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Image source: The Motley Fool. Wednesday, July 29, 2026 at 9:30 a.m. ET Investor Relations - Chelsey Pulcheon Chief Executive Officer - Alok Maskara Chief Financial Officer - Michael Quenzer Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0 and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. And a member of our team will be happy to help you. Welcome to the Lennox 2026 Second Quarter Earnings Call. All lines are in a listen-only mode. And there will be a question-and-answer session at the end of the presentation. You may enter the queue to ask a question by pressing star one on your phone. To exit the queue, press star two. As a reminder, this call is being recorded. Operator: I will now turn the call over to Chelsey Pulcheon from Lennox Investor Relations. Chelsey, please go ahead. Chelsey Pulcheon: Thank you, Madison. Good morning, everyone. Thank you for joining us as we share our 2026 second quarter results. Joining me today is CEO Alok Maskara and CFO Michael Quenzer. Each will share their prepared remarks before we move to the Q&A session. Turning to slide 2. A reminder that during today's call, we will be making certain forward-looking statements which are subject to numerous risks and uncertainties as outlined on this page. We may also refer to certain non-GAAP financial measures that management considers relevant indicators of underlying business performance. Please refer to our SEC filings available on our Investor Relations website for additional detail including a reconciliation of GAAP to non-GAAP measures. The earnings release today's presentation and the webcast archive link for today's call are available on our Investor Relations website at investor.lennox.com. Now, please turn to slide 3 as I turn the call over to our CEO, Alok Maskara. Alok Maskara: Thank you, Chelsey. Good morning, everyone. And thank you for joining us today. Please turn to slide 3. The second quarter demonstrated the strength of our direct-to-dealer business model, our dedicated talent, and proactive actions taken to manage the current operating environment. I want to thank our employees for improving our customer experience through enhanced digital and distribution capabilities. I also want to thank our customers and channel partners for navigating a dynamic market environment alongside us. Lennox delivered a solid second quarter. Revenue increased 3% to $1.5 billion. Total segment profit increased 2% to $355 million, and adjusted earnings per share were flat at $7.72. Within Home Comfort Solutions, year-over-year quarterly performance improved sequentially though the pace of end-market recovery remains muted. Elevated market rates, inflationary pressures and historically low consumer confidence are constraining underlying demand. Looking ahead, channel confidence is continuing to grow and consumer confidence is starting to rebound, which supports our positive long-term outlook for the market. Building climate solutions once again performed exceptionally well. We are seeing signs of progress across commercial end-markets, momentum in emergency replacement, and strong execution in the field to gain share and grow margins. Taken together, the results from the two segments demonstrate the value of our portfolio and the balance it provides across market cycles. Our long-term demand outlook remains unchanged even though the residential demand recovery has been slower than anticipated. As a result, we now expect the most meaningful recovery benefit to extend into 2027 rather than occur in the back half of this year. While we are reducing our earnings outlook, several key elements of our 2026 financial framework such as revenue and free cash conversion, have not changed. Our balance sheet remains healthy and we remain on track with our inventory reduction plans. That combined strength and the industry's long-term outlook provides us with the confidence to continue investing in the business, advancing strategic initiatives, and strengthening our competitive position. Now please turn to slide 4. Let me spend a minute on our recently completed acquisition of the Comfort-Aire, Century and Coast-Air brands. This acquisition is an excellent example of a disciplined bolt-on M&A approach. The acquisition expands our reach into small and midsized distribution channel, and broadens our product offering, allowing us to further accelerate growth. It also sharpens our focus on customer experience, by enabling one order, one invoice, and one shipment to our distribution and contractor partners for most HVACR equipment, accessories, and parts. Finally, we see meaningful opportunities to drive margin improvement through product integration, logistics synergies, and streamlined SG&A through the application of the Lennox Unified Management System, and expect the business to be accretive to our EPS in 2027. This strategic bolt-on acquisition along with DuraDyne and Supco acquisitions, completed in 2025 and the AES acquisition completed in 2023, reinforce our disciplined capital deployment strategy. Now let's turn to slide 5 and discuss the current demand environment and how we are positioning the business for growth acceleration. The factors affecting residential demand today, including affordability pressures, weather variability, softer consumer sentiment, and suppressed new construction activity are, in our view, temporary. We believe that much of the shift from replace to repair represents deferred replacements and the underlying demand profile remains unchanged. Our focus remains on controlling the controllables. We continue to invest in innovative heat pumps and our direct-to-dealer model to make it easier for customers to work with Lennox. Leveraging our successful acquisitions, we are expanding our parts, accessories and service offering, thus creating additional touchpoints with customers. At the same time, we are leaning into initiatives that strengthen our long-term competitive position, including distribution network optimization, and partnerships like Samsung and Ariston to grow share of wallet. Rather than getting weighed down by short-term market fluctuations, we are executing our strategy and investing in the capabilities that matter most when demand returns. With that, I will turn it over to Michael to review our financials. Michael Quenzer: Thank you, Alok. Good morning, everyone. Please turn to slide 6. The quarter reflected a mixed operating environment across the portfolio. Residential demand is still challenging, while strong commercial execution and contributions from recent acquisitions help support overall performance. We continue to navigate cost inflation and factory absorption pressures associated with lower residential production levels. These headwinds were partially offset by pricing actions and the timing of certain tariff refunds. Cash generation and a disciplined focus on working capital management supported strong cash flow performance during the quarter. Against that backdrop, let's turn to Home Comfort Solutions on slide 7. Residential market conditions remain challenging during the second quarter. Although year-over-year demand trends improved compared to the first quarter. Compared to the prior year period, revenue declined 7% driven primarily by a 12% decline in unit volume. Favorable mix and pricing contributed 3% growth, while acquisitions added another 2% partially offsetting the volume decline. While volumes were down year-over-year again, this represented a meaningful improvement from the 21% decline experienced in the first quarter. Performance varied across channels, two-step volumes were relatively flat compared to the prior year, while one-step volumes declined in the mid-teens. Driven largely by continued weakness in residential new construction revenues were down approximately 30% during the quarter. Segment profit declined million. Lower sales volumes created approximately $50 million of EBIT headwinds during the quarter. Mix and price were favorable and mostly offset cost pressures, including ongoing inflation and approximately $10 million of factory absorption headwinds as we align inventory levels with market demand. Product costs also benefited from approximately $25 million tariff refunds that we had originally expected later in the year. Let's move to slide 8 and discuss our Building Climate Solutions segment. While we have strong growth in the first quarter, Building Climate Solutions maintained its momentum in the second quarter, supported by improving commercial end-markets, and continued execution on our growth initiatives. Revenue increased 24% with organic sales up 12%. Growth was driven by success