Lennox Raises Revenue 10% and Cuts 2026 Earnings-per-Share Outlook
Key Facts
Lennox announced on October 28 that revenue reached $1.6 billion in the third quarter of 2026, up 10% year over year, but lowered its full-year adjusted earnings-per-share outlook. The company set the new range at $21.00 to $21.50, compared with its previous outlook of $23.00 to $24.00. Results included adjusted earnings per share of $6.84, down 7% from the year-earlier quarter. CEO Alok Maskara said, "Our margins and results came in below our expectations," attributing this to intensifying competition and continued cost inflation. The stock closed at $372.05 on October 27, the latest listed daily close before the results announcement, then fell 5.8% after the announcement, according to Investing.com.
The figures reflect a divergence between sales growth and declines in some profitability measures. Net income was $221.2 million in the third quarter, compared with $259.9 million a year earlier, while diluted earnings per share were $6.41 versus $7.38. Operating income fell 5% to $312 million, and the operating margin declined 320 basis points to 19.8%. Total segment profit, including unallocated corporate expenses, also fell to $323.3 million from $328.8 million in the third quarter of 2025. This points to pressure on the conversion of revenue growth into profit, as the company also lowered its annual outlook.
Lennox said quarterly earnings were affected by a $45 million burden from product cost inflation, including tariffs, and lower factory utilization. It added that higher fuel costs added $15 million to the pressure. Maskara put the impact of competition and inflation at the center of his explanation for results that fell short of management's expectations. These pressures were evident in the Home Comfort Solutions segment, where revenue rose 3% to $937 million, but segment profit fell 18% to $176 million. The segment margin dropped 490 basis points to 18.7%, according to the company statement.
By contrast, the Building Climate Solutions segment posted faster growth, with revenue rising 24% to $635 million, including organic growth of 15%. Segment profit increased 19% to $167 million, up $26 million, according to the company. But the margin fell 110 basis points to 26.2%, indicating that improved profit did not prevent margin contraction. At the group level, this positive segment performance was offset by lower profit in the Home Comfort Solutions segment and weaker operating income. The differing performance of the two segments shows that sales growth did not have an equal effect on profitability.
Lennox also lowered its 2026 revenue growth outlook to about 6%, including a 5% contribution from completed acquisitions. The company updated its free cash flow outlook to a range of $700 million to $750 million. In the third quarter, operating cash flow was $395 million, compared with $301 million in the same period a year earlier. The company attributed the increase to lower inventory levels. The updated outlook combines expected revenue growth with a lower earnings-per-share range, alongside a revised free cash flow forecast.
The company said its priorities include addressing market share challenges, advancing productivity initiatives and mitigating the impact of tariffs, as well as launching new products. Lennox's conference call to discuss third-quarter results was scheduled for October 28, 2026, at 8:30 a.m. Central Time. Management's plan addresses competition, costs and productivity, which it said affected quarterly results. The announced 2026 outlook puts adjusted earnings per share at $21.00 to $21.50 and revenue growth at about 6%. The updated free cash flow outlook is $700 million to $750 million.