Snapshot
Lennox International Inc reported $1.20B of revenue in Q4 2025, up -11.2% year over year, with diluted EPS of $4.07 and an operating margin of 18.6%.
- Revenue
- $1.20B
- YoY growth
- +-11.2%
- Diluted EPS
- $4.07
- Operating margin
- 18.6%
$1.20B
Revenue
+-11.2%
YoY growth
$4.07
Diluted EPS
18.6%
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.
- •It was a year marked by regulatory changes, softer demand, and broad market headwinds, yet the team remained resilient and delivered solid results.
- •Most notably, we achieved full-year margins above 20% for the first time in our history.
- •Let's turn to slide three for an overview of our fourth quarter and full year financials.
- •Revenue was down 11% in the quarter due to weak residential and commercial end markets.
- •Our segment margin was 17.7% in the quarter, driven by volume decline and expected absorption headwinds.
- •Full year revenue was down 3%, driven by volume headwinds from destocking and softer end markets.
- •However, the team still delivered a record 20.4% segment margin, despite tariff impacts and other inflationary pressures.
- •Operating cash flow was $758 million, down from last year due to temporarily inflated inventory levels.
- •Overall, 2025 was a complex and challenging year, and I'm proud of the team delivering $23.16 in adjusted earnings per share.
- •On the commercial side, we successfully ramped our emergency replacement growth initiative in several metro regions, while the light commercial HVAC industry declined for 17 consecutive months by December 2025.
- •Our internal growth initiatives, such as parts and services growth, commercial emergency replacement coverage, and ductless product penetration, are also expected to accelerate our growth this year.
What went well
- •Achieved record full-year segment margin of 20.4%, above 20% for the first time in company history, marking the fourth consecutive year of margin expansion
- •Delivered full-year adjusted EPS of $23.16, up 2% versus the prior comparable of $22.70, despite a challenging year
- •BCS delivered another strong quarter with revenue up 8% (acquisition contributed approximately 7%) and continued margin expansion through emergency replacement and national accounts
- •Full-year free cash flow of $640 million exceeded prior guidance of $550 million, helped by strong collections and disciplined payments
- •Delivered more than $75 million in cost productivity for 2025 and reduced headcount by over 1,000 employees while continuing long-term growth investments
- •Completed safe and timely conversion of product portfolio to low GWP R-454B and successfully ramped commercial emergency replacement across several metro regions
What went wrong
- •Fourth quarter revenue down 11%, with HCS down 21% in the quarter, worse than expected, driven by deeper channel destocking and soft residential new construction
- •Q4 segment margin of 17.7% pressured by volume decline and expected absorption headwinds; November and December trended worse than October
- •Full-year revenue down 3% on volume headwinds from destocking and softer end markets
- •Light commercial HVAC industry declined for 17 consecutive months by December 2025
- •FIFO inventory levels increased $300 million versus December 2024, with about $200 million more inventory than seasonally typical, creating Q1 2026 absorption headwinds
Guidance changes
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Performance breakdown
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Earnings call themes & trends
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