Shares of Lennox (NYSE:LII) dropped 8.8% on Wednesday after the heating and cooling specialist reported fourth-quarter results that came in below market expectations, reflecting continued industry challenges and the impact of inventory reductions across its distribution channels.
The company posted adjusted earnings of $4.45 per share for the quarter, missing the consensus forecast of $4.77. Revenue fell 11% year on year to $1.2 billion, also below expectations of $1.27 billion, as channel destocking and weaker demand tied to new construction weighed on performance.
Lennox’s largest division, Home Comfort Solutions, saw revenue plunge 21% in the quarter, with segment profit sliding 29% to $137 million. This weakness was partly offset by the Building Climate Solutions unit, which delivered revenue growth of 8%.
“We are pleased with our performance in 2025 given industry headwinds. For the first time in its history, Lennox delivered annual margins over 20%, a particularly meaningful accomplishment driven by our cost reduction actions and mix benefits,” said CEO Alok Maskara.
Despite the fourth-quarter shortfall, Lennox issued full-year 2026 guidance calling for revenue growth of 6% to 7%, with earnings per share expected to range between $23.50 and $25.00. That compares with an analyst consensus estimate of $24.52.
The company said broader macroeconomic uncertainty continues to dampen both consumer and dealer activity, leading to more deferred system replacements. However, management struck a more optimistic tone for the year ahead, noting that one-step channel inventory destocking is nearly complete and that two-step inventories are expected to normalize by the second quarter.
For full-year 2025, Lennox reported adjusted earnings of $23.16 per share, up 2% from the prior year, on revenue of $5.2 billion, representing a 3% year-on-year decline.