with national account customers and an increase in emergency replacement activity. Our service business also grew as customers increasingly leverage our combined equipment and service capabilities. Mix and price contributed 3%, while acquisitions added 9% primarily from DuraDyne. Segment profit also increased, benefiting from higher volumes and favorable mix and price. Product costs reflected inflationary and production cost pressures and were partially offset by approximately $5 million tariff refunds. Within other costs, DuraDyne contributed approximately $11 million of M&A accretion offset in part by investments in customer-facing digital capabilities, and innovation. Now let's turn to slide 9 to review cash flow and capital deployment. We generated million of operating cash flow in the second quarter, and delivered 92% trailing 12-month free cash flow conversion. reflecting disciplined working capital execution, and progress on inventory reduction. While inventory dollars were flat to December, due to inflation and tariff-related cost increases, unit inventory levels continued to decline, and we remain on track to achieve our full-year inventory reduction implied in our full-year free cash flow guidance. Our balance sheet is strong with net debt to adjusted EBITDA of 1.3x at quarter-end. During Q2, we repurchased approximately $130 million of shares, and after quarter-end, we completed the acquisition of the Comfort-Aire and Century brands using approximately $200 million of debt. We are also refining our full-year capital expenditure outlook to approximately $225 million down from $250 million. The change reflects project timing. But our key investment priorities are unchanged. With that, let's turn to slide 10 and discuss our updated financial guidance. As Alok outlined, we are updating our full-year adjusted EPS guidance range to $23 to $24. While our overall revenue growth outlook holds at approximately 8%, the composition of that growth has evolved since our prior guidance. At the segment level, we now expect home comfort solutions revenue growth of approximately 1% compared to our prior expectation of 4%. Building Climate Solutions revenue growth is now expected to be approximately 20% compared to our prior expectation of 16%. These changes reflect lower expected residential volumes, stronger commercial demand and approximately 1 point of enterprise revenue growth from the Comfort-Aire and Century brands acquisition. This acquisition adds approximately two points within HCS. The reduction in our EPS outlook is primarily driven by lower net volume expectations. Stronger commercial demand is more than offset by lower expected residential volumes. We now expect approximately $60 million of productivity versus our prior expectation of $75 million reflecting ongoing absorption headwinds from lower residential volumes and the delayed timing of some material cost reduction initiatives as resources were shifted to tariff mitigation. Interest expense is expected to increase to approximately $70 million and M&A amortization to approximately $25 million following the Comfort-Aire and Century brands acquisition. Importantly, our free cash flow outlook remains unchanged at $750 million to $850 million reflecting confidence in our inventory reduction plans and working capital execution. Other guidance assumptions, inflation, investments, tax rate and share count have not changed. While residential demand is still below our expectations, the strength of our commercial business and continued cash generation position us well for the balance-of-year profit growth. Michael Quenzer: With that, I will turn the call back to Alok. Alok Maskara: Thanks, Michael. As we close, I want to reemphasize that while current market conditions are dynamic, I believe the long-term growth trajectory of the industry is very attractive. What gives me confidence is the performance of our portfolio, the durability of our cash generation, and our ability to continue investing towards growth. We are committed to innovation and operational excellence while continuing to allocate capital to expand our capabilities and improve our customer offerings. Most importantly, the dedication of our employees, and the values that define our culture continue to drive excellence at Lennox. Our fundamentals are strong, our strategy is clear. and our best days are still ahead of us. Thank you. We are happy to answer your questions now. Madison? Let's go to Q&A. Operator: Thank you. To leave the queue at any time, press star two. Thank you. And we will take our first question from Ryan Merkel with William Blair. Please go ahead. Ryan Merkel: Hey, everyone. Thanks for the questions. Wanted to start on the resi revenues. The down 12% for the one-step is surprising. What are the what are the key issues, Alok? And then any steps you are taking to improve the results? Alok Maskara: Sure. Right now, majority of the decline was due to residential new construction. When we talked earlier about we walked away from really low-margin business. And a large portion of that impact is being felt in Q2 due to seasonality. That masks that the underlying sell-through also remains weak, but is improving both sequentially and as we look at this going forward. That is a way we kind of look at the negative 12%. We have internally done a lot of analysis and feel confident that starts improving because we lapped some of the residential low-margin loss in the second half and the comps get easier. Even on the overall market dynamics. Ryan Merkel: Got it. Okay. That is helpful. And then on the guidance cut, it sounds like you had included the, refunds from some tariffs in the guide. So just confirm that for us. And then, you know, it looks like resi going to have weaker margins in the second half. Is that just the fixed cost absorption on the lower volumes? Or is there anything else in there that is pressuring the margins? Michael Quenzer: That is correct. On the tariff guidance, had built an inflation assumption of 5%. That includes the net impact of all increases within the 301 tariffs that we saw earlier in the year. And the IEEPA refunds that we expected initially in the second half of the year that we have now gotten most of them in the second quarter now. Alok Maskara: And there is nothing else based on the second question, Ryan. It is just simply impact of lower volume and the absorption impact related to that. Ryan Merkel: Okay. Got it. Alright. Thanks. Pass it on. Operator: Thank you. And we will move next to Tommy Moll with Stephens. Please go ahead. Tommy Moll: Morning and thank you for taking my questions. Alok, first question for you on the one-step trends for resi. Noted that there is the new construction headwind. Some of that relates to business you have-- low-margin business you have walked away from. I am more interested on the replacement side there what is your view on how market share has progressed? Have you seen any evolution or pressure there? Alok Maskara: Yeah. On replacement, we have seen small market share gain. While in new construction, we have seen a significant loss as we talked about earlier. And we continue to, build our distribution network efficiencies, continue investing in the sales team, but we are pleased with our market share position in the replacement, which has actually ticked up over the past 12 months. Tommy Moll: Related question for you on pricing. Alok specific to resi, it seems like there have been some different strategies year to date. Some have raised and then lowered depending on differing tariff assumptions. Others have been slower to move. Just characterize for us what the Lennox strategy has been there and what you have seen across the market? There has just been a lot of volatility on that point. Alok Maskara: Sure. Putting residential new construction aside because that is a different story. We continue to see higher inflation being offset by pricing actions across the wide spectrum. We continue to remain focused and do pricing competitively. You know, a large portion of the Section 232 tariff pricing is going to get into effect on July 1, which is consistent with how some of the other competitors have done, and we feel good about where we are in the replacement side of the business on the residential portion. And, obviously, we continue monitoring it. We want to be fair with our channel. Some of the early arrival of tariff refunds also, like, impacted how we thought about pricing and how we are going to take this going forward. So we were able to delay some of the pricing actions because of the early arrival of the direct refunds. Tommy Moll: Thank you, Alok. I will turn it back. Operator: Thank