Lennox Shares Tumble 19.9% After Lowering Annual Earnings Forecast

Lennox International shares plummeted 19.9% through late morning on Wednesday after the HVAC manufacturer cut its annual profit forecast, overshadowing a marginal earnings beat in the second quarter.

The company reported earnings of $7.72 per share on $1.5 billion in revenue. While the per-share figure edged past the $7.61 consensus estimate, sales fell short of the roughly $1.6 billion target. Overall revenue grew 3% year over year, but operating profit rose just 2%, leaving GAAP earnings essentially flat.

The mixed performance stems from a stark divergence across its two core divisions. Lennox attributed the underperformance to "continued softness in the residential end market." Residential sales, which make up roughly 60% of total revenue, dropped 7% as lower volumes offset management's attempts to push through higher prices.

Conversely, the commercial segment provided the only meaningful top-line momentum. Sales to businesses, branded as Building Climate Solutions, surged 24% during the quarter. Because the commercial business represents the remaining 40% of the company's revenue mix, this strength was just enough to keep overall sales in positive territory.

However, the forward outlook disappointed investors more than the quarterly revenue miss. Management slashed its full-year earnings guidance by roughly 3%, establishing a new target range of $23 to $24 per share. The entirety of this revised range sits below the Wall Street consensus estimate of $24.52.

The company did reaffirm its longer-term 2026 sales growth target of 8%. Investors should note, however, that just 3% of that growth is expected to be organic, with the remaining 5% reliant on acquisitions.

At 18.4 times the new earnings forecast, Lennox trades at a relatively modest valuation. Yet for market participants, the combination of a deteriorating residential market and the complete lack of near-term earnings growth was enough to trigger a decisive selloff.