What Happened?

Shares of climate control solutions innovator Lennox International (NYSE: LII) fell 4.1% in the morning session after it reported weak third-quarter results and lowered its full-year financial forecast, sending its shares lower. 

Although its adjusted earnings per share of $6.98 beat analysts' estimates by 2%, revenue for the quarter fell 4.8% year on year to $1.43 billion, missing Wall Street's expectations. The company's organic revenue, which excludes factors like acquisitions and currency fluctuations, also declined by 5%. Looking ahead, Lennox lowered its full-year adjusted earnings per share guidance to a midpoint of $23. The combination of a top-line miss and a reduced outlook for profitability weighed on investor sentiment.

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What Is The Market Telling Us

Lennox’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 3 months ago when the stock gained 8.9% on the news that the company reported record second-quarter financial results and raised its full-year guidance. 

The company announced that its revenue and earnings for the quarter surpassed Wall Street's expectations, driven by strong pricing and favorable product mix. Revenue for the second quarter rose 3% to $1.5 billion, while adjusted earnings per share jumped 14% to $7.82. In a sign of confidence for the remainder of the year, Lennox boosted its full-year earnings per share (EPS) forecast to a new range of $23.25 to $24.25. EPS is a widely used metric of a company's profitability. The updated guidance suggested management's optimism about continued demand for its climate-control products. Investors were also impressed by the company's expanding profit margins, which indicated strong operational efficiency even with softer sales volumes.

Lennox is down 13.2% since the beginning of the year, and at $524.54 per share, it is trading 22.7% below its 52-week high of $678.43 from November 2024. Investors who bought $1,000 worth of Lennox’s shares 5 years ago would now be looking at an investment worth $1,817.

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