Lennox Cuts 2026 Earnings Forecast as Competition Limits Residential Price Increases
Revenue rose 10 percent to $1.6 billion. Adjusted earnings fell 7 percent to $6.84 a share. Lennox now expects $21.00 to $21.50 a share for 2026, down from $23.00 to $24.00.
Lennox cut the midpoint of its 2026 adjusted earnings forecast by $2.25 a share after a midyear price increase failed to hold and its expected tax rate rose to 21 percent from 20 percent. The Dallas company reported third-quarter results Oct. 28 showing net income of $221 million, or $6.41 a share, compared with $260 million, or $7.38, a year earlier, even as net sales climbed to $1.57 billion from $1.43 billion.
"However, our margins and results fell short of our expectations, reflecting heightened competitive pressure and the impact of persistent inflation on our costs," CEO Alok Maskara said in the release. Total segment profit slipped 2 percent to $323 million.
Home Comfort Sales Rise Only With Acquisitions
Home Comfort Solutions, the residential segment, posted revenue of $937 million, up 3 percent. Acquisitions supplied the growth, since organic revenue fell 1 percent, an improvement from a 9 percent decline in the second quarter. ACHR News reported that underlying sales volume dropped 3 percent. Sales through Lennox's direct-to-contractor channel fell 6 percent, and two-step organic sales rose 13 percent against last year's distributor destocking.
Segment profit fell 18 percent to $176 million, and margin dropped 490 basis points to 18.7 percent. The release breaks down the $40 million decline: $32 million from product cost inflation, tariffs and lower factory absorption, $15 million from fuel, overhead and investment, and $12 million from lower volumes, offset by $13 million in mix and price and $6 million from acquisitions.
The Price Increase That Did Not Stick
Lennox introduced the increase late in the second quarter, and most of the impact of Section 232 derivative tariffs arrived in the third quarter. Maskara called the resulting realization "very low." He blamed competition, then added, "It's also some pricing fatigue." His summary to analysts: "We just couldn't stick a mid-year price increase."
Lennox responded by adjusting prices selectively by region and customer segment to hold share, and Maskara said the trade-off was lower realization. He said the company has lost no share beyond the residential new construction losses it has already described. Its next general increase is planned for the beginning of 2027.
An Entry Tier Aimed at Overseas Competition
Lennox plans a full launch in the first quarter of 2027 of a lower-priced lineup that includes side-discharge units, mini-splits and a unitary product, following pilots in Florida. Maskara said "the lower-tier offering is definitely in response to some of the overseas new competition coming in." CFO Michael Quenzer said the company expects margins on the products, once costs are reduced, to resemble those of its current entry-level equipment.
Commercial Keeps Growing, With Its Own Price Gap
Building Climate Solutions revenue rose 24 percent to $635 million, including 15 percent organic growth. Segment profit climbed 19 percent to $167 million, though margin fell 110 basis points to 26.2 percent. Quenzer said price increases take longer to work through large national contracts and that competition limited them with local contractors. Lennox is also funding a lab for two-phase data center cooling, which Maskara said is not built into its 2027 plan.
- Revenue growth: about 6 percent, was about 8 percent, with acquisitions adding about 5 points
- Home Comfort revenue: down about 4 percent, was up 1 percent
- Building Climate revenue: up about 23 percent, was up 20 percent
- Adjusted EPS: $21.00 to $21.50, was $23.00 to $24.00
- Free cash flow: $700 million to $750 million, was $750 million to $850 million
Quenzer said the guidance assumes a mid-single-digit organic sales decline in the fourth quarter for the residential segment, after a soft start tied to warm weather in the Midwest and its effect on furnace demand.
Why This Matters to Contractors
Lennox's cost cutting reaches its store counters: Maskara said about half of the planned savings will come from the distribution network, including leases the company can exit "as we retool our stores network," and Quenzer said Lennox may exit some of them quicker than normal with a new Dallas facility in place. Dealers who buy through those stores would be the first to notice. Lennox has also named private equity-backed contractor groups and residential builders as customers where it sees room to deepen relationships, and detailed 2027 guidance is due with fourth-quarter results in January.
Sources
- Lennox, "Lennox Reports 2026 Third Quarter Earnings Results," Oct. 28, 2026 (SEC Exhibit 99.1). sec.gov
- Earnings Whispers, Lennox Q3 2026 earnings call transcript, Oct. 28, 2026. earningswhispers.com
- Dana Slone, ACHR News, "Lennox Residential HVAC Revenue Improves in Q3." achrnews.com