you. We will move next to Noah Kaye with Oppenheimer. Please go ahead. Noah Kaye: Good morning. Thanks for taking the questions. I guess just to make sure that we have got it then on the revised guide, two points. One, so I think you would contemplated resi volumes down mid-single digits for the year. Does that sort of shift now to down high-single digits, down 10%? Is that can you, you know, give us a finer point on that? And the guidance on inflation expectations remaining unchanged with the February partial reprieve was there an offset to some of that goodness to keep the inflation guide intact? Michael Quenzer: Sure. No. I will give you a little bit of insights on that. Yeah. So, within the HCS volume guide, it now is high-single digits. We expect most of the balance-of-year growth to happen within the indirect channel as you have a favorable comp over year. On the direct channel, we expect balance-of-year to be down kind of low-single digits or so within the direct channel in the balance of the year. Then within inflation, we still expect to be 5%. There is a little bit of benefit that we saw with the adjustment to the February, but then we continue to see inflation on commodities, fuel, memory. Those mostly offset that benefit. Noah Kaye: Okay. Thanks. And then when we look at the two segments, and the demand trends juxtaposed, I mean, really, is seemingly a tale of two markets. Feels a little unusual to have such bifurcation, but can you talk a little bit about the drivers of the light commercial strength? You mentioned some nice wins. You know, clearly, national accounts, emergency replacement. But how much of this is sort of underlying versus Lennox share gains? Alok Maskara: You know, I think there is significant amount of share gain that I want to give credit to the team. As we build a new factory, we are focused a lot more on emergency replacement. And that is clearly playing out as we expected, maybe slightly better than we expected. At the same time, the extra capacity is helping us win back the national accounts. But also from end-market perspective, remember, this is the end-market that was from the data down continuously for, like, 17, 18 months in a row. And now it is finally turning the corner. But I would say among the improvement, large portion of share gain. And then there is definitely a benefit of the market not declining anymore. And showing some signs of life. Noah Kaye: Helpful. Thank you, Alok. Operator: Thank you. And we will move next to Jeffrey Hammond with KeyBanc Capital Markets. Please go ahead. Jeffrey Hammond: Hey. Good morning, guys. Alok Maskara: Hi, Jeffrey. Jeffrey Hammond: So just back, it looks like your, you know, HCS, you are bringing down five points on a core basis. Like, is that just all sell-through demand weakness? Or is, like, this RNC you know, walk-away a bigger number? Or is there some other nuance in there? And then just my second one would be, just repair versus replace. You know, a lot of people are saying, like, it is normalizing, exiting the A2L transition, and this canister issue, and just what are you seeing there? Alok Maskara: Sure. The answer is first is it is all one-step. Two-step, we continue to see good growth, and we are forecasting, the lack of destocking leading to good growth in the second half as well. So what I would say is, one-step the RNC loss is within the one-step. So I think that is why those two numbers overlap. I would say the large part of the decline in Q2 in one-step was driven by RNC. And that is a heavy quarter for RNC, as you know. And then even our reduction in the second half is primarily to that. Now we do see some underlying demand recovery that has been delayed. But we think from our perspective, the repair versus replace trend has stabilized. We see the channel confidence which was impacted last year because of canister shortage, has returned fully. And we all know that the consumer confidence is sort of bouncing along based on weather and other pieces. But a short answer to your question, Jeffrey, is that a large portion of the one-step decline is residential new construction, low-margin business that we walked away from. Jeffrey Hammond: Yeah. But I guess my question is that walk-away number bigger now than you thought? Or you knew that was there and your revisions really all underlying replacement weaker? Alok Maskara: It is bigger than what we had originally looked at. That market remains extremely competitive. And the margins were there, which is not acceptable. So it is a little more than what we originally thought. And talked about. Jeffrey Hammond: Okay. Appreciate it. Thanks. Operator: Thank you. And we will move next to Jeffrey Sprague with Vertical Research. Please go ahead. Jeffrey Sprague: Hey, thanks. Good morning. I just wanted to get some insight into how to think about sort of margins for HCS into the back half So we got some absorption issues. Right? But we are walking away from lower margin business. I guess you have some time for price to catch up a bit. So can you just give us some insight on how you think margins progress over the balance of the year in HCS? Michael Quenzer: Maybe relative to, you know, what we posted here in Q2 or relative to last year. Certainly be helpful. Yes, Jeffrey, we expect the margin headwind year-over-year in second half to be better than the first half even after you adjust for some of the tariff refunds, mostly driven by the volume growth that we expect now of low-single digits balance of the year to get the 35% incrementals on that. Also, we had a much heavier first half absorption headwind, and then we are going to pick up a point or two price in the second half versus first half. it is some of the new pricing initiatives that Alok mentioned in July come in. So better margin performance in the second half is the volumes start to come back. Alok Maskara: And Jeff, to your earlier point, I want to add that our product mix is positive right now because of walking away from loss-making accounts. That is just masked by the other factors that Michael mentioned. Because of all the noise around absorption and the pieces. But the underlying mix is positive for us. Given our decision to not compete on those lower margin, negative margin accounts. Jeffrey Sprague: Is it overly optimistic to think that HCS margins are up on a year-over-year basis in the back half? Michael Quenzer: Well, you are going to get some headwind from the M&A that is a bit dilutive. Price-cost is a bit dilutive. The volume is accretive. All of that still might lean to slightly negative. Jeffrey Sprague: No. Alok Maskara: So I think overall, we think it is pretty balanced, Jeffrey. We do not think it is optimistic nor do we think it is super conservative. Trying to put a very balanced picture forward. Jeffrey Sprague: Right. But something around sort of flattish to slightly down margins in the back half, I think, is what you are indicating. If I read that right. Michael Quenzer: Yeah. That is basically within the guide. That is approximate. Alok Maskara: Within the range. Jeffrey Sprague: Yeah. And what do you actually think industry volumes were in Q2? Alok Maskara: The June AHRI data and everything else that we looked at, like, you know, continues to show us continued difference between sell-in and sell-through. That is obviously going to become a much longer conversation, Jeffrey. But we think the sell-in has obviously improved substantially, and we see that in our numbers. And I think the sell-through, we still have to get more data and see how everybody comes through. I think that still remains under pressure. Jeffrey Sprague: And maybe last one. Do we still have a little bit more work to do on channel inventory as it relates to Lennox and some related absorption headwinds from that in the back half? Alok Maskara: No. I think we are pretty complete on that, Jeffrey. Channel inventory is pretty normalized, and there is no more destocking. Jeffrey Sprague: Okay. Great. Thanks, guys. I will leave it there. Operator: Thank you. And we will move next to Steve Volkmann with Jefferies. Please go ahead. Stephen Volkmann: Good morning, guys. Thanks for taking the question. Maybe just to put a sharp point on it, the one-step down 12%, are you willing to sort of say what the walk-away business was of that 12%? Alok Maskara: No. We are not willing to kind of go into that level of account details of where it was, but we can just tell you vast majority of that 12% was residential new construction. Stephen Volkmann: Okay. Alright. Worth a shot. Look, I think on previous calls, we have talked a little bit sort of affordability and inflation in the end-market. And maybe some demand destruction. I