Earnings

Lennox Cuts 2026 Adjusted EPS Outlook After Profit Drop

The Tip Desk · November 1, 2026 · 3 min read

Third-quarter revenue rose 10% year over year to $1.6 billion, while adjusted diluted earnings fell 7% year over year to $6.84 a share as Home Comfort Solutions profit fell 18% and the company lowered its full-year EPS range to $21.00–$21.50.

Lennox International (LII), a maker of energy-efficient building and home comfort systems, cut its 2026 adjusted earnings-per-share outlook to a range of $21.00 to $21.50 after third-quarter revenue rose 10% year over year to $1.6 billion but profit fell and Home Comfort Solutions margins compressed sharply.

The company reported third-quarter revenue of $1.6 billion, up 10%, a faster pace than the 3% increase in the second quarter. GAAP operating income fell 5% year over year to $312 million after rising 2% year over year in the second quarter, with operating margin down 320 basis points to 19.8%. Adjusted diluted earnings per share declined 7% year over year to $6.84 after being flat year over year at $7.72 in the second quarter. GAAP diluted earnings were $6.41 a share.

Chief Executive Officer Alok Maskara said Building Climate Solutions continued to deliver strong revenue growth and residential end-markets began stabilizing, but that margins and results fell short of expectations, reflecting heightened competitive pressure and persistent inflation on costs. The company said it is retooling processes to pass through cost increases and accelerate productivity.

Home Comfort Solutions revenue increased 3% to $937 million after a 7% year-over-year decline in the second quarter. Segment profit fell 18% to $176 million, and segment margin dropped 490 basis points to 18.7%, a steeper compression than the 130-basis-point decline in the second quarter. The company said targeted price adjustments in select market segments were implemented to defend and recapture share, and that those actions, combined with inflation and tariff-related costs, weighed on profitability. Profit declined $40 million versus the year-ago quarter, primarily reflecting a $12 million headwind from lower sales volumes and a $32 million headwind from product cost inflation, including tariffs, and lower factory absorption. Higher fuel costs, inflation across selling, general and administrative expenses and distribution, and ongoing investments added a further $15 million of pressure, partially offset by $13 million of mix and price benefits and $6 million from completed acquisitions.

Building Climate Solutions revenue increased 24% to $635 million, matching the second-quarter growth rate, with organic growth of 15% and continued strength across commercial HVAC, refrigeration, and services. Segment profit rose 19% to $167 million. Segment margin declined 110 basis points to 26.2% from record prior-year levels. The company said the profit increase primarily reflected $24 million from higher sales volumes, $8 million of mix and price benefits, and $13 million from completed acquisitions, partially offset by a $14 million headwind from product cost inflation, including tariffs, and lower factory absorption, and an additional $5 million from higher SG&A and distribution costs. It said it still expects full-year margins to expand despite inflation and tariff pressures.

At the consolidated level, profitability was impacted by a $45 million headwind from product cost inflation, including tariffs, and lower factory absorption, plus $15 million of higher fuel costs, inflation across SG&A and distribution, and ongoing investments. Those headwinds were partially offset by $13 million from higher sales volumes, $21 million of mix and price benefits, and $20 million from completed acquisitions. Net income was $221 million, or $6.41 a share, compared with $260 million, or $7.38 a share, a year earlier. Adjusted net income was $236 million, or $6.84 a share.

Operating cash flow was $395 million, compared with $301 million in the prior-year quarter, which the company attributed to reduced inventory levels. Net capital expenditure was $33 million. Share repurchases totaled $151 million. Corporate expenses were $19 million, down $8 million from the year-ago quarter.

For full-year 2026, the company expects revenue growth of approximately 6%, including a 5% benefit from completed acquisitions. Free cash flow guidance was $700 million to $750 million. Prior to the third-quarter update, the company had set the adjusted EPS range at $23.00 to $24.00 after the second quarter.

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