LII Stock Risk & Deep Value Analysis
Lennox International Inc
DVR Score
out of 10
What You Need to Know About LII Stock
We analyzed Lennox International Inc using our deep value framework. Sign in to see our full verdict and DVR Score.
We ran LII through our deep value framework — analyzing financial health, distress signals, competitive moat, and risk factors. Our risk assessment: Moderate. Here's what we found.
LII Risk Analysis & Red Flags
What Could Go Wrong
The biggest risk for LII is that persistent volume declines in its Home Comfort Solutions segment (projected down 6% for FY2026) cannot be continually offset by favorable product mix and pricing power. If these volume declines accelerate or pricing power diminishes, the company's ability to achieve its 8% FY2026 revenue growth target and maintain its record 23.6% segment margin could be severely challenged, impacting its $650M-$800M FCF guidance.
Risk Matrix
Overall
Moderate
Financial
Low
Market
Medium
Competitive
Medium
Execution
Medium
Regulatory
Low
Red Flags
- ⚠
Q2 2025 YoY revenue growth of 3% (adjusted for acquisitions) is below the broader industry average cited in previous analyses.
- ⚠
An analyst downgrade cited Q4 2025 revenue decline of 11.2% and net income fall, hinting at potential future volatility despite raised current year guidance.
- ⚠
Trading at a premium to peers on key multiples (e.g., Forward P/E ~21-24x) in a mature industry without a clear hypergrowth catalyst.
Upcoming Risk Events
- 📅
Q3 2025 Earnings Miss & Guidance Reduction (July 22, 2026): A miss on the $7.61 EPS estimate or a downward revision of the full-year FY2026 EPS/revenue guidance.
- 📅
Persistent Home Comfort Volume Declines (Late 2026 Earnings): If Home Comfort Solutions volume declines (projected down 6% for FY2026) worsen and cannot be offset by pricing/mix, severely impacting revenue growth and margin expansion.
When to Reconsider
- 🚪
Exit if full-year FY2027 revenue growth guidance (expected early 2027) drops below 4%.
- 🚪
Sell if segment margin falls below 20% for two consecutive quarters.
- 🚪
Exit if full-year Free Cash Flow guidance is revised below $500M.
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Investment Thesis
If Lennox International continues to leverage its strong brand, operational efficiency, and pricing power to achieve its raised FY2026 guidance of 8% revenue growth and maintain record segment margins of 23.6%+, then it can sustain robust Free Cash Flow generation of $650M-$800M annually, supporting further investment and consistent shareholder returns. This is bullish because the market often undervalues stable, cash-generative industrials that demonstrate consistent execution and margin expansion in mature sectors.
Is LII Stock Undervalued?
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LII Price Targets & Strategy
12-Month Target
$570.00
Bull Case
$650.00
Bear Case
$450.00
Valuation Basis
Based on 23.5x forward P/E applied to $24.25 (midpoint of FY2026 EPS guidance) = $570.00.
Entry Strategy
Dollar-cost average on dips towards $500 (psychological support and potential value entry below recent average targets).
Exit Strategy
Take 50% profit at $570 (median analyst target), reconsider remaining position at $650 (highest analyst target). Stop loss set at $480 (recent support level).
Portfolio Allocation
3-5% for moderate risk tolerance, reflecting its stability and consistent cash flow.
Price Targets & Strategy
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Is LII Financially Healthy?
Valuation
P/E Ratio
22.21
Price/Book
15.21
Price/Sales
3.46
Profitability
Gross Margin
33.43%
Operating Margin
19.95%
Net Margin
15.27%
Return on Equity
73.85%
Revenue Growth
-2.03%
EPS
$22.77
Balance Sheet
Current Ratio
1.60
Quick Ratio
0.63
Debt/Equity
1.19
Cash Flow
Free Cash Flow
$623.30M
Other
Beta (Volatility)
1.18
Dividend Yield
1.08%
Does LII Have a Competitive Moat?
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Moat Trend
Stable
Moat Sources
4 Identified
LII's moat is durable due to the essential nature of HVAC systems, regulatory tailwinds favoring energy efficiency, its established brand, and long-standing relationships with installers and distributors. However, the mature and competitive nature of the industry prevents a 'wide' moat.
Moat Erosion Risks
- •Rapid technological disruption by new entrants in smart home integration or next-gen climate control solutions.
- •Aggressive pricing strategies or superior innovation from larger competitors like Carrier or Trane Technologies.
LII Competitive Moat Analysis
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LII Market Intelligence
Sentiment & Insider Activity
Social Sentiment
Neutral, as LII is a large-cap industrial stock that typically garners less speculative retail investor attention.
Institutional Sentiment
Neutral. The consensus rating is 'Hold' among 17 firms, with recent mixed price target adjustments (some nudged up, some cut, one downgrade to 'Sell').
Insider Activity (Form 4)
Director Sherry Buck acquired 343 shares (grant) and Director John W. Norris III gifted 990 shares in May 2026. Director Sivasankaran Somasundaram resigned effective May 26, 2026. No open-market sales or purchases by CEO/CFO reported in the last 90 days.
Options Flow
Normal options activity; no specific data indicating unusual institutional positioning was provided.
