LII Financial Analysis

Analysis Date: 1/30/2025

Business Model

Lennox generates revenue primarily through two main segments: Home Comfort Solutions and Building Climate Solutions

Revenue Sources

• Home Comfort Solutions (66% of Q4 2024 revenue)
• Building Climate Solutions (34% of Q4 2024 revenue)

Revenue Distribution by Channel

• Home Comfort Solutions: $887.4M in Q4 2024
• Building Climate Solutions: $457.6M in Q4 2024

Income Statement Analysis

• Core revenue grew 22% driven by strong volume and pricing
• Operating margin expanded 220 basis points to 18.2%
• Adjusted EPS increased 54% to $5.60

Balance Sheet Analysis

• Strong cash position with $415.1M, up significantly from prior year
• Net debt to adjusted EBITDA ratio improved to 0.6x

Cash Flow Analysis

• Strong free cash flow generation of $272.8M in Q4, up 50% YoY
• Full year free cash flow conversion at 97% of net income

Capital Allocation

Company focused on ROI-driven investments in enhanced front-end systems, distribution network expansion and efficiency. Maintaining strong balance sheet while pursuing inorganic growth opportunities and returning capital through share repurchases and dividends.

Management Commentary

2024 was a remarkable year filled with record achievements

Successfully navigated complex product transition to new refrigerant

Integration of AES exceeding synergy expectations

New commercial factory ramp-up costs impacting margins

Overall Sentiment: Very positive on execution and strategic progress while acknowledging some near-term cost pressures

Recommendation

Rating: Buy

Reason for Rating: Strong execution, margin expansion and cash generation support positive outlook

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/30/2025, 7:53:35 AM