Lennox International (LII) — Q2 2026 Earnings Preview

Ticker: LII Earnings Date: July 29, 2026 (Pre-Market) Prepared: July 28, 2026

1. Earnings Preview

Key Takeaway: Setup is modestly constructive — consensus is a manageable bar and the biggest swing factor is whether HCS residential volumes inflect faster than expected in Q2, but the real story is whether BCS can sustain its record-setting momentum and whether factory absorption fully clears as guided.

Heading into Q2 2026, LII's bar looks achievable: consensus expects revenue of ~$1.56B (+4.3% YoY) and adjusted EPS of ~$7.67, both of which reflect a meaningful step-up from Q1's depressed levels driven by seasonal strength, pricing actions kicking in, and easier comps. Management guided HCS down low-single digits organically for Q2 and explicitly flagged weather uncertainty, while BCS is expected to continue its strong trajectory with national accounts and emergency replacement as the primary drivers. Estimate revisions have been modestly positive since the Q1 print — Q2 consensus EPS moved up ~$0.02 and FY2026 EPS moved up ~$0.07 — suggesting the street has largely digested the tariff headwind and is comfortable with the reaffirmed $23.50–$25.00 EPS guide. The stock has recovered +5.7% since the Q1 earnings date (vs. CARR +12.3%, TT +0.8%), suggesting LII has underperformed peers on a relative basis, which could reflect lingering HCS skepticism and the antitrust overhang, but also means the bar for a positive reaction is lower. The key wildcard is the June 2026 Section 232 tariff relief proclamation — management called it 'slightly better' but said it doesn't change the full-year outlook; any incremental color on cost mitigation progress or a narrowing of the EPS guidance range to the upper half would be the most likely positive catalyst.

2. KPIs & Consensus Expectations

Key Takeaway: Consensus is a moderate bar — Q2 revenue of $1.56B implies +4.3% YoY growth, a meaningful deceleration from BCS's record Q1 pace but achievable given pricing tailwinds and easier comps. Adjusted EPS of $7.67 is the bigger swing factor: it requires HCS margins to recover from Q1's under-absorption trough and BCS to sustain its 25%+ operating margin, both of which management guided explicitly.

Table 1 — Q2 2026 Current Quarter Snapshot

Source: Visible Alpha Consensus and Actuals Data. All consensus figures as of July 28, 2026. Q2 2026 = 2QFY-2026 (quarter ending June 30, 2026). Q1 2026 actual = last reported quarter (April 29, 2026). Q2 2025 actual = prior year comparable period.

Table 2 — Beat/Miss History (Last 8 Quarters, Top 2 KPIs: Net Sales & Adjusted EPS)

Pattern: LII has beaten adjusted EPS consensus in 6 of the last 8 quarters, with the two misses (Q3 2025 revenue, Q4 2025 both) concentrated in the destocking trough. The Q1 2026 beat on both revenue (+7.2%) and EPS (+5.1%) signals the company is back in beat mode as volumes recover. Revenue beats have been less consistent than EPS beats, reflecting the company's strong cost discipline even in soft demand environments.

Source: Visible Alpha Consensus and Actuals Data.

3. Guidance & Commentary Evolution

Key Takeaway: Guidance has evolved materially since Q1 earnings — revenue raised to ~8% growth (from 6–7%), EPS reaffirmed at $23.50–$25.00 despite significantly higher cost inflation, and the June 2026 Section 232 tariff relief proclamation provided incremental relief without changing the full-year financial outlook. Tone has shifted from cautiously optimistic to slightly more confident on the cycle, with management declaring channel destocking '100% behind us' and repair-vs-replace 'stabilized.'

Source: LII Q1 2026 Earnings Call (April 29, 2026); Visible Alpha Consensus and Actuals Data.

4. Guidance vs. Estimate Revision Tracker

Key Takeaway: Estimates have been modestly revised upward since the Q1 2026 print — Q2 2026 EPS consensus moved up ~$0.02 and FY2026 EPS moved up ~$0.07 — suggesting the street has absorbed the tariff headwind and is comfortable with the reaffirmed guidance range. The gap between consensus ($24.47) and the guidance midpoint ($24.25) is narrow, implying limited cushion if HCS volumes disappoint in Q2 or tariff costs accelerate beyond current assumptions.