think your view was that the most likely source of kind of, give there was going to be in the installer, margins. And that was two or three quarters ago we had that conversation. So I am curious if you are starting to see any sort of price normalization to the consumer that might sort of address this affordability issue. Issue? Alok Maskara: Right, and I think this obviously is the problem is synonymous with the repair versus replace. So when there is demand destruction for equipment, they still have to repair it. And we do see movement there. I think the contractors are adding more promotions. They are getting more aggressive. We are, and also the manufacturers are earning more consumer-based promotions to take this forward. So, yes, I think we are all very aware of that. All the channels and the manufacturers are doing our part. To increase affordability and make sure promotional dollars can apply to consumer purchase. Stephen Volkmann: Okay. Appreciate it. Pass it on. Operator: Thank you. And we will move next to Christopher Snyder with Morgan Stanley. Please go ahead. Christopher Snyder: Thank you. I wanted to follow-up on some of the HCS margin discussion. I guess if we adjust out $25 million from Q2 operating profit, it seems like it takes that 23.7% to, like, 21.0%. So maybe, just like is that right? And then it seems like almost every year segment margins decline sequentially into both Q3 and Q4. And I guess the question is, should we be running sequential declines off that 21% number? I could not really follow all of the communication before. Thank you. Alok Maskara: Yeah. Let me start by that saying we wanted to give you the tariff refund number for the sake of transparency, and that is how we are as a company. Do not think it is fair to exclude the tariff refunds as one-time because remember, our overall impact of tariff pricing all of that continues in the second half. A lot of our pricing actions are going into effect in the beginning of Q3. So when we gave you the numbers for sake of transparency, do not think It is fair to take it out fully. Because pricing would have offset portions of that if it had not come through. Q2 and Q3, yes. Q2 is the highest margin. But I think today, and this year is not a normal environment. Given lots of changes around pricing dynamics, tariff, inflation, Michael mentioned all those pieces. So we feel very comfortable for the full second half guide as we have given. But it is difficult to break it down between Q3 and Q4 at this stage for you guys. Christopher Snyder: Thank you. I appreciate that. And I was not really commenting on, you know, whether or not it is appropriate to leave it in EPS. I was just kind of more trying to figure out what the true underlying margin was in Q2. As we build into the back half. Like, so is it fair to run the declines off the 27% or the 21%? If that question makes sense. Michael Quenzer: Yeah. I would focus more on just our guide points that we expect volumes second half to be up low-single digits. You get 35% incrementals on that price-cost neutral, more price coming in. I think that is what I would focus on the second half, and that is what we are focused on delivering. Christopher Snyder: Thank you. I appreciate that. And then, if I could also just follow-up on the second half. It seems to me like you guys are calling for HCS revenue in Q3 just to be mid- to high-single digits above Q2. So is that right? And I guess the question I have is I think the only year where HCS revenue increased sequentially into Q3 was Q3 24, which was, of course, the start of the refrigerant build. So I would just want to make sure I have that sequential top line movement right on HCS. Thank you. Michael Quenzer: We do not give quarterly guidance. What I will say is keep looking back to the second half that we expect Q3 year-over-year better than the Q2 year-over-year. Q4 year-over-year better than Q3. So we continue to see improvement year-over-year as we go through the balance of the year. With the volumes up low-single digits balance of the year mostly around the indirect channel. Christopher Snyder: Thank you. Operator: Thank you. And we will move next to Nicole DeBlase with Deutsche Bank. Please go ahead. Nicole DeBlase: Yeah. Thanks. Good morning, guys. Alok Maskara: Hi, Nicole. Hello. Nicole DeBlase: I guess, I do just have a few nitpicky ones since we have been through a lot of Q&A already. I guess, first, under absorption, I feel like you guys were kind of implying that you had seen most of that headwind in the first half, but that maybe there could be a little bit in the second half. Can you just give us a sense if under absorption is still a headwind in the second half? Michael Quenzer: Yes. There is a small headwind. Within the-- Now we reduced some of that cost productivity for that additional absorption, mostly related to now that we have lower sales volumes, we still want to hit our inventory reduction targets within the free cash flow. So a little bit of absorption headwind went into the second half in our new guidance. Nicole DeBlase: Okay, understood. Thanks, Michael. And then BCS, the incrementals here have obviously been pretty good, high-20s in the first half. You guys expecting that high-20s to kind of continue in the second half within your guidance framework? Michael Quenzer: Overall, we continue to see volume growth there, get 35% incremental, so we are focused on price-cost neutral within that side of the business as well. Alok Maskara: Yeah, and we are very pleased with BCS performance. Nicole, the three businesses within BCS -- the services business, the refrigeration business, and the rooftop business -- all continue to do very well. And that is the it can be just a result of great execution and good supporting market dynamics. So we believe that we are now at the cusp of HCS reaching similar performance. As we turn around the corner on market dynamics. Nicole DeBlase: Got it. Thanks, Alok. I will pass it on. Operator: Thank you. We will move next to Nigel Coe with Wolfe. Please go ahead. Nigel Coe: Yeah. Look, it definitely bears mentioning BCS was fantastic. But understand there will be a lot of focus here on HCS. Just want to make sure I understand the moving pieces on the guide change for HCS, the plus 1%. That now includes the acquisition of Heat Controller. So is that what I heard? That is two points to HCS, and now we have about four points M&A coming in there. So the core is down three. Is that right? Michael Quenzer: That is correct. So within the guide, yeah, you picked up two points within M&A for the HCS revenue guidance, then you lost 5 for volume. So you went from 4 positive to 1 positive. Nigel Coe: Okay. Okay. And there is a bit more M&A. Okay. Great. And then, look, just taking a step back. You know, you have you have you have had a very, you know, transparent strategy of high-grading the customer base, you know, firing lower margin customers, pushing price. You know, where are we in that process? Are we more or less complete in that process at this point, or is there still some ways to go? And maybe, Mike, could you just maybe just clarify is there any more IEEPA refunds in the second half guide? Thanks. Alok Maskara: Sure. So let me take the first one. I would say we are nearly complete on the lower margin. And some of it was just driven by highly competitive RFP processes where we did not want to go into negative margins. But at this stage, like, some of that volume went away faster than we thought. And our offsetting growth in the AOR side is coming through just a little slower than we expected. I think that is what you are seeing in Q2. It is like the perfect storm. You know, we lost the RNC business a little sooner, and share gain in AOR was a little slower than we expected. But net, we feel good about where we are to protect our margin and make smart business choices so we do not fall victim of taping $100 bills to every unit that is being shipped out to some of these accounts. So we do not want to do that again. We have done that in the past. So we feel good about where we are. I will let Michael answer the IEEPA question. Michael Quenzer: So on the refunds, we recognized 100% of our refunds that we think we can that we are entitled to within the quarter. And we have also received a lot of that cash flow already related to the gain on those refunds. Nigel Coe: Great. Thank you. Operator: Thank you. And we will move next to Deane Dray with RBC Capital Markets. Please go ahead. Deane Dray: Thank you. Good morning, everyone. Deane Dray: Hey. Sorry to circle back on the walk-away business. But just be really interested in hearing Alok. Did you change your return requirements