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Lennox International Inc LII

Morningstar Rating
$488.76 +2.08 (0.43%)
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Company Report

We Still Expect Single-Family Construction and Repair and Remodel Spending to Grow in 2024

New single-family home sales increased 4% in 2023 to 666,000 units, as homebuilders capitalized on a dearth of existing for-sale inventory while also offering more sales incentives, cutting base home prices, and building smaller homes to improve affordability. By the fourth quarter of 2023, homebuilders began to pull back on sales incentives as the average 30-year fixed mortgage rate retreated from 7.62% in October 2023 to 6.64% in January 2024. However, mortgage rates have trended higher recently, and we now forecast the average 30-year fixed rate will be 6.50% in 2024, up from our previous forecast of 6.10%. Even so, that’s lower than the 2023 average of 6.81%, and we think homebuilders won’t hesitate to increase sales incentives if needed; they still enjoyed above-average gross profit margins last year with elevated incentives. As such, in 2024, we think new-home sales will increase 9% to 730,000 units and single-family housing starts will increase 4% to 985,000 units. However, we expect total housing starts will decline roughly 5% to 1,345,000 units due to a 23% decline in multifamily starts to 360,000 units, as there’s currently approximately 1,000,000 multifamily units under construction—the largest backlog in at least 50 years.

Price vs Fair Value

LII is trading at a 44% premium.
Price
$489.01
Fair Value
$854.00
Uncertainty
Medium
1-Star Price
$547.00
5-Star Price
$131.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Lennox is well positioned to benefit from elevated demand for more energy-efficient residential and commercial HVAC systems.

Bears

Lennox's revenue growth could slow amid a maturing residential HVAC replacement cycle.

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News

Trading Information

Previous Close Price
$486.68
Day Range
$485.58489.94
52-Week Range
$232.00501.72
Bid/Ask
$487.56 / $489.81
Market Cap
$17.39 Bil
Volume/Avg
139,803 / 234,936

Key Statistics

Price/Earnings (Normalized)
27.07
Price/Sales
3.49
Dividend Yield (Trailing)
0.90%
Dividend Yield (Forward)
0.90%
Total Yield
0.97%

Company Profile

Lennox International manufactures and distributes heating, ventilating, air conditioning, and refrigeration products to replacement (75% of sales) and new construction (25% of sales) markets. In fiscal 2023, residential HVAC was 68% of sales and commercial HVAC and Heatcraft refrigeration was 32% of sales. The company goes to market with multiple brands, but Lennox is the company’s flagship HVAC brand. The Texas-based company will be focused on North America after the sale of its European HVAC and refrigeration businesses in late 2023.
Sector
Industrials
Industry
Building Products & Equipment
Stock Style Box
Mid Core
Total Number of Employees
12,600

Competitors

Valuation

Metric
LII
CARR
JCI
Price/Earnings (Normalized)
27.0721.1318.86
Price/Book Value
60.705.582.65
Price/Sales
3.492.231.66
Price/Cash Flow
23.8924.7115.24
Price/Earnings
LII
CARR
JCI

Financial Strength

Metric
LII
CARR
JCI
Quick Ratio
0.651.860.63
Current Ratio
1.412.730.97
Interest Coverage
14.096.347.36
Quick Ratio
LII
CARR
JCI

Profitability

Metric
LII
CARR
JCI
Return on Assets (Normalized)
22.86%8.43%5.55%
Return on Equity (Normalized)
1,795.12%28.60%14.71%
Return on Invested Capital (Normalized)
38.51%13.13%9.63%
Return on Assets
LII
CARR
JCI
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