Lennox International (LII 0.23%), a major manufacturer of HVAC (heating, ventilation, air conditioning, and refrigeration) systems, reported its results for the second quarter on July 23, 2025. The earnings release showed stronger-than-expected performance: earnings per share (Non-GAAP) reached $7.82, higher than the analyst consensus of $6.86, and GAAP revenue came in at $1.50 billion, ahead of the $1,471.07 million estimate. The company also posted notable profit and margin improvements. Management raised its full-year 2025 guidance after what was generally a solid period for the business.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $7.82 | $6.86 | $6.83 | 14% |
| Revenue (GAAP) | $1.50 billion | $1,471.07 million | $1.45 billion | 3% |
| Segment Profit | $354 million | $319 million | 11% | |
| Operating Margin | 23.6% | 22.1% | 1.5 pp | |
| Free Cash Flow (Non-GAAP) | $58.7 million | $151.9 million | -61% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Key Success Factors
Lennox International supplies a wide range of climate control solutions for homes, businesses, and industrial customers. Its core business includes manufacturing and selling air conditioners, furnaces, heat pumps, and refrigeration equipment, as well as providing related parts and services.
In recent years, Lennox has emphasized several key areas to maintain its competitive standing. Innovation in new refrigerant technologies, proactive adaptation to shifting regulations, and expansion of its distribution channels have taken center stage. The company also focuses on strategic acquisitions, investing in its workforce, and strengthening its distribution network to help drive growth and support margin expansion.
Quarter in Review: Financial and Operating Performance
The quarter brought outperformance on most fronts compared to analyst forecasts. The company’s earnings per share (Non-GAAP) came in at $7.82, a 14% improvement compared to the same period last year. Revenue (GAAP) grew 3% year over year, reflecting discipline in pricing and a favorable shift in the product mix. Both the Home Comfort Solutions and Building Climate Solutions segments saw overall sales volume shrink. A combination of price increases and favorable product mix offset this weakness.
Segment profit reached $354 million, up 11% from Q2 2024, with operating margin improved by 1.5 percentage points to 23.6%. Price and mix added $114 million in profit, more than enough to counter $42 million in reduced volume and $16 million in increased product costs. Both main operating divisions experienced margin gains, with Home Comfort Solutions posted a 25.3% segment margin (non-GAAP), and Building Climate Solutions hitting a 24.9% segment margin.
Innovation and compliance with shifting regulations were critical over the quarter. Lennox rolled out its new generation of low–global warming potential (GWP) R-454B refrigerant products across both residential and commercial HVAC lines during Q1 2025. R-454B is a replacement for older refrigerants and is required to meet updated environmental rules. Price premiums on these products contributed meaningfully to profitability.
The company also continued building its presence in replacement markets, expanding company–owned distribution capabilities, and ramping up emergency replacement programs in its Building Climate Solutions unit. These moves were coupled with earlier investments in sales and training as well as workforce support for new product and regulatory transitions. Free cash flow (non-GAAP) dropped to $58.7 million, down 61% from $151.9 million in Q2 2024.
Responses to higher steel and aluminum tariffs led to two rounds of pricing actions, with the second implemented early in the second quarter. The first price increase compensated for rising material costs, while the second addressed the direct impact of new tariffs. These adjustments appeared to stick in the market, with management citing “mid-single-digit” realization rates. No new acquisitions were finalized this quarter, but prior deals, such as the AES Industries and AES Mechanical Services additions, continue to support growth in the Building Climate Solutions segment.
Looking Ahead: Guidance and Key Watchpoints
Lennox management raised its full-year 2025 outlook, with revenue growth now expected to be approximately 3%, up from the previous forecast of approximately 2%. Adjusted (non-GAAP) earnings per share for FY2025 is now projected at $23.25 to $24.25, an increase over the earlier $22.25 to $23.50 range. Free cash flow guidance for FY2025 is unchanged at $650 million to $800 million
There are several areas that investors and observers should keep an eye on. First, the company’s ability to sustain price increases as cost pressures continue to move through the supply chain will affect both revenue growth and profits. Second, possible changes in tariffs or softer consumer and construction activity could still alter these plans. Management did not revise capital expenditure expectations and reported no significant one-time or exceptional charges impacting coming quarters.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