Estimates have been remarkably stable since the Q1 print, with revisions of less than +0.5% across all KPIs and periods — the street is essentially anchored to management's reaffirmed guidance. The narrow consensus-to-guidance gap (+0.9% above midpoint on FY EPS) means there is limited room for error: any Q2 miss on HCS volumes or incremental tariff cost disclosure could push consensus toward the lower half of the $23.50–$25.00 range.

Source: Visible Alpha Consensus and Actuals Data. 'Post Q1 Earnings' baseline = consensus as of May 6, 2026 (5 trading days after April 29, 2026 earnings). Current = July 28, 2026.

5. Stock Performance

Key Takeaway: LII has underperformed HVAC peers since Q1 earnings (+5.7% vs. CARR +12.3%, TT +0.8%), with the stock's recovery driven primarily by the Q1 beat and June tariff relief news rather than estimate revisions, which have been minimal. The relative underperformance vs. CARR likely reflects LII's greater HCS residential exposure and the antitrust litigation overhang, creating a lower bar for a positive Q2 reaction.

LII vs. CARR vs. TT — Indexed to 100 at Q1 2026 Earnings (April 29, 2026). Peers used: CARR (Carrier Global, direct HVAC peer) and TT (Trane Technologies, commercial/residential HVAC peer). No S&P 500 data was available in the dataset; CARR and TT serve as the primary sector benchmarks. Source: Stock Price Data.

• April 29, 2026 (Q1 Earnings): LII surged ~+4.3% on the day (from $495.52 pre-earnings close to $517.62), driven by a revenue beat (+7.2% vs. consensus) and EPS beat (+5.1%), with BCS delivering record quarterly performance. Stock continued to rally to $534.89 the following day.
• May 6–21, 2026 (Pullback Phase): LII gave back gains, falling from ~$541 to ~$481, as the market digested the tariff headwind disclosure and HCS residential uncertainty. CARR and TT also pulled back during this period.
• June 9, 2026 (Wells Fargo Conference / 232 Tariff Relief): LII rallied sharply to $529 as the June 1 Section 232 proclamation reducing tariff rates on residential HVAC systems became more widely discussed at the Wells Fargo Industrials & Materials Conference. CARR also rallied strongly on the same day.
• June 24–July 2, 2026 (Peak): LII reached a post-earnings high of ~$573 on June 30, representing a +10.7% gain from the earnings date, before pulling back to the current ~$547 level.
• Current Level (July 28, 2026): LII at ~$547 (post-market ~$540), up +5.7% from the Q1 earnings date. CARR has outperformed at +12.3% indexed, while TT is roughly flat at +0.8%. LII's relative underperformance vs. CARR reflects greater residential HVAC exposure and the antitrust litigation overhang.

Source: Stock Price Data (Yahoo Finance).

6. Peer Commentaries — Q2 2026 Read-Through

Key Takeaway: Peer commentary from CARR (Q2 2026 earnings, July 28), TT (Q1 2026 earnings + conferences), and AAON (Q1 2026 earnings + William Blair conference) is broadly constructive for LII's Q2 print: residential HVAC demand has exceeded expectations, channel inventories are clean, commercial HVAC is exceptionally strong, and pricing is sticking. The primary read-through risk is that CARR's Q2 tariff headwind (net negative in Q2 due to timing lag) could signal a similar dynamic for LII, though LII's FIFO accounting means tariff costs don't hit the P&L until Q3.

Note: Only commentary from after LII's Q1 2026 earnings (April 29, 2026) and relevant to Q2 2026 or the current demand environment is included below. CARR Q2 2026 earnings (July 28, 2026) are included as they directly read through to LII's Q2 print.

