Lennox Posts In-line Q2 Earnings, Misses on Revenues - Analyst Blog

Diversified machinery company, Lennox International, Inc. ( LII ) reported impressive second-quarter 2014 results. The company's adjusted earnings per share from continuing operations came in at $1.51, up 15% from $1.31 recorded in the year-ago quarter. The results were in line with the Zacks Consensus Estimate.

On a GAAP-basis, earnings per share were $1.50, up 19% from $1.26 per share reported in the year-ago quarter.

Lennox International Inc - Earnings Surprise | FindTheBest


Lennox International's net sales increased 5% year over year to $961 million, lagging the Zacks Consensus Estimate of $964 million. On a constant currency basis, top-line growth was 6%, driven by higher volumes and price/mix impacts.

Lennox International reports its top-line results under three heads - Residential Heating & Cooling, Commercial Heating & Cooling, and Refrigeration. The second-quarter results of these segments are briefly discussed below.

The Residential Heating & Cooling segment generated net sales of $528 million, representing nearly 55% of total net sales. Compared with the year-ago quarter, the segment's net sales were up 11% due to favorable price/mix and volume gains.

Net sales from the Commercial Heating & Cooling segment were up 5% year over year to $241 million, accounting for 25.0% of total net sales.

The Refrigeration segment produced net sales of $192 million, down 7% year over year and comprising 20% of total net sales.


Lennox International's cost of goods sold in the second quarter went up 5.9% year over year and represented 72.7% of total revenue, relatively flat year over year. Gross margin was 27.3%.

Selling, general and administrative expenses, as a percentage of total revenue, stood at 15.5%, down 110 basis points year over year.

Balance Sheet/Cash Flow

Exiting second-quarter 2014, Lennox International had cash and cash equivalents of $49.6 million versus $39.0 million recorded in the preceding quarter. Long-term debt increased 6.6% sequentially to $419.8 million.

In the six months ended Jun 30, 2014, the company used cash amounting to $73.4 million for its operating activities, as compared with nearly $88.3 million used in the year-ago comparable period. Spending on purchase of property, plant and equipments increased 76.1% year over year to $41.2 million, in the first half of 2014.

In the second quarter, Lennox International increased its dividends by 25% to 30 cents per share. Also, the company repurchased $50 million worth of shares.


Lennox International has raised the guidance for 2014. Total revenue is presently expected to grow in the 5−7% range compared with the previous 2−6% range, including a 1% negative impact from foreign currency translations. Expected adjusted earnings per share is narrowed to a range of $4.30−$4.50 from the earlier estimate of $4.20−$4.60. On a GAAP-basis, earnings per share expectations are reduced to a range of $4.27−$4.47, from the previous projection of $4.18−$4.58.

Effective tax rate is maintained in a range of 34−35% and corporate expense is estimated at approximately $70 million. The company intends to spend $90 million as capital expenditure and repurchase shares worth $150 million.

Lennox International currently has a $4.3 billion market capitalization and carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include CommScope Holding Company, Inc. ( COMM ), Comfort Systems USA Inc. ( FIX ) and Equinix, Inc. ( EQIX ). While CommScope Holding sports a Zacks Rank #1 (Strong Buy), Comfort Systems and Equinix hold a Zacks Rank #2 (Buy).

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

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

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