- Oppenheimer Analyst Noah Kaye initiated the coverage Lennox International Inc LII with a perform assessment.
- Lennox is realigning its North American segments under new leadership and has begun a process to sell its European commercial HVACR businesses.
- The analyst sees LII well positioned to resume NorAm home air conditioner stock gains through distribution strength, e-commerce and innovation capabilities.
- The analyst highlights the runway for heat pump penetration as an opportunity for Lennox.
- The company is targeting a commercial segment EBIT improvement of US$100 million from FY22 to FY25 through a combination of price/mix improvements, scale efficiency and capacity expansion.
- The analyst is encouraged by the recent positive development in manufacturing efficiency and follows LII’s progress in moving the majority of production to Mexico.
- The analyst said that the target margin for FY26 (18-20%) set at LII’s Investor Day 2022 could be in the top quartile below peers.
- The analyst is positive about LII’s brand and channel advantages, strong corporate culture and industry-leading ROIC.
- The analyst sees Lennox’s realignment and focus on winning in North America as likely to improve key financial metrics.
- The analyst oversees execution of long-term strategic targets (residential stock earnings, economic recovery, margin expansion) and intermediate catalysts (e.g., Saltillo expansion, EU divestiture) amid cyclical headwinds currently impacting organic growth and FCF generation.
- price action: LII shares trade 0.20% lower at $242.35 on the latest check Tuesday.
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