Earnings Intelligence
Next Earnings
2026-07-22 (Q3 2025 Earnings)
Surprise Probability
Medium, given the recent beat and raised guidance, but also mixed analyst sentiment.
Historical Earnings Pattern
LII's stock typically reacts positively to earnings beats and guidance raises, as observed after the Q2 2025 report, but is sensitive to any signs of demand softening or margin pressure.
Key Metrics to Watch
Competitive Position
Top Competitor
CARR (Carrier Global Corp)
Market Share Trend
Stable overall, but experiencing volume declines in Home Comfort Solutions which are being offset by product mix and pricing power, suggesting a competitive environment.
Valuation vs Peers
Trading at a premium to sector peers on key multiples (e.g., Forward P/E) despite its moderate growth profile.
Competitive Advantages
- •Established Brand Power (Lennox)
- •Extensive Distribution Network
- •R&D in Energy Efficiency Technology
- •Reputation for Product Quality and Reliability
Market Intelligence
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What Could Drive LII Stock Higher?
Near-Term (0-6 months)
- •Q3 2025 Earnings (July 22, 2026): A beat on the $7.61 adjusted EPS estimate or a further upward revision of the FY2026 revenue growth guidance (currently 8%).
- •Sustained Segment Margin Expansion (Q3/Q4 2025): Continued improvement in segment margin above 23.6% (Q2 2025 record) indicating persistent pricing power and operational efficiency.
Medium-Term (6-18 months)
- •Accelerated HVAC Replacement Cycle (Q4 2025 - Q2 2027): Macro tailwinds from increased focus on energy efficiency or aging residential/commercial infrastructure driving sustained organic revenue growth above 5% YoY.
- •Strategic Bolt-on Acquisition (mid-2027): Announcement of a tuck-in acquisition in smart home HVAC technology or energy management solutions, projected to add 1-2% to annual revenue and expand gross margins.
Long-Term (18+ months)
- •Building Decarbonization & Electrification (2028-2030): If LII captures a leading share (15%+) of the growing market for high-efficiency heat pumps and electric HVAC systems, this could add $500M+ in annual revenue by 2029.
- •Industrial Solutions International Expansion (2028-2030): Successful market penetration into high-growth international industrial segments, boosting Industrial Solutions revenue growth to 8-10% consistently, potentially adding $300M+ by 2030.
Catalysts & Growth Drivers
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What's the Bull Case for LII?
- ✓
Watch quarterly segment margin: Sustained segment margin above 23.6% signals continued operational efficiency and pricing power.
- ✓
Monitor Home Comfort Solutions volume trend: A reversal from current volume declines to positive growth (e.g., +2% YoY) would indicate strengthening demand.
- ✓
Track full-year FCF guidance: Reaffirmation or increase of $650M-$800M FCF guidance indicates robust financial health.
Bull Case Analysis
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How Lennox International Inc Makes Money
Lennox International designs, manufactures, and markets climate control products for heating, ventilation, air conditioning, and refrigeration (HVAC/R) markets worldwide. The company serves both residential and commercial customers through a direct sales force, independent distributors, and retailers. Revenue is primarily generated through the sale of its high-efficiency systems and components, complemented by aftermarket parts and services, playing a critical role in providing comfort and maintaining air quality in various environments.
Read Full Business Model BreakdownFAQ
What is the DVR Score for Lennox International Inc (LII)?
As of June 12, 2026, Lennox International Inc has a DVR Score of 6.0 out of 10, placing it in the "Solid Pick" category. This score is generated by our AI-powered deep value analysis framework that evaluates growth potential, financial health, competitive moat, and risk factors.
What is the market capitalization of Lennox International Inc?
Lennox International Inc's market capitalization is approximately $17.8B..
What is the risk level for LII stock?
Our analysis rates Lennox International Inc's overall risk as Moderate. This assessment considers execution risk, market risk, financial risk, competitive risk, and regulatory risk. For a full breakdown, see the risk analysis section above.
What is the P/E ratio of LII?
Lennox International Inc currently has a price-to-earnings (P/E) ratio of 22.2. This is in line with broader market averages.
Does Lennox International Inc pay a dividend?
Yes, Lennox International Inc pays a dividend with a current yield of approximately 1.08%.
Is Lennox International Inc's revenue growing?
Lennox International Inc has reported revenue growth of -2.0%. Revenue has been declining, which warrants closer examination.
Is LII stock profitable?
Lennox International Inc has a profit margin of 15.3%. The company is profitable but margins are modest.
How often is the LII DVR analysis updated?
Our AI-powered analysis of Lennox International Inc is refreshed regularly to incorporate the latest financial data, market conditions, and news. The most recent update was on June 12, 2026.
Important Disclaimer – Not Financial Advice
Deep Value Reports is an independent research platform for educational and informational purposes only. We are not financial advisors, investment advisors, or licensed professionals. The analysis, scores, and information provided on this page for LII (Lennox International Inc) should not be construed as personalized investment advice, a recommendation to buy or sell any security, or an offer to provide investment advisory services.
All investments involve risk, including the potential loss of principal. Past performance does not guarantee future results. Always conduct your own research, consider your financial situation, and consult with a qualified financial advisor before making any investment decisions.