The heating and cooling equipment maker's adjusted earnings fell 7% and missed estimates. Its 2026 guidance now sits well below what analysts expected, and the shares fell about 10% to a 52-week low.
Lennox sold more equipment in the third quarter and made less money on it.
The heating, ventilation and air-conditioning maker reported revenue of $1.57 billion, up 10% from a year earlier. Adjusted earnings fell 7% to $6.84 a share, below the $7.36 analysts expected, according to LSEG. GAAP earnings fell to $6.41 a share from $7.38, and the GAAP operating margin narrowed by 3.2 percentage points to 19.8%.
The outlook
Lennox cut its 2026 adjusted earnings guidance to $21.00 to $21.50 a share from $23.00 to $24.00. At the midpoint, that is about a $2.25 reduction, and it sits about 9% below the $23.38 analysts expected.
When revenue rises 10% and earnings fall, the gap usually comes from costs, mix or both. A 3.2-point drop in operating margin in a single year is a large move.
The reaction
The shares fell from $372.05 at Tuesday's close to about $333.70 in early afternoon, down about 10%, after hitting a new 52-week low of $332.82.
The guidance cut is a signal for other residential HVAC makers and distributors, such as Carrier, Trane Technologies, Johnson Controls and Watsco, though each has a different mix of residential and commercial business.
Two views of the cut
The more forgiving view: revenue is still growing at 10%, which suggests demand has held up, and the earnings pressure may reflect temporary costs that can be managed down.
The harsher view: margins are moving the wrong way despite growth, the full-year cut is large relative to the remaining quarter, and investors may now question whether the company's previous margin targets are achievable.
What to watch
Management's explanation of the margin decline, fourth-quarter pricing and volume, inventory levels at distributors, and comments from Carrier, Trane and Watsco on residential demand.