Now let me pull the Q2 2025 earnings release for comparison figures and check the full-year 2025 EPS base and Q2 2025 segment detail.# Lennox International (LII) — Q2 2026 Earnings Preview Report Date: Wednesday, July 29, 2026 (before market open) | Event: 2026Q2 Earnings Call
| Stock (7/28/26 close) | ~$544, down from a 52-week closing high near $573 in late June |
| Consensus Q2 revenue | ~$1.56B (analysts had been looking for roughly 4% y/y growth) |
| Consensus Q2 adj. EPS | ~$7.60–$7.65 (down ~2–3% y/y vs. $7.82 in Q2 2025) |
| FY2026 guidance (reaffirmed at Q1) | Revenue +~8% (incl. ~4 pts M&A); Adj. EPS $23.50–$25.00; FCF $750M–$850M |
| Beat history | Beaten consensus EPS in 3 of last 4 quarters, incl. a 6% beat last quarter |
Shares have pulled back roughly 5% from their late-June highs heading into the print, though the average analyst price target still implies modest upside from current levels.
Lennox's Q1 2026 print (reported April 29) showed revenue was $1.1 billion, up 6% year-over-year as growth initiatives gain traction and channel conditions stabilize, though segment margin was 14.4% in the quarter, down 130 basis points primarily due to the impact of factory under-absorption. The quarter told a classic two-speed story:
Management reaffirmed full-year adjusted EPS guidance of $23.50–$25.00 but raised revenue growth guidance to ~8% (from 6–7%) largely on price and mix, while simultaneously raising the cost inflation assumption to ~5% (from ~2%) due to tariffs and commodity inflation (aluminum, steel, copper, diesel). Crucially, management guided that most of the incremental price and cost impact would land in the second half, not Q2 — Michael Quenzer, Executive VP & CFO: "Most of the cost impact and the price impact would fall within the second half...predominantly, both of these should come into the second half of the year."
Q1 HCS segment margin fell 390bps as Lennox deliberately cut production (~30% in Q1) to work down excess channel inventory, creating roughly $15M of under-absorption. On the Q1 call, management signaled "there will be a little bit of a headwind in the second quarter. But by the end of the second quarter, that should all be behind us, and we should start to see actually some year-over-year absorption benefit as we get to the second half." Q2 is seasonally HCS's most profitable quarter (historically 23–25% margins), so investors should watch whether the sequential step-up materializes as management expects, or whether restocking-driven demand runs hotter/cooler than planned.
This is arguably the single biggest incremental datapoint since Q1. In April, new Section 232 derivative tariffs blindsided the industry and management flagged roughly $100M of incremental gross cost headwind. However, on June 1 the White House issued a proclamation expanding eligibility for a reduced 15% tariff rate to include agricultural equipment, residential HVAC systems and components, effective June 8 — "Section 232 cuts HVAC tariffs from 25% to 15% on June 8, 2026, through Dec 31, 2027." This should meaningfully soften the cost-inflation guide investors were bracing for and is a key swing factor for the H2/FY guide. Watch for commentary on whether this gets fully passed through to margin or partly reinvested/shared with the channel, and recall management's own framing that under FIFO accounting, tariff cost impacts wouldn't hit the P&L until Q3 anyway.
Management guided mid-single-digit price for the year with an unusually high ~90% incremental drop-through (vs. ~75% previously), reflecting a shift from mix-driven to price-driven gains as the R-454B refrigerant-mix tailwind fades. With input costs (aluminum +25%, steel +20-25%, diesel +50%, copper +10-15% since January per the CFO) still elevated but now partially offset by tariff relief, the net price/cost algebra for H2 is the key debate. Investors should listen for any updated framing now that tariffs have been cut.
Carrier Global — a useful residential/commercial HVAC bellwether — reported Q2 results the day before Lennox and raised its full-year 2026 sales, operating profit and earnings-per-share outlook after reporting stronger-than-expected second-quarter results, supported by a sharp increase in orders, record backlog and improving demand in residential. Carrier's CEO characterized the residential backdrop constructively: "Carrier expects the North American residential HVAC market to total approximately 7 million to 7.5 million units this year, largely stable with 2025. Field inventories ended the second quarter down about 25% from a year earlier." That inventory dynamic squares with Lennox's own restocking narrative from Q1 and is a modestly encouraging signal that channel destocking has largely run its course. Note Carrier's earnings also flagged margin pressure from tariffs/mix and shares fell despite the beat — a reminder that inflation is a live issue across the group even after the June tariff relief.
A class-action was filed in March 2026 in the Eastern District of Michigan alleging that several of the largest HVAC equipment manufacturers coordinated actions that led to higher prices beginning in January 2020, naming Lennox alongside Carrier, Trane, Daikin, Rheem, Bosch and AAON. On the Q1 call, CEO Alok Maskara read a scripted legal response — "The lawsuit contains only plaintiff allegation and there has been no funding of wrongdoing. We dispute the accuracy of the allegation and will actively and vigorously defend our position" — and it's likely to come up again, though it remains early-stage and not a near-term financial item.
Q2 is a seasonally critical, high-margin quarter for Lennox, and expectations are muted (consensus implying a modest EPS decline y/y) largely because of Q1's under-absorption drag, tough BCS comps, and inflation/tariff uncertainty flagged back in April. Since then, the backdrop has arguably improved: Section 232 tariffs on residential HVAC were cut from 25% to 15% in June, channel inventories appear to be normalizing (echoed by Carrier's Q2 commentary), and BCS's emergency-replacement/national-account momentum looked durable rather than one-off. The key swing factors for tomorrow are (1) whether HCS margins show the expected sequential recovery as under-absorption fades, (2) how much of the tariff relief flows through to the cost-inflation guide, and (3) whether management leaves the $23.50–$25.00 full-year EPS range unchanged, narrows it, or nudges it given the more favorable tariff backdrop and strong BCS momentum.