this quarter in any way? And I would suspect not, but just maybe some color there in terms of, you know, how much of the price competition surprised you? Alok Maskara: No. We did not change our return requirements, Deane. I think our return requirements have been pretty steady over the past 4 to 5 years. So and, yes, I was surprised by the price competition in the residential new construction. Alok Maskara: At the end of the day, our focus is going to remain on our valued replacement customers, our valued new construction customers. where there is appreciation for the value that we provide versus commodity-type business. So I think we feel good about where we are, but we do understand this. short-term repercussions for that, and we are going to work through that and appropriately adjust our cost structure and our sales force accordingly. Deane Dray: Good. That is helpful. And then it sounds like there was some good news on the emergency replacement business and the reentry there and have you gained share? Any update would be helpful. Alok Maskara: Yes. We have definitely gained share in emergency replacement, our core contractor business in commercial, our residential dealers, and working distribution, all three have gained, and we are pleased with the progress there. The new factory is doing very well. And the freed up capacity in Stuttgart is also helping us strengthen and gain share in the key account business. So we feel good about that strategy. And the results there are as you can see in the P&L and otherwise, just working out as we expected, maybe slightly better than we expected. Deane Dray: Good to hear. Thank you. Operator: Thank you. We will move next to Brett Linzey with Mizuho. Please go ahead. Brett Linzey: Hey, good morning, all. Just a follow-up on the emergency replacement there. So you called it out as a growth driver. It sounds like you are taking some share. I guess from a margin perspective, historically, you know, ER was above segment margins. Where are we in that ramp process? Is it accretive to segment margins now? Or do you still need more scale? And uptake in that business? And, you know, any thoughts on the future profitability there? Alok Maskara: Yeah. Overall, it is attractive business. The margins are in line with some of our large national account business. We like that business, and we have opportunities that continue to expand those margins as we work on our distribution excellence within that channel. So it is really good business, and many years of growth opportunities still in front of us. Michael Quenzer: Yeah. I remember it being better than the segment average, but we have always said it is kind of in line with segment averages. Brett Linzey: Okay. No. That is helpful. And then on the tariff mitigation sounds like you shifted some resources there, which delayed some of the material cost reduction initiatives. and led to that productivity cut. When do you think those deferred cost-out initiatives resume? And are they volume-dependent and that is really the driver of that? Or is it just timing and maybe there is an opportunity to recapture some of that $15 million here in the coming months and quarters. Alok Maskara: It is mostly timing dependent. I mean, there is obviously a small, small element of volume, but it is mostly timing dependent as we move resources. I wish I could tell you that we can get it all in 2027 and we will if there are no more changes to the tariff and the tariff rules. The continuous evolution of tariff rules and tariff changes and Mexico and Canada, and just that has taken up a lot of engineering and other resources to mitigate that. But assuming a stable thing, we get it all next year. Brett Linzey: Okay. All makes sense. Thanks a lot. Best of luck. Operator: Okay. Thank you. Since there are no further questions, this will conclude Lennox's 2026 second quarter earnings call. You may disconnect your line. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Lennox (LII) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Modine Manufacturing Company MOD reported adjusted earnings of $1.53 per share for the first quarter of fiscal 2027, up 44% year over year. The figure beat the Zacks Consensus Estimate of $1.27 by 20.47%. Net sales increased 28% year over year to $874.1 million but missed the consensus estimate of $876 million by 0.17%. Data Centers sales surged 90%, while three consecutive quarters of record order intake pushed backlog to nearly twice the year-ago level. MOD currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Modine Manufacturing Company price-consensus-eps-surprise-chart | Modine Manufacturing Company Quote Gross profit rose 10% year over year to $182 million. However, gross margin contracted 340 basis points to 20.8%, reflecting lower margins across all three operating segments. Adjusted EBITDA increased 5% to $106.5 million, while the corresponding margin declined 270 basis points to 12.2%. Operating income slipped 1% to $74.8 million as higher gross profit was offset by increased expenses supporting growth and the planned Performance Technologies separation. Data Centers revenues jumped to $348.6 million from $183.7 million a year earlier, primarily driven by higher sales to hyperscale customers in North America. Americas sales grew 112%, while EMEA sales advanced 18%. The segment's adjusted EBITDA rose 27% to $51.7 million, though adjusted EBITDA margin fell to 14.8% from 22.1%. Supply shortages limited production and caused labor inefficiencies and weak overhead absorption. Management estimated that excess labor and under-absorbed overhead reduced the margin by 450-550 basis points. Commercial HVAC sales increased 22% to $261.6 million. Growth reflected higher coil sales to data center customers and $19.7 million of incremental revenues from acquired businesses. Organic sales increased 6%. Adjusted EBITDA advanced 7% to $41.6 million, while the margin declined to 15.9% from 18.1%. Profitability was affected by acquisition-related business mix, manufacturing consolidation inefficiencies and a greater proportion of lower-margin coil sales. Management expects the segment's margin to improve sequentially through fiscal 2027. Performance Technologies revenues declined 3% to $277.8 million. Weak automotive and commercial vehicle demand more than offset higher sales to power-generation customers. Organic sales decreased 4%. Adjusted EBITDA fell 3% to $36.2 million, while the margin edged down 10 basis points to 13%. Higher material and tariff costs pressured results, with contractual recoveries lagging cost increases. A $2 million reduction in selling, general and administrative expenses partly mitigated these headwinds. Selling, general and administrative expenses rose 22% to $103.3 million, driven by Data Centers investments, acquired Commercial HVAC operations, incentive compensation and separation-related spending. As a percentage of sales, however, SG&A expenses decreased to 11.8%. The quarter included $3.9 million of restructuring expenses and $7.1 million of costs tied to the planned Performance Technologies spin-off and merger with Gentherm. The transaction remained on schedule for completion in the fourth quarter of calendar 2026, subject to approvals and closing conditions. Net cash provided by operating activities increased to $41.4 million from $27.7 million. Free cash flow was negative $5 million compared with positive $0.2 million a year earlier, mainly because capital expenditures rose to $46.4 million as the company expanded Data Centers production capacity. MOD ended the quarter with $95.3 million in cash and cash equivalents and total debt of $528.2 million. Net debt increased to $432.9 million from $362.8 million at the end of fiscal 2026, largely due to treasury-stock purchases associated with employee equity awards. Modine maintained its fiscal 2027 guidance for net sales growth of 20-35% and adjusted EBITDA of $650-$680 million. The outlook includes Performance Technologies for the full fiscal year and implies adjusted EBITDA growth exceeding 40%. Data Centers sales are projected to increase 60-80%, while Commercial HVAC revenues are expected to grow 5-10%. Management expects companywide margins to improve sequentially, including a 200-250-basis-point increase in the second quarter, as component availability, production throughput and cost recovery improve. Johnson Controls International plc JCI reported third-quarter fiscal 2026 (ended June 2026) adjusted earnings of $1.42 per share, which beat the Zacks Consensus Estimate of $1.32. The bottom line increased 35.2% year over year. Total revenues (continuing operations) of $6.61 billion surpassed the consensus estimate of $6.43 