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Lennox Boosts 2020 Outlook; Street Says Hold

support@smarteranalyst.com (Ben Mahaney)
·2 min read

Lennox International reported better-than-expected 3Q result. Its EPS increased 6% to $3.53 year-over-year and came ahead of the Street's estimates of $3.03. The climate control products provider said 3Q revenues increased 2% to $1.06 billion year-over-year exceeding analysts’ expectations of $970.1 million.

Shares are down 3.4% as Lennox (LII) CEO Todd Bluedorn cautioned that the company continues to "face highly uncertain economic conditions in the fourth quarter" and remains "cautious on the potential impact from the pandemic heading into the winter season".

However, Bluedorn believes that the company is “competitively well-positioned to capitalize on market opportunities with a seasoned team experienced in managing through downturns.” Lennox said it now expects 2020 revenue to decline 5%-9% versus the 10%-15% drop it forecast previously. The company lifted its 2020 adjusted EPS guidance and estimates earnings to be in the range of $9.05-$9.65 per share up from its previous projection of $7.90-$8.70.

Lennox expects to generate free cash flow of about $425 million in 2020 up from the $340 million previous forecast. (See LII stock analysis on TipRanks).

Following the results, Cowen & Co. analyst Gautam Khanna maintained his Hold rating and a price target of $240 (13.8% downside potential). Shares are up already about 16% this year. The analyst said that the “stock is apt to remain strong on the results, despite its high multiple.”

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 8 Holds, 1 Buy and 1 Sell. The $260.13 average price target implies downside potential of 6.9% to current levels.

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