Lennox International (LII) Q4 2025 earnings summary

Executive summary

• Achieved record full-year segment margin above 20% for the first time, with adjusted EPS of $23.16, up 2% year-over-year, despite regulatory changes, softer demand, and market headwinds in 2025.

• Full year 2025 revenue was $5.2B, down 3% year-over-year, with Q4 revenue at $1.2B, down 11% year-over-year.

• Q4 2025 adjusted EPS was $4.45, down 22% year-over-year.

• Successfully converted product portfolio to meet new low GWP requirements.

• Broad residential market weakness impacted profit, but indicators suggest gradual improvement.

Financial highlights

• Full-year segment margin reached 20.4%, up 90 bps year-over-year; Q4 segment margin was 17.7%, down 110 bps year-over-year.

• Operating cash flow for 2025 was $758M, down due to higher inventory; free cash flow for 2025 was $640M, exceeding guidance.

• Free cash flow conversion for 2025 was 95%, with net debt to adjusted EBITDA at 0.6x by year-end.

• Share repurchases totaled $482M in 2025; dividend saw a double-digit increase in May 2025.

• Q4 operating income was $196M, down 22% year-over-year, with a 16.4% margin.

Outlook and guidance

• 2026 revenue growth expected at 6–7%, with organic volumes down low single digits and growth in the second half.

• Adjusted EPS guidance for 2026 is $23.50–$25.00.

• Free cash flow expected between $750M and $850M in 2026.

• 2026 CapEx planned at $250M, focused on innovation, digital, and network optimization.

• EBIT margin expansion expected for the fourth consecutive year.