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FY2026 Q1
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Lennox International, Inc. earnings call
Buzzberg read
Company raises revenue guidance due to price actions
Lennox reported a return to revenue growth (+6%) with BCS strength offsetting HCS softness. The company maintained full-year EPS guidance despite higher tariffs and input costs, raising the revenue outlook to +8% on price hikes and raising segment revenue guidance for both HCS and BCS. Revenue grew 6% to $1.1B, with EPS of $3.35; segment margin fell 130bps on $15M under-absorption.
Buzzberg read Company raises revenue guidance due to price actions Lennox reported a return to revenue growth (+6%) with BCS strength offsetting HCS softness. The company maintained full-year EPS guidance despite higher tariffs and input costs, raising the revenue outlook to +8% on price hikes and raising segment revenue guidance for both HCS and BCS. Revenue grew 6% to $1.1B, with EPS of $3.35; segment margin fell 130bps on $15M under-absorption. Read full analysisCollapse analysis
Lennox reported a return to revenue growth (+6%) with BCS strength offsetting HCS softness. The company maintained full-year EPS guidance despite higher tariffs and input costs, raising the revenue outlook to +8% on price hikes and raising segment revenue guidance for both HCS and BCS. Revenue grew 6% to $1.1B, with EPS of $3.35; segment margin fell 130bps on $15M under-absorption.
- HCS organic revenue declined 12%, but the volume decline of 21% was a marked improvement from -32% in Q4 2025.
- BCS organic sales surged 26% with 300bps margin expansion, driven by emergency replacement, national accounts, and new 454B product mix.
- Full-year EPS guidance maintained at $23.50-$25.00, with revenue guidance raised to ~8% growth.
Revenue$1.1351B-5% QoQ
EPS$3.35-25% QoQ
Gross margin30.95%Reported
Operating margin14.63%Reported
6 grounded callouts
What matters now
The highest-signal changes from the call.
Margins
Cost inflation guidance nearly doubled to 5%
Pricing
New price increase announced, impacting second half
Show 3 more callouts
Demand
BCS organic sales up 26% with record quarter
Demand
HCS volumes improve sequentially from Q4 decline
Supply Chain
Inventory build significantly reduced versus prior year
Reported period
Actuals
| Metric | Reported | Change |
|---|---|---|
| Revenue | $1.1351B | -5% QoQ |
| EPS | $3.35 | -25% QoQ |
| Gross margin | 30.95% | Reported |
| Operating margin | 14.63% | Reported |
| Free cash flow | $-0.0394B | Reported |
| Capex | $0.0555B | Reported |
Forward-looking
Forward guidance
| Metric | Period | Range | Midpoint | Status |
|---|---|---|---|---|
| Capex | FY2026 | $250M | $250M | Maintained |
| Free cash flow | FY2026 | $750M–$850M | $800M | Maintained |
| Revenue | FY2026 | 8% | 8% | Raised |
| RevenueHCS | FY2026 | 4% | 4% | Raised |
| RevenueBCS | FY2026 | 16% | 16% | Raised |
AI, capex & demand read
Management read
Measured
Management expressed confidence in underlying momentum and reiterated guidance despite cost inflation, but highlighted ongoing uncertainty and the need for continuous execution.
Management AI read
Management highlighted AI investments in pricing, demand planning, and agentic AI for SG&A productivity. They noted good results in pricing and demand planning, with optimism for future benefits, but no specific revenue or adoption metrics were provided.
Investment and capacity
The company reaffirmed its 2026 capital expenditure guidance of approximately $250 million, focused on innovation and training centers, digital capabilities, distribution network optimization, ERP modernization, and targeted AI capabilities. This represents a year-over-year increase of approximately $30 million in Q1.
all 1 named companies below
Companiesreturns since call
Partners
Partners
Alok Miskara
Samsung ductless JV is gaining momentum, with high-quality products and dealer conversion expected to drive continued upside.
Evidence
“And we are pleased with the current momentum and feel like there's a lot more upside as we take this forward. especially as we look at everybody's impacted the same way from Taryn.”
External signals
Supply-chain alpha · 3returns since call
Lennox has reduced Q1 production by ~30% and built only $60M of inventory versus $210M in the prior year, leading to a $15M under-absorption headwind.
Evidence
“We reduced our productions about 30% in the first quarter, so there'll be a little bit of absorption that will go into the second quarter, but by the end of the second quarter, the inventory normalization will have occurred.”
Lennox has intentionally shed low-margin residential new construction business, which will negatively impact volume but improve profitability.
Evidence
“Two steps going to do better than one step. You know, from a profitability perspective, That's going to work in our favor because the margins were like negative to zero in those businesses that we have lost.”
BCS emergency replacement is early innings (2nd inning), but has already taken volume away from Stuttgart, enabling its factory to focus on profitable national accounts.
Evidence
“I'm still in the second inning or something out of a nine-inning game.”
Methodology & coverage
Management-only analysis. All 1 validated company mentions are shown. Reported actuals and forward guidance are kept separate. Public evidence is limited to eight short attributed quotes. AI-generated analysis can be incomplete or wrong; verify important claims against the original source.