Lennox International Inc. Beats Q2 Earnings Estimates

Shares of Lennox International, Inc. LII, which provides climate control products for HVAC and refrigeration markets, were up 1.01% mid-morning on Tuesday. The stock is riding a high after posting positive results for the second quarter, which beat earnings estimates.

Lennox posted quarterly adjusted earnings of $3.67 per share. The company’s bottom line increased by 29.7% compared to the same period last year. GAAP revenue in the second quarter came in at 1.18 billion.

GAAP operating income hit a record $195 million, up 11%. Revenues for the Residential Heating & Cooling unit, which includes heat pumps and complete HVAC systems, increased 10% year-over-year to hit $716 million. Volume and price growth as well as a positive foreign exchange impact helped fuel the increase.

“In Residential, revenue and profit hit new highs on strength in both replacement and new construction business,” said Todd Bluedorn, Chairman and CEO. “Residential revenue was up 9% at constant currency, and profit rose 9% as segment margin remained at the record 21.5% level.”

The Commercial Heating & Cooling sector also saw a strong performance in the second quarter, rising 13% to hit a record of $292 million in revenue. Higher prices, higher volume, cost cutting measures and favorable warranty helped fuel growth in the sector.

Revenue in the Refrigeration unit saw the least growth, rising 2% to $150 million.

Income from continued operations reached $139.2 million, or $3.39 per share, on a GAAP basis. The figure is up from $116.4 million posted in the second quarter of last year. Adjusted income from continued operations was $150.5 million, or $3.67 per share, up from $121 million in the same quarter last year.

Net cash in the second quarter fell to $49 million from $59 million in Q2 2017. Capital expenditures hit $21 million, up from $19 million in the same period last year. Free cash flow came in at $28 million compared to the $41 million posted in the prior year’s quarter.

As of the end of June, Lennox had total cash and cash equivalents of $39 million.

Lennox paid $21 million in dividends in the second quarter and spent $200 million on stock repurchases.

The company adjusted its guidance for 2018. Lennox expects GAAP revenue growth to be between 4% and 6% versus the 4% to 8% increase that was previously projected. Guidance for adjusted revenue growth has increased from 4-8% to 6-8%. Guidance for GAAP EPS was also increased from $8.79-$9.39 to $9.43-$9.83.