Residential HVAC Demand — Positive Read-Through

• CARR (Q2 2026 Earnings, July 28, 2026): Residential business performed better than expected, with Q2 sales up 'high single digits.' CARR raised its full-year residential sales outlook to 'up high single digits' and now expects the total U.S. market to be 'around 7 to 7.5 million units this year, largely stable versus last year' — up from an initial projection that could have started with a '6 million' handle. Management stated demand has 'exceeded our expectations' and sees a 'trend back to that 9 million units' over time due to pent-up demand from deferred replacements.
• Read-through for LII: Strongly positive for HCS. If the U.S. residential market is tracking 7–7.5M units (vs. prior fear of 6M), LII's Q2 HCS organic volume decline could be less severe than the 'down low-single digits' management guided. The pent-up replacement demand narrative also supports LII's repair-vs-replace stabilization thesis.
• TT (Q1 2026 Earnings, April 30, 2026; Wolfe Conference, May 20, 2026): Residential demand was 'down low single digits' in Q1 vs. a guided decline of 'around 20%' — a significant positive surprise. TT raised its full-year residential guide to 'flattish for the year' and expects Q2 to be 'flattish, pivoting to growth in the second half aided by easier prior year comps.' TT also shifted to a 'level loading' production strategy, which will be a 'tailwind in the second half of the year.'
• Read-through for LII: Positive for HCS. TT's better-than-expected residential performance and H2 growth pivot aligns with LII's own guidance for HCS to return to growth in H2 2026. The level-loading production strategy at TT mirrors LII's own inventory normalization effort.

Commercial HVAC Demand — Strongly Positive Read-Through

• CARR (Q2 2026 Earnings, July 28, 2026): Commercial HVAC is 'off the charts good.' Q2 commercial HVAC orders were up ~65%, with data center orders up 4x year-over-year. CARR raised its full-year data center sales outlook from $1.5B to 'about $2 billion' and total company backlog is now 'over $8 billion, up about 40% versus last year and up 20% sequentially.' CARR is finalizing plans for a new U.S. manufacturing facility to meet demand.
• Read-through for LII: Positive for BCS. While LII does not currently compete in data center cooling (chiller-based), the broader commercial HVAC strength — including national accounts, healthcare, and government — directly benefits LII's BCS segment. CARR's record backlog and capacity expansion signal a multi-year commercial upcycle that supports LII's BCS growth trajectory.
• TT (Q1 2026 Earnings, April 30, 2026; Wolfe Conference, May 20, 2026): Commercial HVAC bookings were 'up 40%' in Q1, with applied bookings 'up over 160%.' Backlog is up nearly 70% year-over-year. Growth is broad-based across data centers, healthcare, higher education, and government. TT expects 'strong acceleration into the second half of the year led by our commercial HVAC businesses.'
• Read-through for LII: Positive for BCS. TT's broad-based commercial strength and record backlog confirm the commercial HVAC upcycle is real and durable. LII's BCS national accounts and emergency replacement initiatives are well-positioned to capture share in this environment.
• AAON (Q1 2026 Earnings, May 7, 2026; William Blair Conference, June 2, 2026): Seeing 'signs of recovery inside the commercial HVAC market.' AAON branded equipment bookings increased ~9% YoY in Q1 and ~15% on a trailing 12-month basis. Management views 2026 as a 'market share capture year.' Orders for 'alpha-class' fully electric heat pump configurations increased 56% in Q1.
• Read-through for LII: Positive for BCS. AAON's commercial recovery and heat pump order growth support LII's own commercial HVAC recovery narrative and heat pump product expansion.

Channel Inventory — Positive Read-Through

• CARR (Q2 2026 Earnings, July 28, 2026): Field inventory levels 'continue to remain healthy, ending Q2 down about 25% versus last year.' CARR feels '100%' good about inventory normalization and expects to benefit from the 'absence of destocking in the second half' — a ~10-point tailwind in H2.
• TT (Q1 2026 Earnings, April 30, 2026; Wolfe Conference, May 20, 2026): Residential inventories have 'normalized' and are 'set properly' in the independent wholesale distributor channel. TT's level-loading production strategy means absorption headwinds in H1 will reverse as a tailwind in H2.
• Read-through for LII: Positive. LII management declared channel destocking '100% behind us' as of Q1 earnings, consistent with CARR and TT commentary. Clean inventories across the channel support LII's thesis that Q2 restocking is 'normal seasonal behavior' with no tariff-driven pre-buy.