billion in the quarter. The top line increased 9.3% year over year, whereas organic revenues increased 10%. Johnson Controls anticipates fiscal 2026 organic revenue growth to be about 8% from the prior-year level. Operating leverage is expected to be 45-50%. It expects adjusted earnings per share to be approximately $5.05 and adjusted free cash flow conversion of about 100%. Vertiv Holdings VRT delivered second-quarter 2026 adjusted earnings of $1.52 per share, up 60% year over year. The results beat the Zacks Consensus Estimate by 6.29%, supported by higher sales volume, operating productivity and margin expansion. Net sales increased 24.1% year over year to $3.27 billion but missed the consensus estimate by 3.41%. Organic sales rose 18%, while acquisitions and favorable foreign exchange contributed 5% and 1%, respectively. For 2026, Vertiv forecasts net sales in the range of $13.8 billion to $14.2 billion. Adjusted earnings are projected to be in the range of $6.65 to $6.75 per share, while adjusted operating profit is expected to be between $3.29 billion and $3.37 billion. Lennox International LII came out with second-quarter 2026 adjusted quarterly earnings of $7.72 per share, beating the Zacks Consensus Estimate of $7.63 per share. This compares to earnings of $7.82 per share a year ago. Revenues were $1.55 billion, up 3% over the same period last year but missing the Zacks Consensus Estimate of $1.56 billion. For 2026, the company expects its revenue growth to be approximately 8%, reflecting a 5% contribution from completed acquisitions. Earnings per share are forecast in the range of $23-$24, and free cash flow is guided in the range of $750-$850 million for the year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Modine Manufacturing Company (MOD) : Free Stock Analysis Report Johnson Controls International plc (JCI) : Free Stock Analysis Report Lennox International, Inc. (LII) : Free Stock Analysis Report Vertiv Holdings Co. (VRT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Lennox International, Inc.? Here are five stocks we like better. Q2 revenue rose 3% to $1.5 billion, while adjusted EPS was flat at $7.72. Strong 24% growth in the commercial Building Climate Solutions segment offset a 7% decline in residential Home Comfort Solutions revenue. Residential demand remains pressured by weak new construction, elevated mortgage rates and consumers delaying replacements. Lennox said the recovery is progressing more slowly than expected, with meaningful benefits now anticipated in 2027. Lennox lowered its full-year adjusted EPS guidance to $23–$24 and reduced its residential growth outlook, while raising its commercial growth forecast to approximately 20%. The company maintained its 8% enterprise revenue-growth target and $750 million–$850 million free-cash-flow outlook. 3 Stocks With Analyst Revisions That Could Drive Earnings Surprises Lennox International (NYSE:LII) reported second-quarter revenue growth of 3% to $1.5 billion, while total segment profit increased 2% to $355 million and adjusted earnings per share was flat at $7.72. The company said strong performance in its commercial-focused Building Climate Solutions segment helped offset continued weakness in residential markets. Chief Executive Officer Alok Maskara said the quarter reflected the benefits of Lennox’s direct-to-dealer model, investments in digital and distribution capabilities, and actions to manage a changing operating environment. However, he said residential demand recovery has progressed more slowly than expected, leading the company to shift expectations for the most meaningful recovery benefits into 2027 rather than the second half of 2026. → Refiner Stocks Are Near Record Highs—Can Iran-Driven Margins Keep Them There? These 3 Stocks Are Buying Back Billions in Shares Home Comfort Solutions revenue declined 7% from the prior-year period, led by a 12% decline in unit volumes. Favorable pricing and mix added 3% growth, while acquisitions contributed another 2%. The volume decline nevertheless improved from the 21% drop reported in the first quarter. Residential new-construction weakness was a major factor, with revenue in that market down about 30% during the quarter. One-step channel volumes declined by the mid-teens, while two-step volumes were relatively flat year over year. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now Investing in Cooling Technologies: 3 Top Stocks to Beat the Heat Maskara said much of the one-step decline was tied to residential new-construction business that Lennox chose to leave because margins were too low. He said the company’s exit from that business occurred faster than expected amid competitive pricing, but added that Lennox is nearly complete with its effort to move away from lower-margin accounts. “We don’t want to do that again,” Maskara said, referring to shipping units at negative margins. “We feel good about where we are to protect our margins and make smart business choices.” → AMD’s AI Bubble Could Burst Into Explosive Upside The company said replacement-market share has increased modestly over the past 12 months, even as it has lost significant share in new construction. Maskara cited elevated mortgage rates, inflation, low consumer confidence and subdued housing construction as constraints on residential demand. He said Lennox believes replacement demand has been deferred rather than eliminated, as consumers choose repair over replacement. Home Comfort Solutions segment profit fell $30 million. Lower sales volume represented roughly $50 million of EBIT headwinds, including about $10 million of factory absorption pressure as the company adjusted production and inventories to match market conditions. The segment also received approximately $25 million of tariff refunds during the quarter, earlier than initially expected. Building Climate Solutions revenue rose 24%, including 12% organic growth. Acquisitions, primarily Duro Dyne, added 9% growth, while favorable mix and pricing contributed 3%. Management attributed the performance to national-account wins, increased emergency replacement activity and growth in the service business. Maskara said additional manufacturing capacity has helped Lennox improve its emergency replacement offering and regain national accounts. He characterized a substantial portion of the segment’s improvement as share gains, alongside signs that commercial end markets are no longer declining. Building Climate Solutions segment profit increased on higher volumes and favorable mix and pricing. Duro Dyne contributed approximately $11 million of M&A accretion, partly offset by investments in customer-facing digital capabilities and innovation. The business also received approximately $5 million in tariff refunds. Maskara said Lennox’s services, refrigeration and rooftop businesses all performed well during the quarter. He added that emergency replacement margins are in line with the company’s large national-account business, with further opportunity for improvement through distribution execution. Lennox reduced its full-year adjusted EPS outlook to a range of $23 to $24, while maintaining its expectation for approximately 8% enterprise revenue growth and free cash flow of $750 million to $850 million. Home Comfort Solutions revenue growth is now expected to be approximately 1%, down from prior guidance of 4%. Building Climate Solutions revenue growth is now projected at approximately 20%, up from 16% previously. The company now expects Home Comfort Solutions volumes to decline by high single digits for the full year. Expected productivity was reduced to approximately $60 million from $75 million, reflecting lower residential production and delayed material cost-reduction initiatives. Capital expenditures are now expected to be about $225 million, down from $250 million, due to project timing. Chief Financial Officer Michael Quenzer said the EPS reduction primarily reflects lower residential volume expectations, which more than offset stronger commercial demand. The company expects second-half Home Comfort Solutions margins to improve relative to the first half as volume comparisons improve and July pricing actions take effect, though management indicated margins could be flat to slightly down year over year because of acquisition dilution and price-cost dynamics. Quenzer said the company recognized all tariff refunds it expects to receive during the second quarter. Lennox continues to forecast 5% inflation for the year, as benefits from adjustments to Section 232 tariffs are expected to be offset by inflation in commodities, fuel and memory. Lennox generated $172 million in operating cash flow during the second quarter and reported