Snapshot
Lennox International Inc reported $1.43B of revenue in Q3 2025, up -4.8% year over year, with diluted EPS of $6.98 and an operating margin of 21.7%.
- Revenue
- $1.43B
- YoY growth
- +-4.8%
- Diluted EPS
- $6.98
- Operating margin
- 21.7%
$1.43B
Revenue
+-4.8%
YoY growth
$6.98
Diluted EPS
21.7%
Operating margin
01 Key takeaways
What management said
- •The earnings release, today's presentation, and the webcast archive link for today's call are available on our Investor Relations website at investor.lennox.com.
- •Our results were also fueled by our recent investments, which will accelerate our growth and expand our margins as the industry turns a corner into a brighter 2026.
- •Revenue this quarter declined 5% as growth initiatives and share gains were unable to fully offset the impact of soft residential and commercial end markets.
- •Operating cash flow was $301 million, which was lower than last year as a sharp industry decline has temporarily elevated our finished goods inventory levels.
- •Adjusted EPS was a third quarter record of $6.98, a 4% year-over-year increase.
- •HCS segment profit margin expanded by 30 basis points as the team executed meaningful cost actions to offset industry headwinds.
- •BCS segment results were impressive as profit margins expanded 330 basis points and revenue grew 10%, even though the end markets remained weak.
- •The team was able to offset end market conditions with rigorous execution of growth initiatives such as share gains in emergency replacement, business development in refrigeration, and full lifecycle value proposition in commercial services.
- •Given current end market conditions, we are adjusting our full-year outlook to reflect an anticipated sales decline of 1%.
- •Now, let's move to slide four to discuss how our recent acquisition will increase the attachment rate for our parts and accessories.
- •Our bolt-on acquisition of AES Industries in 2023 helped accelerate the attachment of commercial services and was a tremendous success based on financial and strategic metrics.
- •Similarly, the recent acquisition of Durodyne and SUPCO will help accelerate attachment of parts and accessories across both HCS and BCS segments.
What went well
- •Delivered a record third quarter segment margin of 21.7% and record third quarter adjusted EPS of $6.98, up 4% year-over-year, despite a challenging environment
- •BCS revenue grew 10% with profit margins expanding 330 basis points, driven by emergency replacement share gains, refrigeration business development, and full lifecycle commercial services
- •HCS segment profit margin expanded 30 basis points through meaningful cost actions despite a 12% revenue decline
- •Emergency replacement grew nearly 100% on a small base (about 5% of BCS revenue), with inventory deployed and positioned for multi-year growth
- •Closed the Duro Dyne and Supco acquisition (approximately $225 million annual revenue, 25% EBITDA margins), expected to be accretive in 2026
- •Saltillo commercial factory now fully operational and delivering measurable productivity improvements
What went wrong
- •Total revenue declined 5%, with HCS revenue down 12% on a 23% decline in unit sales volumes, greater than expected
- •Lowered full-year revenue guidance to down 1% from prior 3% growth, and cut adjusted EPS guidance to $22.75-$23.25 from $23.25-$24.25
- •Reduced full-year free cash flow guidance to approximately $550 million from $650 million-$800 million due to elevated finished goods inventory from deeper destocking
- •Deeper-than-expected channel destocking on both one-step and two-step sides, with contractors also reducing inventory levels more than anticipated
- •Clear shift toward system repair rather than full replacements amid weak dealer confidence, soft home sales, and moderate weather
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|