Lennox International (NYSE:LII) reported a double-digit revenue decline for its fourth quarter, yet the climate-control leader managed to offset the top-line pressure with record-breaking profitability.
For the first time in its 130-year history, the Dallas-based manufacturer achieved full-year segment margins exceeding 20%, driven by aggressive cost-reduction initiatives and a shift toward higher-efficiency product mixes.
The company posted fourth-quarter revenue of $1.2 billion, an 11% decrease from the prior year.
The slump was primarily felt in the Home Comfort Solutions segment, where sales plummeted 21% as distributors continued to flush out legacy inventory and high interest rates cooled the new construction market.
Despite the volume drop, GAAP diluted earnings per share (EPS) for the quarter came in at $4.07, while full-year GAAP EPS reached $22.79.
Lennox's Building Climate Solutions (Commercial) segment provided a crucial buffer, as demand for emergency replacements and shorter lead times helped mitigate the residential slowdown.
The company also benefited from recent acquisitions and a new joint venture with Samsung, which targets the rapidly expanding North American heat pump market.
Following the quarter's performance, management issued a confident outlook for 2026, projecting revenue to bounce back with growth of 6% to 7%.
The company expects adjusted EPS to climb to between $23.50 and $25.00, supported by approximately $250 million in capital expenditures and free cash flow projected between $750 million and $850 million.