Lennox International (LII) Q3 2026 earnings summary

Executive summary

• Q3 revenue was $1,572.5M, up 10.2% YoY; total segment profit was $323.3M, down 2%, and adjusted diluted EPS was $6.84, down 7%.

• Building Climate Solutions delivered strong growth, while Home Comfort Solutions faced lower volumes and margin pressure from competition, tariffs, inflation, and lower factory absorption.

• Recovery priorities include residential share recapture, dynamic pricing, productivity, entry-tier products, and improved customer experience.

Financial highlights

• Operating income was $312.1M, down 5.1%; GAAP net income was $221.2M versus $259.9M, and diluted EPS was $6.41 versus $7.38.

• Adjusted net income was $235.9M versus $259.9M; adjusted diluted EPS was $6.84 versus $7.38.

• Gross margin fell 250 bps to 31.6%; segment-profit margin was 20.6%, down 240 bps, amid $45M of product-cost inflation and tariffs, $15M of higher fuel costs, and lower factory absorption.

• Operating cash flow was $395.3M and free cash flow was $362.7M, versus $300.7M and $265.3M, respectively; TTM free cash flow conversion reached 108%.

Outlook and guidance

• FY2026 adjusted EPS guidance was reduced to $21.00–$21.50 from $23.00–$24.00; free cash flow guidance fell to $700M–$750M from $750M–$850M.

• FY2026 revenue growth is expected at ~6%, including a 5% benefit from completed acquisitions; low-single-digit price/mix growth and a low-single-digit volume decline are expected.

• Building Climate Solutions revenue growth outlook increased to ~23%; Home Comfort Solutions revenue is expected to decline ~4%, versus prior guidance for 1% growth. Full-year Building Climate Solutions margins are expected to expand.

• Q4 organic sales are expected to decline mid-single digits; 2027 planning assumes muted industry volumes, resilient replacement demand, soft new construction, and a tougher first half.