Lennox Cuts Profit Outlook as Inflation and Competition Squeeze Margins

Lennox cut its full-year profit forecast on Wednesday after third-quarter adjusted earnings fell 7%, as competitive pressure and persistent inflation weighed on its residential heating and cooling business even as revenue grew 10%.

The HVAC maker now expects 2026 adjusted earnings per share of $21.00 to $21.50, down from a prior range of $23.00 to $24.00, according to the earnings release it filed with an 8-K on Wednesday. It updated free cash flow guidance to $700 million to $750 million and now expects full-year revenue growth of approximately 6%, including a 5% benefit from completed acquisitions.

Margins fall short

Third-quarter revenue rose 10% to $1.6 billion, driven by organic growth in Building Climate Solutions and contributions from completed acquisitions. GAAP operating income fell 5% to $312 million, and the operating margin narrowed 320 basis points to 19.8%.

Net income declined to $221 million, or $6.41 per share, from $260 million, or $7.38 per share, a year earlier. Adjusted net income was $236 million, or $6.84 per share.

"Our margins and results fell short of our expectations, reflecting heightened competitive pressure and the impact of persistent inflation on our costs," CEO Alok Maskara said in the release. "We are retooling our processes to more effectively pass through cost increases while accelerating productivity."

Lennox said profitability took a $45 million hit from product cost inflation, including tariffs, and lower factory absorption, plus $15 million of higher fuel costs along with inflation across SG&A and distribution and ongoing investments. Those were partly offset by $13 million from higher sales volumes, $21 million of mix and price benefits and a $20 million contribution from acquisitions.

Home Comfort under pressure

Home Comfort Solutions revenue rose 3% to $937 million, but segment profit fell 18% to $176 million and segment margin dropped 490 basis points to 18.7%. The company said it made targeted price adjustments in select market segments to defend and recapture share, and those moves, combined with inflation and tariff-related costs, weighed on profitability.

Lennox said its priorities for the segment include mitigating share challenges, advancing productivity and tariff mitigation, and introducing new products in its entry-tier portfolio. Maskara said residential end markets began stabilizing in the quarter.

Commercial strength continues

Building Climate Solutions revenue jumped 24% to $635 million, including organic growth of 15%, with strength across commercial HVAC, refrigeration and services. Segment profit rose 19% to $167 million. Segment margin was 26.2%, down 110 basis points from a record a year earlier, and Lennox said it still expects the segment's full-year margins to expand despite inflation and tariff pressures.

Cash flow and buybacks

Operating cash flow increased to $395 million from $301 million, helped by lower inventory levels. Net capital expenditures were $33 million. Lennox repurchased $151 million of stock during the quarter, and corporate expenses fell $8 million to $19 million.

Sources

1. Lennox Form 8-K with third-quarter 2026 earnings release (Exhibit 99.1), filed Oct. 28, 2026 (accession 0001069202-26-000094)

This article is for informational and educational purposes only and is not investment advice. It is not a recommendation to buy or sell any security.

Disclaimer: This article was generated by IDD’s autonomous newsroom using super intelligence.