Climate control solutions innovator Lennox International (NYSE: LII) fell short of the market’s revenue expectations in Q2 CY2026 as sales rose 3% year on year to $1.55 billion. Its GAAP profit of $7.72 per share was in line with analysts’ consensus estimates.
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Lennox (LII) Q2 CY2026 Highlights:
- Revenue: $1.55 billion vs analyst estimates of $1.56 billion (3% year-on-year growth, 1% miss)
- EPS (GAAP): $7.72 vs analyst estimates of $7.73 (in line)
- EPS (GAAP) guidance for the full year is $23.50 at the midpoint, missing analyst estimates by 4.7%
- Operating Margin: 23%, in line with the same quarter last year
- Free Cash Flow Margin: 8.8%, up from 3.9% in the same quarter last year
- Market Capitalization: $18.94 billion
"Our results this quarter reflect the strength of our portfolio and team," said Alok Maskara, Chief Executive Officer.
Company Overview
Based in Texas and founded over a century ago, Lennox (NYSE: LII) is a climate control solutions company offering heating, ventilation, air conditioning, and refrigeration (HVACR) goods.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Lennox grew its sales at a mediocre 7.1% compounded annual growth rate. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about Lennox.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Lennox’s recent performance shows its demand has slowed as its annualized revenue growth of 4% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
Lennox also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Lennox’s organic revenue averaged 4.4% year-on-year growth. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results. 
This quarter, Lennox’s revenue grew by 3% year on year to $1.55 billion, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 9.2% over the next 12 months, an improvement versus the last two years. This projection is commendable and indicates its newer products and services will fuel better top-line performance.
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Operating Margin
Lennox has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 17.7%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, Lennox’s operating margin rose by 5.3 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Lennox generated an operating margin profit margin of 23%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Lennox’s EPS grew at 11.6% compounded annual growth rate over the last five years, higher than its 7.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into Lennox’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Lennox’s operating margin was flat this quarter but expanded by 5.3 percentage points over the last five years. On top of that, its share count shrank by 7.7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth. 
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Lennox, its two-year annual EPS growth of 11.7% is similar to its five-year trend, implying strong and stable earnings power.
In Q2, Lennox reported EPS of $7.72, up from $7.71 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Lennox’s full-year EPS to grow 16% from $22.51 to $26.12.
Key Takeaways from Lennox’s Q2 Results
Lennox's revenue fell slightly short of Wall Street’s estimates and full year guidance was below expectations. Overall, this quarter could have been better. The stock traded down 8.3% to $498.82 immediately after reporting.
Is Lennox an attractive investment opportunity right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).
