RBC Capital analyst Deane Dray reiterated a Sector Perform rating and $598.00 price target on Lennox International (NYSE: LII).

The analyst comments "Our view: Sector Perform-rated Lennox reported in-line operating results but missed our estimate by $0.20/3%. The headline EPS of $6.98 was boosted 20c by below-the-line items, including 20c lower tax driving the $0.16/2% headline beat vs. consensus. The downside this quarter was the 12% Y/Y revenue decline at Home Comfort, where resi weakness and destock headwinds weighed on earnings as we highlighted in our earnings preview (see note here ), but operating results came in lower than expected. Home Comfort declined -11.6% organically vs. our -0.5% estimate, while segment margins slightly expanded 30 bps Y/Y to 22.2% vs. our 21.9% estimate. Price/mix added 11ppts, but did not offset the volume decline of -23ppts in Home Comfort that was driven by distributor and contractor destocking, weak new construction and a mix shift to more repair than replace. Additionally, we will be watching how the latest tariffs have impacted price/mix and cost. Building Climate posted upside vs. our estimate, with better margins on and higher-than-expected 10.4% organic sales growth. At the total company level, operating margins expanded 150 bps Y/Y to 21.7% vs. our 21.0% estimate/20.9% consensus, netting to small positive incremental margins. FCF was seasonally softer at 108% conversion vs. its 3Q historical average of 144%. Looking ahead, the company lowered its 2025 EPS guidance by $0.75/3.2% midpoint-to-midpoint, reflecting the challenging resi environment. Total sales growth outlook was also lowered by 4ppt to down -1%, with softer Home Comfort (down -4% vs. up 3% previously) and better Building Climate (raised to up 6% vs. up 2% previously). Free cash flow guidance was sizeably reduced from $650-$800 million down to ~$550 million/24% related to temporary elevated inventory levels after a weak 2025 summer selling season, preparation for regulatory transition, emergency replacement, and investments in the Samsung JV. Potential stock reaction: Shares have underperformed Multi-Industry peers by 780 bps over the past two months and are trading below the midpoint of its historical relative P/E range vs. peers. Weighing the magnitude of the reduced EPS and FCF guidance, we would not be surprised to see a -LSD% relative underperformance in shares today."

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Shares of Lennox International closed at $548.99 yesterday.