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Lennox Q4 Earnings Beat Ests - Analyst Blog

Posted: 2/6/2014 12:00:00 PM
Referenced Stocks: CMI;COMM;GGG;LII

Diversified machinery company, Lennox International, Inc. ( LII ) reported adjusted earnings per share of 77 cents in the fourth quarter 2014, up 37.5% year over year and above the Zacks Consensus Estimate of 73 cents.

Earnings per share, including one-time items in the quarter, were 68 cents, up from 52 cents reported in the year-ago quarter.

In 2013, adjusted earnings per share were $3.70, up 37.0% from $2.70 recorded in 2012. The bottom line was also above the Zacks Consensus Estimate of $3.67.


Net sales generated in the reported quarter were $749.5 million, up 9.4% year over year due to volume gains. The price/mix impact was neutral in the quarter.

Lennox International reports its top-line results under three heads, the fourth quarter results of which are discussed below.

Net sales generated by the Residential Heating & Cooling segment were $358.6 million, up 17.6% over the year-ago comparable quarter. Commercial Heating & Cooling segment recorded net sales of $212.6 million, reflecting year-over-year increase of 13.4%. The Refrigeration segment generated net sales of $178.3 million in the quarter, down 7.3% year over year.

In 2013, Lennox International generated net sales of $3,199.1 million, up 8.5% year over year.


Lennox International's cost of goods sold in the fourth quarter 2013 went up 4.9% year over year and represented 72.3% of total revenue, down from 75.4% in the year-ago quarter. Gross margin in the quarter was 27.7%, up 310 basis points year over year.

Selling, general and administrative expenses, as a percentage of total revenue, stood at 19.5%, up 90 basis points year over year.

Balance Sheet/Cash Flow

Exiting the fourth quarter of 2013, Lennox International's cash and cash equivalents were $38.0 million, flat with $37.8 million recorded in the preceding quarter. Long-term debt was $233.2 million versus $266.2 million in the previous quarter.

In the fourth quarter 2013, Lennox International's cash flow from operating activities was $145.3 million, down 7.5% year over year. Spending on purchase of property, plant and equipments increased 68.0% to $37.3 million.

In 2013, cash flow generation from operating activities was down 5.0% while capital expenditure was up 56.0% to $210.3 million and $78.3 million, respectively. The company repurchased shares worth $125.0 million and paid dividends of $34.0 million.


Lennox International maintained its guidance for 2014. Revenue is expected to grow in the 3%-7% range, including the negative impact from foreign currency translation. Adjusted earnings per share are predicted in the $4.20-$4.60 range.

The effective tax rate is anticipated within 34%-35%. The company intends to spend $90 million as capital expenditure and repurchase shares worth $150 million.      

Lennox International currently has a $4.2 billion market capitalization and carries a Zacks Rank #2 (Buy). Other stocks worth considering in the industry include CommScope Holding Company, Inc. ( COMM ), Graco Inc. ( GGG ) and Cummins Inc. ( CMI ). All these three companies carry the same Zacks Rank as Lennox.

CUMMINS INC (CMI): Free Stock Analysis Report

COMMSCOPE HLDG (COMM): Free Stock Analysis Report

GRACO INC (GGG): Free Stock Analysis Report

LENNOX INTL INC (LII): Free Stock Analysis Report

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