trailing 12-month free cash flow conversion of 92%. Inventory dollars were flat compared with December because of inflation and tariff-related costs, but unit inventory continued to decline. The company said it remains on track to meet the inventory-reduction assumptions embedded in its free-cash-flow outlook. Net debt to adjusted EBITDA was 1.3 times at quarter-end. Lennox repurchased approximately $130 million of shares in the second quarter and, after quarter-end, completed the acquisition of the Comfort-Aire, Century and Coast Air brands using approximately $200 million of debt. Maskara said the acquisition expands Lennox’s reach in small and midsize distributor channels and broadens its HVACR equipment, accessories and parts offerings. The company expects the acquisition to be accretive to earnings per share in 2027 and sees opportunities for product integration, logistics savings and SG&A efficiencies. Lennox International Inc is a global manufacturer of climate control products and services, principally serving residential and commercial heating, ventilation and air conditioning (HVAC) markets. The company designs, engineers and produces a range of products including furnaces, air conditioners, heat pumps, air handlers, packaged rooftop units and related controls and indoor air quality equipment. Lennox also supplies aftermarket parts and accessories and supports its product lines with technical service, training and warranty programs for dealer and distribution partners. Originally founded in 1895 by Dave Lennox, the company has grown from its early roots into a multinational business with operations concentrated in North America and a presence in other international markets. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Lennox International Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Lennox International (LII) came out with quarterly earnings of $7.72 per share, beating the Zacks Consensus Estimate of $7.63 per share. This compares to earnings of $7.82 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +1.18%. A quarter ago, it was expected that this manufacturer of furnaces, air conditioners and other products would post earnings of $3.16 per share when it actually produced earnings of $3.35, delivering a surprise of +6.01%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Lennox, which belongs to the Zacks Building Products - Air Conditioner and Heating industry, posted revenues of $1.55 billion for the quarter ended June 2026, missing the Zacks Consensus Estimate by 1.12%. This compares to year-ago revenues of $1.5 billion. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Lennox shares have added about 12.1% since the beginning of the year versus the S&P 500's gain of 8.5%. While Lennox has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Lennox was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $7.96 on $1.59 billion in revenues for the coming quarter and $24.45 on $5.63 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Building Products - Air Conditioner and Heating is currently in the top 14% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, Tecogen Inc. (TGEN), is yet to report results for the quarter ended June 2026. This company is expected to post quarterly loss of $0.09 per share in its upcoming report, which represents a year-over-year change of -50%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Tecogen Inc.'s revenues are expected to be $5.92 million, down 18.9% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lennox International, Inc. (LII) : Free Stock Analysis Report Tecogen Inc. (TGEN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Revenue: Increased 3% to $1.5 billion. Total Segment Profit: Increased 2% to $355 million. Adjusted Earnings Per Share (EPS): Flat at $7.72. Home Comfort Solutions Revenue: Declined 7%, driven by a 12% decline in unit volumes. Building Climate Solutions Revenue: Increased 24%, with organic sales up 12%. Operating Cash Flow: Generated $172 million in the second quarter. Free Cash Flow Conversion: 92% trailing 12-month conversion. Net Debt to Adjusted EBITDA: 1.3 times at quarter end. Share Repurchase: Approximately $130 million of shares repurchased in Q2. Capital Expenditure Outlook: Refined to approximately $225 million, down from $250 million. Full Year Adjusted EPS Guidance: Updated to $23 to $24. Full Year Revenue Growth Outlook: Holds at approximately 8%. Free Cash Flow Outlook: Unchanged at $750 million to $850 million. Warning! GuruFocus has detected 5 Warning Sign with LII. Is LII fairly valued? Test your thesis with our free DCF calculator. Release Date: July 29, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Lennox International Inc (NYSE:LII) reported a 3% increase in revenue to $1.5 billion for the second quarter. The Building Climate Solutions segment showed strong performance with a 24% revenue increase, driven by national account successes and emergency replacement activity. The company completed the acquisition of Comfort-Aire, Century, and Coast Air brands, which is expected to be accretive to EPS in 2027. Lennox International Inc (NYSE:LII) maintained a strong balance sheet with a net debt to adjusted EBITDA ratio of 1.3 times. The company generated $172 million of operating cash flow in the second quarter, with a trailing 12-month free cash flow conversion of 92%. Residential demand remains challenging, with a 7% decline in revenue driven by a 12% decline in unit volumes. The company reduced its full-year adjusted EPS guidance due to lower net volume expectations in the residential segment. Lennox International Inc (NYSE:LII) faced cost inflation and factory absorption pressures, impacting profitability. The residential new construction market saw a significant decline, with revenues down approximately 30% during the quarter. The company experienced a reduction in expected productivity from $75 million to $60 million due to ongoing absorption headwinds and delayed material cost reduction initiatives. Q: The residential revenues were down 12% for the one-step channel. What are the key issues, and what steps are being taken to improve results? A: The majority of the decline was due to residential new construction, where we walked away from low-margin business. This impact is felt in Q2 due to seasonality. The underlying sell-through remains weak but is improving. We expect improvement as we lap some of the residential low-margin loss in the second half, and the comps get easier. Q: Regarding the guidance cut, was the tariff refund included in the guide? Also, will residential margins be weaker in the second half due to fixed cost absorption on lower volumes? A: Yes, the tariff guidance included the refunds. The weaker margins in the second half are primarily due to the fixed cost absorption on lower volumes, with no other significant factors impacting margins. Q: On the one-step trends for residential, how has market share progressed, particularly on the replacement side? A: We have seen a small market share gain in replacement, while in new construction, we have seen a significant loss. We continue to build distribution network efficiencies and invest in the sales team, and we are pleased with our market share position in replacement, which has ticked up over the past 12 months. Q: Can you clarify the revised guidance for residential volumes and inflation expectations? A: Residential volumes are now expected to be down high single digits. The inflation expectation remains at 5%, with benefits from the 232 tariff adjustments offset by ongoing inflation in commodities, fuel, and other areas. Q: How do you view the light commercial strength, and how much of it is due to underlying market conditions versus Lennox share gains? A: There is a significant amount of share gain, supported by our new factory and focus on emergency replacement. The market is also showing signs of improvement after a long period of decline. A large portion of the improvement is due to share gain, with some benefit from the market not declining anymore. Q: Regarding HCS margins in the back half, how do you expect them to progress relative to Q2 or last year? A: We expect the margin headwind year-over-year in the second half to be better than the first half, driven by volume growth and improved pricing initiatives. The underlying mix is positive due to walking away from low-margin accounts, although this is masked by other factors like absorption. Q: Is there more work to do on channel inventory related to Lennox, and are there any related absorption headwinds in the back half? A: The channel inventory is normalized, and there is no more destocking expected. We are complete on that front. Q: On the emergency replacement business, is it accretive to segment margins now, or do you still need more scale? A: The emergency replacement business is attractive, with margins in line with our large national account business. We have opportunities to expand margins further through distribution excellence, and there are many years of growth opportunities ahead. