Lennox (NYSE: LII) revenue climbs 10% but cuts full-year profit outlook

Posted by Jessica Moore on Oct 28th, 2026

What happened

Lennox International Inc. (NYSE: LII) grew third-quarter revenue 10% to $1.6 billion but cut its full-year adjusted earnings guidance.

Profit moved the other way. Adjusted diluted EPS was $6.84, down 7% from $7.38 a year earlier. GAAP diluted EPS was $6.41. The prior-year quarter had no adjustments, so its GAAP and adjusted EPS were the same. Adjusted EPS leaves out restructuring charges, special litigation charges and acquisition costs, net of a gain on earlier dispositions.

GAAP operating income was $312 million, down 5%. Operating margin was 19.8%, down 320 basis points. Net income was $221 million, against $260 million a year earlier.

Chief Executive Alok Maskara said margins and results "fell short of our expectations, reflecting heightened competitive pressure and the impact of persistent inflation on our costs." He said the company is retooling its processes to pass through cost increases more effectively while speeding up productivity.

Key numbers

Metric	Latest	Change	Source
Third-quarter revenue	$1.6 billion	from $1.43 billion, +10%	SEC 8-K, Exhibit 99.1
Adjusted diluted EPS	$6.84	from $7.38, -7%	SEC 8-K, Exhibit 99.1
Full-year adjusted EPS guidance (prior range $23.00 to $24.00)	$21.00 to $21.50	-8.7% at low end, -10.4% at high end	Calculated from SEC 8-K
Home Comfort Solutions segment margin	18.7%	-4.9 percentage points	SEC 8-K, Exhibit 99.1
Building Climate Solutions revenue	$635.3 million	from $513.9 million, +24%	SEC 8-K, Exhibit 99.1
Third-quarter operating cash flow	$395.3 million	from $300.7 million, +31.5%	Calculated from SEC 8-K

Where the margin went

Total segment profit, including unallocated corporate expenses, was $323 million, down 2%. Total segment margin fell 240 basis points to 20.6%. Costs outran the gains from price, volume and acquisitions.

The filing lists the pressures. Product cost inflation, including tariffs, and lower factory absorption cost $45 million. Higher fuel costs, inflation across SG&A and distribution, and ongoing investments cost another $15 million. Higher sales volumes added $13 million, mix and price added $21 million, and completed acquisitions added $20 million.

Net interest expense rose to $17.5 million from $10.5 million a year earlier. The tax provision rose to $72.1 million from $57.5 million.

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Home Comfort slips while Building Climate Solutions grows

Home Comfort Solutions revenue rose 3% to $937 million, but segment profit fell 18% to $176 million. Segment margin dropped 490 basis points to 18.7%. The company said it cut prices in select market segments to defend and win back share. Those cuts, inflation and tariff costs weighed on profit.

Within the segment, product cost inflation and lower factory absorption cost $32 million, and lower sales volumes cost $12 million. Management's priorities are to address share challenges, advance productivity and tariff mitigation, and introduce new entry-tier products.

Building Climate Solutions revenue rose 24% to $635 million, including 15% organic growth, led by commercial HVAC, refrigeration and services. Segment profit rose 19% to $167 million. Margin was 26.2%, down 110 basis points from record margins a year earlier. The company still expects full-year margins in this segment to expand despite inflation and tariff pressures.

Why it matters

OptimistFi has argued that Lennox's value rests on pricing and manufacturing discipline more than on rapid unit growth. This quarter tests both in the larger segment. Home Comfort cut prices to defend share and absorbed lower factory absorption, and its margin fell by almost five points. Building Climate Solutions supports the case. The net read is mixed.

The guidance cut is the clearest signal. The low end of 2026 adjusted EPS guidance fell 8.7% and the high end fell 10.4%. Revenue growth guidance is about 6%, including a 5% benefit from completed acquisitions. That leaves 1 percentage point from other sources. Free cash flow guidance is $700 million to $750 million.

The counterweights are real. Operating cash flow was $395 million against $301 million a year earlier, and Lennox repurchased $151 million of shares. The filing says the cash flow gain came from reduced inventory levels. That is a working-capital effect, not an earnings gain. Because the strongest segment still earned a 26.2% margin, the pressure may be concentrated rather than structural.

What's next

Management discussed the results on a conference call the morning of Oct. 28. A replay is available until Nov. 4. The next test is the next quarterly report. It will show whether Home Comfort margin stops falling and whether tariff mitigation and productivity work pull the year toward the $21.00 to $21.50 range. Another cut would weaken the case further. A recovering Home Comfort margin would support it.