CARR - Lennox's Strong Performance Smacks Into High Expectations
- Lennox posted operating earnings more than 10% better than Street expectations, but the shares declined - likely due to high expectations going into the quarter and concerns about moderating residential.
- I believe Lennox bears may be underestimating the durability of residential new construction growth and the impact of demographic shifts toward warmer states (shorter replacement cycles).
- Commercial markets are a more mixed opportunity for Lennox; energy efficiency retrofits can offset weaker new construction, but I don't think Lennox is ideally placed to participate in IAQ growth.
- Lennox shares trade at a rich premium, with the sell-side increasingly straining to justify ever-higher targets.
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Lennox's Strong Performance Smacks Into High Expectations