Lennox International (LII) Q3 2024 earnings summary

Executive summary

• Achieved record Q3 2024 results with 15% core revenue growth to $1.5 billion, adjusted segment margin of 20.2%, and adjusted EPS up 24% to $6.68 year-over-year, driven by pricing, volume, and operational execution.

• Operating income rose 62% to $303 million, with net income up 83% to $239 million and free cash flow up 50% to $412 million.

• Both Home Comfort Solutions and Building Climate Solutions segments delivered 15% revenue growth and strong profit gains, with AES acquisition integration completed ahead of schedule.

• Raised full-year 2024 EPS guidance to $20.75–$21.00 and free cash flow guidance to $575–$650 million.

• Chief Legal Officer John Torres retiring; Monica Brown to succeed effective January 2025.

Financial highlights

• Core revenue for Q3 was $1.5 billion, up 15% year-over-year, with 13% organic growth and 2% from acquisitions.

• Adjusted segment profit increased 21% to $303 million, with margin up 90 basis points to 20.2%.

• Operating margin expanded 650 basis points to 20.2%; gross margin for Q3 2024 was 32.6%.

• Operating cash flow reached $452 million, up 44% year-over-year; free cash flow for Q3 was $412 million.

• Net debt to adjusted EBITDA improved to 0.8x from 1.8x last year; cash and cash equivalents increased to $243 million.

Outlook and guidance

• Full-year 2024 core revenue expected to increase approximately 10%, including 2% from AES acquisition.

• EPS guidance raised to $20.75–$21.00; free cash flow guidance increased to $575–$650 million.

• 2025 outlook anticipates margin expansion from low-GWP product mix, productivity gains, and price/cost benefits.

• Industry volume for 2025 expected to be flat to slightly up; commercial market to grow low single digits.

• Management expects continued demand from replacement business and new construction, with seasonality and commodity price volatility as ongoing factors.