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management attributed the 12% decline in residential unit volume primarily to a strategic decision to walk away from low-margin residential new construction business. The Building Climate Solutions segment acted as a portfolio stabilizer, achieving 24% revenue growth driven by emergency replacement share gains and national account wins. Residential demand recovery is now expected to be a 2027 event rather than a second-half 2026 rebound due to persistent affordability and consumer sentiment pressures. The direct-to-dealer model and recent bolt-on acquisitions like Comfort-Aire are being leveraged to expand the parts and accessories business, creating more customer touchpoints. Management noted that the shift from equipment replacement to repair represents deferred demand rather than permanent destruction, supporting a positive long-term outlook. Operational focus has shifted to 'controlling the controllables,' including distribution network optimization and factory absorption management amidst lower production levels. Full-year adjusted EPS guidance was lowered to $23-$24, reflecting lower residential volumes partially offset by stronger commercial demand and acquisition contributions. The 2026 financial framework assumes residential volumes will be down high-single digits for the year, with the indirect channel expected to outperform the direct channel in the second half. Free cash flow guidance of $750 million to $850 million remains unchanged, underpinned by a commitment to aggressive inventory reduction despite lower sales. Productivity expectations were reduced from $75 million to $60 million as engineering resources were diverted from cost-reduction initiatives to tariff mitigation efforts. The acquisition of Comfort-Aire and Century brands is expected to be accretive to EPS in 2027, following integration and the realization of logistics synergies. The quarter benefited from $30 million in total tariff refunds ($25 million in HCS; $5 million in BCS) that were originally anticipated for later in the year. Factory absorption created a $10 million headwind in the residential segment as production was slowed to align with inventory reduction targets. Capital expenditure guidance was refined downward to $225 million from $250 million due to project timing, though core investment priorities remain intact. Management highlighted that the competitive environment for residential new construction remains 'extremely competitive,' leading to the decision to prioritize margin over volume. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management clarified that the vast majority of the decline was due to walking away from low-margin residential new construction (RNC) business during seasonal peaks. Underlying replacement market share actually 'ticked up' over the past 12 months, contrasting with the significant volume loss in the RNC channel. Lennox delayed some pricing actions due to the early arrival of tariff refunds but implemented Section 232 tariff-related pricing on July 1. Management observed that contractors are becoming more aggressive with promotions to address consumer affordability concerns. Growth is being driven by a combination of market stabilization and significant share gains in the emergency replacement sector following the opening of a new factory. The segment is targeting 35% incremental margins on volume growth while remaining focused on price-cost neutrality. Management stated that channel inventory is now 'pretty normalized' and they do not anticipate further destocking impacts in the second half of the year.

Wall Street expects a year-over-year increase in earnings on higher revenues when SPX Technologies (SPXC) reports results for the quarter ended June 2026. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates. The earnings report, which is expected to be released on July 30, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower. While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise. This infrastructure equipment supplier is expected to post quarterly earnings of $1.85 per share in its upcoming report, which represents a year-over-year change of +12.1%. Revenues are expected to be $635.64 million, up 15.1% from the year-ago quarter. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core. The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For SPX Technologies, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +1.35%. On the other hand, the stock currently carries a Zacks Rank of #2. So, this combination indicates that SPX Technologies will most likely beat the consensus EPS estimate. While calculating estimates for a company's future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that SPX Technologies would post earnings of $1.55 per share when it actually produced earnings of $1.69, delivering a surprise of +9.03%. Over the last four quarters, the company has beaten consensus EPS estimates four times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. SPX Technologies appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Among the stocks in the Zacks Building Products - Air Conditioner and Heating industry, Lennox International (LII), is soon expected to post earnings of $7.63 per share for the quarter ended June 2026. This estimate indicates a year-over-year change of -2.4%. This quarter's revenue is expected to be $1.56 billion, up 4.2% from the year-ago quarter. The consensus EPS estimate for Lennox has been revised 1.1% higher over the last 30 days to the current level. However, a higher Most Accurate Estimate has resulted in an Earnings ESP of +0.56%. When combined with a Zacks Rank of #2 (Buy), this Earnings ESP indicates that Lennox will most likely beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates three times. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPX Technologies, Inc. (SPXC) : Free Stock Analysis Report Lennox International, Inc. (LII) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Lennox International (LII) is expected to deliver a year-over-year decline in earnings on higher revenues when it reports results for the quarter ended June 2026. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on July 29. On the other hand, if they miss, the stock may move lower. While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise. This manufacturer of furnaces, air conditioners and other products is expected to post quarterly earnings of $7.65 per share in its upcoming report, which represents a year-over-year change of -2.2%. Revenues are expected to be $1.56 billion, up 4.2% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 0.68% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction). The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Lennox, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +1.26%. On the other hand, the stock currently carries a Zacks Rank of #2. So, this combination indicates that Lennox will most likely beat the consensus EPS estimate. Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Lennox would post earnings of $3.16 per share when it actually produced earnings of $3.35, delivering a surprise of +6.01%. Over the last four quarters, the company has beaten consensus EPS estimates three times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Lennox appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Carrier Global (CARR), another stock in the Zacks Building Products - Air Conditioner and Heating industry, is expected to report earnings per share of $0.83 for the quarter ended June 2026. This estimate points to a year-over-year change of -9.8%. Revenues for the quarter are expected to be $6.02 billion, down 1.5% from the year-ago quarter. The consensus EPS estimate for Carrier Global has been revised 0.4% lower over the last 30 days to the current level. However, a lower Most Accurate Estimate has resulted in an Earnings ESP of -3.24%. When combined with a Zacks Rank of #2 (Buy), this Earnings ESP makes it difficult to conclusively predict that Carrier Global will beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates three times. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lennox International, Inc. (LII) : Free Stock Analysis Report Carrier Global Corporation (CARR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research