Pricing — Broadly Positive, Watch for Timing Lag

• CARR (Q2 2026 Earnings, July 28, 2026): Initial residential price increases were in the 'high single-digit range,' but CARR 'reduced price a little' when tariffs were lowered from 25% to 15% (with a path to 10%). Q2 price realization was 'around 3%' and full-year expectation is 'probably 4%.' Importantly, tariffs and associated pricing were a 'net negative' headwind in Q2 due to a timing lag — tariffs went into effect early April but pricing adjustments didn't take effect until end of April.
• Read-through for LII: Mixed. LII's FIFO accounting means new tariff costs don't hit the P&L until Q3, so LII should NOT face the same Q2 timing lag that hurt CARR. LII's price actions (announced late April) should begin flowing through in Q2 and predominantly in H2, consistent with guidance. The CARR timing lag is actually a relative positive for LII in Q2.
• TT (Q1 2026 Earnings, April 30, 2026; Wolfe Conference, May 20, 2026): Announced 'up to a 5% price increase in April' for residential products, expecting '2% realized from that throughout the year.' Full-year enterprise price guide is 'probably closer to 2 points.'
• AAON (William Blair Conference, June 2, 2026): Has 'put pricing actions in place' to address cost dynamics from late 2025 and expects 'margin improvement' as better-priced products flow through. Maintains a '10-ish percent premium' on rooftop units.

Tariffs — Manageable but Watch for Timing

• CARR (Q2 2026 Earnings, July 28, 2026): Section 232 tariffs reduced from '25% to 15% with a path to 10%' depending on U.S. steel content. The tariff/pricing timing mismatch was a 'net negative' headwind to Q2 margins. CARR is managing through pricing, supply chain optimization, and vendor cost-sharing.
• TT (Wolfe Conference, May 20, 2026): TT's 'in-region for-region manufacturing strategy' with '21 factories and growing in the United States' means a 'different impact when you think about 232 on our business.' Contracts also include 'tariff protection' clauses for abrupt changes.
• AAON (Q1 2026 Earnings, May 7, 2026): 'Tariff-related and general inflation pressures' were cited as temporary Q1 gross margin impacts, expected to 'moderate as the year progresses.'
• Read-through for LII: Neutral to slightly positive. LII's FIFO accounting insulates Q2 from new tariff costs (impact deferred to Q3), and the June 2026 Section 232 proclamation reducing rates on residential HVAC systems is a net positive for LII's competitive positioning vs. Mexico-based manufacturers. The key watch item is Q3 guidance — that is when FIFO-deferred tariff costs will first hit LII's P&L.

Refrigerant Transition — Favorable Comp Tailwind

• TT (BofA Conference, May 13, 2026): The refrigerant transition was a 'challenge' in H1 2025, creating a 'prebuy with refrigerant' followed by a 'refrigerant problem where you couldn't install new units, so you couldn't burn through the inventory.' This disruption creates favorable year-over-year comparisons for H1 2026.
• AAON (William Blair Conference, June 2, 2026): The transition 'caused a lot of noise in our bookings cadence in '24 and '25' and disrupted Q1 2025 results, leading to a 'favorable comparison to the prior year period.'
• Read-through for LII: Positive. LII's BCS segment completed the full transition of light commercial products to R-454B in Q1 2026, contributing 9% price/mix revenue growth. The favorable comp from the 2025 refrigerant disruption should continue to benefit BCS in Q2.

Sources: CARR Q2 2026 Earnings Call (July 28, 2026); CARR Wells Fargo Industrials & Materials Conference (June 9, 2026); CARR Wolfe Research Global Transportation & Industrials Conference (May 19, 2026); TT Q1 2026 Earnings Call (April 30, 2026); TT Wolfe Research Global Transportation & Industrials Conference (May 20, 2026); TT Bank of America Industrials, Transportation and Airlines Conference (May 13, 2026); AAON Q1 2026 Earnings Call (May 7, 2026); AAON William Blair Growth Stock Conference (June 2, 2026).

7. Material News & Developments

Key Takeaway: The most important development since Q1 earnings is the June 2026 Section 232 tariff relief proclamation, which management views as restoring competitive parity vs. Mexico-based manufacturers — a net positive for LII's domestic manufacturing advantage. The antitrust litigation (Berg v. Bosch et al.) remains an unresolved overhang, though management disputes all allegations.

