Lennox International (LII) Q1 2026 earnings summary

Executive summary

• Revenue grew 6% year-over-year to $1.1–$1.135 billion in Q1 2026, driven by acquisitions and strong commercial performance, despite softness in Home Comfort Solutions.

• Adjusted/diluted EPS was $3.35, down 8% year-over-year, reflecting higher costs and factory under-absorption.

• Operating cash flow improved to $16 million, a $52 million increase year-over-year, though free cash flow remained negative.

• Integration of Duro Dyne and Supco acquisitions supported growth and strategic initiatives.

• Full-year adjusted EPS guidance reaffirmed at $23.50–$25.00.

Financial highlights

• Segment profit margin was 14.4%, down 130 bps year-over-year, with total segment profit at $163.5–$164 million.

• Gross margin decreased to 30.9%–31.0% due to inflation and under-absorption, partially offset by favorable mix and price.

• SG&A expenses increased to $185 million, mainly from higher employee costs and acquisitions.

• Free cash flow was a $39 million use of cash, improved from $61 million use last year.

• Net debt to adjusted EBITDA increased to 1.3x; debt-to-total-capital ratio rose to 56%.

Outlook and guidance

• Full-year 2026 revenue growth guidance updated to approximately 8%, including 4% from acquisitions.

• HCS revenue guidance raised to 4% growth, BCS to 16%.

• Free cash flow expected in the range of $750–$850 million for 2026.

• Cost inflation expected to rise 5%, mainly due to tariffs and input costs.

• Management is evaluating the impact of new U.S. tariffs, including a temporary 10% global surcharge and Section 232 tariffs.