Lennox (LII) Reports In-Line Q4 EPS, Revenues Beat; Reiterates FY20 EPS Mid-Point Guidance Below Consensus

Lennox (NYSE: LII) reported Q4 EPS of $2.45, in-line with the analyst estimate of $2.45. Revenue for the quarter came in at $885 million versus the consensus estimate of $881.8 million.

"Weather was a headwind to growth in the last three quarters of 2019, but the company posted records for adjusted revenue, margin and profit for the year and had strong cash generation,\" said Chairman and CEO Todd Bluedorn. "In 2019, we completed the divestiture of non-core Refrigeration businesses, operationally recovered from the tornado, and resumed capturing share in the market. We introduced new products in 2019 and continued to make investments for future growth and profitability that position the company well for 2020 and beyond.

"In the fourth quarter, our Residential business reported new fourth-quarter records for revenue, profit and margin. Residential revenue was up 8% on growth in both replacement and new construction business. Residential profit rose 20%, and segment margin expanded 190 basis points to 19.6%.

\"As presented in December, the Residential business in the fourth quarter had negative tornado impact of $23 million to revenue and $13 million to segment profit offset by $25 million of insurance recovery for a net benefit of $12 million to segment profit. For the year, Residential had negative tornado impact of $109 million to revenue and $59 million to segment profit offset by $99 million of insurance recovery for a net benefit of $40 million to segment profit.

"In the fourth quarter for Commercial, the business set new fourth-quarter records for revenue, profit and margin. Commercial revenue was up 12% on broad strength across the equipment and service businesses. Commercial profit rose 24%, and segment margin expanded 190 basis points to 19.0%. In Refrigeration, adjusted revenue was relatively flat at constant currency. North America was up low-single digits, and Europe was down low-single digits at constant currency. Refrigeration profit rose 5%, and segment margin expanded 70 basis points to 11.1%.

"Looking ahead for the company overall, we are well-positioned for a year of strong growth and profitability and reiterate guidance for 2020. With a strong balance sheet and cash generation, the company continues to invest in the business to drive performance, grow the dividend with earnings, and repurchase stock, with $400 million planned for 2020."

GUIDANCE:

Lennox sees FY2020 EPS of $11.30-$11.90, versus the consensus of $11.61.

The company reiterates its financial guidance for 2020:

• Adjusted revenue growth of 4-8%
• GAAP and adjusted EPS from continuing operations of $11.30-$11.90
• Corporate expenses of approximately $90 million
• Effective tax rate of 21-22% on an adjusted basis for the full year
• Capital expenditures of approximately $153 million, including $53 million funded by insurance proceeds received in 2019
• $400 million of stock repurchases

For earnings history and earnings-related data on Lennox (LII) click here.

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