10-Q · April 29, 2026
Lennox International (LII) reported Q1 2026 earnings with revenue of $1.14 billion, reflecting a 6% increase compared to $1.07 billion in Q1 2025, but diluted EPS of $3.35 was below last year's $3.63. The Home Comfort…
Earnings analysis · 10-Q
LII earnings analysis
Filed July 29, 2026 · Our reading of the company's report
The latest report
Lennox delivered mixed Q2 results: revenue rose 3.0% to $1.5453 billion and GAAP EPS was essentially flat at $7.72 versus $7.71, as Building Climate Solutions more than offset weakness in Home Comfort Solutions. Gross…
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Lennox delivered mixed Q2 results: revenue rose 3.0% to $1.5453 billion and GAAP EPS was essentially flat at $7.72 versus $7.71, as Building Climate Solutions more than offset weakness in Home Comfort Solutions. Gross margin expanded 40 bps to 34.9%, but operating margin contracted 30 bps to 23.0% due to higher SG&A and other costs. Cash generation improved materially in the first half, though elevated debt, tariff uncertainty, residential volume declines, and newly disclosed antitrust litigation temper the outlook.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
Reported figures
- Earnings per share
- $7.72
What stood out
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Revenue rose and margins recovered sequentially
Q2 net sales rose 3.0% year over year to $1.5453 billion and increased from $1.1351 billion in Q1 2026. Gross margin improved 40 bps year over year to 34.9%, while operating margin was 23.0% versus 23.3% a year earlier but materially above Q1's 14.4%.
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EPS held flat year over year
Diluted EPS was $7.72, up $0.01 from $7.71 in Q2 2025 and up from $3.35 in Q1 2026. Operating income increased $6.0 million to $355.0 million despite lower underlying organic volume.
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Building Climate Solutions drove growth
Building Climate Solutions revenue increased $118.1 million, or 24%, to $609.7 million, with segment profit up $34.7 million, or 29%, to $155.3 million. Growth reflected 12% higher volume, 9% acquisition-related volume, and 3% favorable mix and price.
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Operating cash flow improved sharply
Six-month operating cash flow increased to $188.1 million from $51.0 million, driven primarily by favorable working-capital changes. Less $91.0 million of capex, implied six-month free cash flow was $97.1 million.
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Liquidity supports capital returns
The company had $51.5 million in cash and $586.3 million of revolver availability at June 30, 2026, after $412.0 million of commercial paper. It repurchased $151.0 million of stock and paid $91.0 million of dividends during the first six months.
What to watch
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Residential-market softness pressured Home Comfort
Home Comfort Solutions sales fell $73.7 million, or 7%, to $935.6 million, while profit declined $30.2 million, or 12%, to $221.8 million. The segment faced a 12% decline in sales volume, partly offset by 3% favorable mix/price and 2% acquisition-related volume.
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Tariff and cost volatility remain a headwind
Q2 gross margin benefited from $30.0 million of tariff refunds, while product-cost inflation and factory under-absorption reduced margin by 80 bps. The company is evaluating new Section 301 forced-labor tariffs of 10.0% or 12.5% on imports from 60 trading partners.
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Higher borrowing increased interest and leverage
Total debt was $1.5813 billion at June 30, 2026, including $412.0 million of commercial paper and a $300.0 million term loan; interest expense rose to $15.0 million from $8.0 million year over year. Debt-to-total-capital increased to 55% from 54% at December 31, 2025.
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New antitrust litigation carries unquantified exposure
Seven HVAC manufacturers, including Lennox, were named in antitrust litigation filed March 20, 2026; plaintiffs filed three amended consolidated complaints on July 10, 2026. The putative class covers U.S. purchasers from January 1, 2020 to present, seeks unspecified damages, and management cannot estimate a loss range.
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No formal risk-factor changes disclosed
Item 1A states there were no material changes to risk factors from the 2025 Form 10-K. However, the filing's legal-proceedings disclosure adds the March 20, 2026 antitrust case as a potentially material contingency.
Management's outlook
The 10-Q MD&A contains no quantitative revenue, EPS, or free-cash-flow outlook. Quantitative outlook was deferred to the earnings release/call rather than included in this filing.
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.