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• Revenue Growth: 2% increase in the first quarter.

• Segment Margin: 14.5%, a decrease of 140 basis points.

• Operating Cash Usage: $36 million.

• Adjusted Earnings Per Share (EPS): $3.37 for the quarter.

• Home Comfort Solutions Sales Increase: 7% driven by new R-454B product.

• Building Climate Solutions Revenue Decline: 6% decrease due to destocking and order delays.

• Operating Cash Outflow: $36 million compared to $23 million in the prior year.

• Net Debt to Adjusted EBITDA: 0.8x, improved from 1.4x in the prior year quarter.

• Full Year Revenue Growth Guidance: Confirmed at 2%.

• Full Year Adjusted EPS Guidance: Raised to a range of $22.25 to $23.50.

• Total Cost Inflation Expectation: Increased to 9% from previous 3% guidance.

• Price Increase: New price increases effective early in the second quarter, boosting price gains to 7%.

• Warning! GuruFocus has detected 1 Warning Sign with SF.

Release Date: April 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lennox International Inc (NYSE:LII) reported a 2% revenue growth in the first quarter, driven by favorable mix initiatives from new R-454B products.

• The company has successfully transitioned to new low GWP products, with approximately 50% of equipment sales in the quarter being the new R-454B product.

• Lennox International Inc (NYSE:LII) has implemented two price increases to offset tariff impacts, which are expected to boost price gains to 7%.

• The company is actively pursuing tariff mitigation strategies, including production shifts and leveraging more U.S.-based components.

• Lennox International Inc (NYSE:LII) maintains a strong balance sheet, with net debt to adjusted EBITDA at 0.8x, an improvement from 1.4x in the prior year quarter.

Negative Points

• Segment margin decreased by 140 basis points to 14.5%, primarily due to tariff-related costs and manufacturing inefficiencies.

• The Building Climate Solutions segment experienced a 6% decline in revenue, with sales volumes down 9% due to expected destocking and order delays.

• Operating cash outflow increased to $36 million compared to $23 million in the prior year, due to inventory investments.

• The company has revised its full-year volume assumptions downward, anticipating a decrease in sales volumes by 4% compared to previous guidance of a 2% increase.

• Lennox International Inc (NYSE:LII) faces ongoing challenges from tariff impacts, with total cost inflation now expected to be 9%, up from previous guidance of 3%.

Q & A Highlights

Q: Can you explain the order delays in the commercial segment and whether the issue has been resolved? A: Alok Maskara, CEO: The slow start was due to destocking and the transition to new products. Order rates have improved sequentially, and while some inefficiencies may continue into Q2, the issue is largely behind us.