Lennox Beats Earnings in 2Q13 - Analyst Blog


The diversified machinery company, Lennox International, Inc. ( LII ) reported strong second quarter 2013 results with earnings per share of $1.31, increasing 33.7% from the 98 cents recorded in the year-ago quarter, led by increased revenues and margins. Earnings also beat the Zacks Consensus Estimate of $1.19 by 10.1%.


Revenues in the reported period grew 8.7% year over year to $913.1 million as a result of better volumes and price/mix. Foreign currency impacts were neutral. Sales also beat the Zacks Consensus Estimate of $887.0 million by a comfortable margin.


Lennox's gross profit margin in the quarter was 27.8%, up 300 basis points year over year, due to better volumes, favorable price/mix and low material costs. Selling, general and administrative expenses represented 16.6% of sales at $151.3 million. Adjusted income from continuing operations in the quarter reached $66.5 million, increasing 31.4% year over year.

Segment Details

Residential Heating & Cooling segment generated revenues of $476.2 million against $411.9 million in the year-ago quarter. The rise was brought about by better volumes and favorable price mix along with lower material costs, thus improving the operating profit margin of the segment by 370 basis points to 13.9%.

Commercial Heating & Cooling segment's sales improved 3.7% year-over-year to $229.6 million, resulting from better volumes and favorable price mix as well. The margins, however, were negatively impacted by higher SG&A costs and investments in distribution expansion. Operating profit margin increased 10 basis points to 15.1%.

Revenue from the Refrigeration segment was recorded at $207.3 million, almost flat compared with the year-ago quarter. Operating profit margin grew 220 basis points to 12.4%.

Financial Update

Exiting the second quarter, Lennox's cash and cash equivalents were $45.3 million, against $34.9 million at the close of the preceding quarter. Long-term debt decreased to $410.8 million from $489.8 million at the end of first quarter 2013.

Moreover, in the reported quarter, Lennox paid a quarterly dividend of 20 cents a share to shareholders as of Jun 28, 2013. The dividend represents a 20% hike year over year. The company repurchased $33.0 million stock in the quarter.


Based on the current performance of the business, Lennox's management increased its expected revenues and earnings for the year 2013. Core sales in the year 2013 are now expected to grow by 6% to 8%, against the previously announced 3% to 6%. Moreover, earnings per share for the year are currently expected to be in the range of $3.45-$3.75 against $3.25-$3.55 expected earlier.

Lennox also reiterated its tax rate guidance to be 34%-35% for the full year. Capital expenditures guidance for the year is maintained at $60.0 million along with stock repurchase plans worth $100.0 million in 2013.

The new construction as well as replacement businesses of the company are performing well, and are expected to continue growing in the coming quarters. Lennox continues to have stronger foothold in South America and Asia Pacific, although, the European market still makes us cautious.

Other Stocks to Consider

Watsco Inc. ( WSO ) released its second quarter results on Jul 18, 2013. The company reported earnings per share of $1.48, beating the Zacks Consensus Estimate of $1.41 by 5.0%.

Chart Industries Inc. ( GTLS ) is expected to release its second quarter results before the market open on Jul 30, 2013. The Zacks Consensus Estimate for the quarter is 77 cents.

Macquarie Infrastructure Company LLC ( MIC ) is expected to release its second quarter results after the market close on Jul 31, 2013. The Zacks Consensus Estimate for the quarter is 97 cents.

Lennox currently carries a Zacks Rank #3 (Hold).

CHART INDUSTRIE (GTLS): Free Stock Analysis Report

LENNOX INTL INC (LII): Free Stock Analysis Report

MACQUARIE INFRA (MIC): Free Stock Analysis Report

WATSCO INC (WSO): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: GTLS , LII , MIC , WSO



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