Lennox International (LII) Q4 2024 earnings summary

Executive summary

• Achieved record revenue over $5.3 billion and adjusted segment profit over $1 billion for 2024, with both segments delivering double-digit revenue and EPS growth year-over-year, driven by pricing, productivity, and successful integration of acquisitions.

• Adjusted EPS reached $5.60 for Q4 and $22.58 for the full year, with core revenue up 22% in Q4 and 13% for the year.

• Successfully completed the initial phase of a transformation plan, including pricing initiatives, portfolio simplification, and strategic acquisitions, with AES integration ahead of schedule.

• Divested European operations in Q4 2023, focusing on core North American business; 2024 results exclude these operations for core and adjusted metrics.

• Home Comfort Solutions led growth, benefiting from prebuy activity ahead of refrigerant transition and strong pricing.

Financial highlights

• Q4 2024 core revenue rose 22% year-over-year to $1.3B; full year core revenue up 13% to $5.3B.

• Q4 adjusted EPS increased 54% year-over-year to $5.60; full year adjusted EPS up 26% to $22.58.

• Q4 adjusted segment margin expanded 250 bps to 18.4%; full year margin at 19.4% (+150 bps YoY).

• Operating cash flow was $332 million in Q4 and $946 million for the year; free cash flow up 61% to $785M.

• Net debt to adjusted EBITDA improved to 0.6x at year-end 2024.

Outlook and guidance

• 2025 core revenue projected to grow ~2%, with headwinds in Q1 and Q4 due to 2024 pre-buy and normalization post-refrigerant transition.

• Adjusted EPS guidance for 2025 is $22–$23.50; free cash flow expected between $650 million–$800 million; capital expenditures planned at $150 million.

• Inflation expected to increase costs by 3%, offset by $50 million in productivity savings; $25 million in strategic investments planned for IT, distribution, and customer service.

• 2026 revenue target range reaffirmed at $5.4–$6 billion, with ROS at the high end of 19–24%.