cash flow $363M; $151M in share repurchases
Extended-hours trading shows LII at $349.99, down 5.93% from the regular close of $372.05. The guidance cut — slashing FY adjusted EPS by ~$2.50 at midpoint — is driving the after-hours selloff despite the 10% revenue beat.
A ~9% guidance cut at midpoint from an HVAC bellwether signals that tariff and inflation pressures are overwhelming even strong commercial segment growth, with residential margin erosion accelerating.
Lennox's Home Comfort margin collapse mirrors broader HVAC residential weakness, but the 490 bps segment margin decline is steeper than peers. Building Climate Solutions' 26.2% margin remains best-in-class despite 110 bps compression, suggesting commercial HVAC remains the sector's bright spot.
Home Comfort Solutions faces acute margin compression from $45M in product cost inflation (including tariffs) and lower factory absorption, plus $15M in higher fuel and SG&A costs. Price cuts to defend share are eroding profitability faster than cost mitigation can offset.