Zacks Investment Research upgraded
Lennox International, Inc.
) to a Zacks Rank #1 (Strong Buy) on Jul 24, based on the
company's impressive second-quarter 2013 results and a strong
Why the Upgrade?
Lennox reported impressive results for second-quarter 2013
with adjusted earnings per share of $1.31, increasing 33.7% year
over year. Revenues in the quarter were $913.1 million,
increasing 8.7% year over year, due to better volumes and
In the quarter, Lennox experienced a positive momentum in the
replacement and new construction business, driving the
Residential segment revenues. Commercial segment's demand in
North America was strong, though that in Europe remained
The company's cost control measures paid off in the quarter,
resulting in a 300 basis points (bps) increase in the gross
profit margin to 27.8%. Moreover, adjusted income from continuing
operations in the quarter reached $66.5 million, increasing 31.4%
year over year.
Lennox expects to venture into the emergency replacement
markets in the coming quarters. The company is investing in
distribution centers, to be able to provide deliveries on the
same day or the next. It is expected that the company will have
32 commercial distribution centers by the end of 2013.
Lennox is well positioned to expand through investments and
product launches with a strong balance sheet with cash and cash
equivalents of $45.3 million. Moreover, the company remains
focused on increasing shareholders' value. In the reported
quarter, Lennox paid a quarterly dividend of 20 cents a share,
representing a 20% hike year over year.
Subsequent to the strong second quarter, Lennox upped its
guidance for 2013. Core sales in 2013 are now expected to grow by
6% to 8% year over year, against the previously announced 3% to
6%. Moreover, earnings per share for the year are currently
expected in the range of $3.45 - $3.75 against $3.25 - $3.55 as
Lennox continues to strengthen its foothold in South America
and Asia Pacific, although the European market keeps us
Other Stocks to Consider
Besides Lennox, other operators in the sector having a
favorable Zacks Rank are
Eagle Materials Inc.
). All of them currently have a Zacks Rank #2 (Buy).
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