Lennox International falls after weaker-than-expected quarterly earnings

What happened

Lennox International (LII) fell 10.6% on October 28, 2026, because of its third-quarter results, which missed analysts' expectations and led the company to update its full-year guidance. The company reported adjusted diluted earnings per share of $6.84 against $7.36 expected, a shortfall of 7.1% according to the last report, and it set full-year adjusted EPS guidance to a range of $21.00 to $21.50. News outlets including Seeking Alpha and Zacks Investment Research covered the results, which highlighted revenue growth driven by commercial equipment demand, acquisitions and improving residential sales.

How big was the move

The stock closed at $332.64 after opening 6.2% below the previous close, leaving the session down 10.6% and 9.2% lower over the last five sessions. Trading volume was 4.2 times its 20-day average, and the day's decline was 4.9 times a typical daily move for this stock, underlining an unusually large reaction. The S&P 500 rose 0.3% on the day while the industrials sector median rose 0.2%, making the stock's performance 10.8 percentage points worse than the sector median. With a beta of 0.85, the stock tends to move less than the market, so this earnings-driven drop stood out from its typical behavior.

The technical picture

The technical picture shows the stock trading well below its moving averages: 7.6% below its 20-day moving average, 10.3% below its 50-day moving average and 29.8% below its 200-day moving average. The 50-day average is below the 200-day average, a sign of a weak longer-term trend. The Relative Strength Index (14 days) was 34, inside a neutral range between 30 and 70. Over one month the stock fell 7.6%, over three months it fell 20.3% and over one year it fell 33.8%, leaving the stock 43.4% below its 52-week high. Volatility was 34% annualized over 60 days, higher than 68% of its own readings over five years.

Fundamentals and valuation

For the four quarters through September 30, 2026, Lennox reported revenue of $5.45 billion, which grew 1.9% from a year earlier, and diluted earnings per share of $21.55, which fell 9.0% from a year earlier. Gross margin was 32.6% compared with 33.3% a year earlier, and operating margin was 18.9% versus 19.9% a year earlier. Free-cash-flow margin was 15.3% and return on invested capital was 22.8%, metrics that point to solid cash generation and efficient capital use even as profitability slipped year over year. The balance sheet showed net debt of 1.8 times EBITDA, and share count over one year decreased by 2.8%.

Valuation by traditional multiples sits at 15.4 times trailing earnings and 14.2 times forward earnings, while free-cash-flow yield was 6.4%. The price-to-trailing-earnings reading was the lowest of the past five years, compared with a five-year median of 23.0 times earnings. Those valuation metrics suggest investors are pricing in weaker near-term growth or greater risk, a contrast with the company's PromtFinance scores that show strong Value and Quality but very weak Momentum and Revisions.

Earnings and analyst expectations

Lennox reported on October 28, 2026, that GAAP diluted EPS was $6.41 and adjusted diluted EPS was $6.84, down 7% from the prior year, with third-quarter revenue of $1.6 billion driven by commercial equipment demand, acquisitions and improving residential sales. The adjusted diluted EPS missed the $7.36 consensus, a 7.1% shortfall. The last report left Lennox with zero consecutive quarters beating estimates and an average surprise over the last four reports of 1.9% below estimates. Typical two-day reactions after recent reports saw the stock fall 6.3%, making this session's move larger than the typical post-earnings response.

Management lowered the full-year adjusted EPS outlook to a range of $21.00 to $21.50, a change that reduces near-term upside for investors and sets a new bar for the January report. The next report date is January 27, 2027, a milestone investors will watch for any signs of margin recovery or clearer demand trends across commercial and residential markets.

What to watch

• January 27, 2027: next scheduled earnings report date
• Full-year adjusted EPS guidance range of $21.00 to $21.50, updated on October 28, 2026
• Consensus price target $489.40, 47.1% above the closing price
• 30 analysts with a rating and 27% of them showing Buy or Strong Buy
• Net debt of 1.8 times EBITDA