• June 1, 2026 — Section 232 Tariff Relief Proclamation (Positive): The White House issued a proclamation reducing Section 232 tariff rates on residential HVAC systems and components. Management characterized the overall tariff stance as 'slightly better' following this news, viewing it as restoring competitive parity vs. Mexico-based manufacturers. Does not change the full-year financial outlook but reduces the tail risk of further tariff escalation on residential products. LII's stock rallied ~+3% on June 9 as the news was discussed at the Wells Fargo Industrials & Materials Conference.
• April 29, 2026 — Q1 2026 Earnings Beat & Guidance Raise (Positive): LII reported Q1 2026 revenue of $1,135.1M (+7.2% vs. consensus) and adjusted EPS of $3.35 (+5.1% vs. consensus). Revenue growth guidance raised to ~8% (from 6–7%). EPS guidance reaffirmed at $23.50–$25.00 despite significantly higher cost inflation (+5% vs. prior +2%). BCS delivered record quarterly performance with organic sales +26% and margins +300 bps. Stock rose ~+4.3% on the day.
• April 29, 2026 — New Section 232 Tariff Announcement (Negative/Headwind): New Section 232 derivative tariffs were announced earlier in April, significantly raising LII's cost inflation outlook from +2% to +5% for FY2026. ~80% of the incremental cost increase is 232-related. Due to FIFO accounting, no P&L impact expected until Q3 2026. LII announced price increases the same week to offset. Mitigation strategies include cross-border steel sourcing and dual-sourced supply base optimization.
• March 2026 — HVAC Industry Antitrust Litigation (Negative/Overhang): Lennox named as a defendant in Berg v. Bosch et al., a civil antitrust class action filed in the Eastern District of Michigan alleging industry-wide price-fixing among major HVAC manufacturers. Management disputes all allegations and is vigorously defending. No finding of wrongdoing has been made. This litigation overhang is likely contributing to LII's relative underperformance vs. CARR since Q1 earnings.
• Post-Q1 2026 — Analyst Rating & Price Target Actions (Mixed): Following Q1 earnings: RBC Capital (Deane Dray) maintained Sector Perform, raised PT from $485 to $579; Barclays (Julian Mitchell) maintained Overweight, lowered PT from $600 to $597; Wells Fargo (Joseph O'Dea) maintained Equal-Weight, raised PT from $480 to $555; Vertical Research upgraded to Buy with $600 PT; BNP Paribas Exane initiated coverage at Neutral with $535 PT. Current consensus: Hold (16 analysts; 4 Buy, 10 Hold, 2 Sell); average PT ~$566.
• Ongoing — Hub-and-Spoke Distribution System Rollout (Positive, Longer-Term): LII's new hub-and-spoke distribution system went live in February 2026 and is being rolled out nationally. Distribution fill rates have improved from mid-to-high 70s% (when current CEO joined) to ~low 90s% currently, with a long-term target of ~high 90s%. This is a key enabler of the emergency replacement initiative and parts/accessories attachment rate expansion.
• Ongoing — Supco/DuroDyne Integration (Positive): Integration of Supco parts and supplies is on track and strengthening attachment rate growth. Parts and accessories attachment rate currently in the teens, targeting 30–35% entitlement. M&A contributed ~+2% to HCS revenue and ~+12% to BCS revenue in Q1 2026.
• Ongoing — Samsung Ductless & Ariston Water Heater Launch (Positive, Early Stage): Samsung ductless and Ariston heat pump water heater inventory now positioned ahead of the summer selling season after missing the 2025 season. ~Half of Lennox dealers now selling water heaters (up from ~1-in-20 a decade ago). 2029 regulation requiring heat pump water heaters above a certain tank size viewed as a step-change catalyst.

8. Insider Transaction Activity

Key Takeaway: Insider activity since Q1 earnings is minimal — only one open-market sale was filed, by the VP-Corporate Controller, and it was a small discretionary sale (971 shares, ~$510K). No open-market buys were filed, and the absence of clustered selling or unusual transaction sizes means there is no meaningful insider signal heading into Q2 earnings.

No open-market purchases were filed by any LII insider in the period from April 29, 2026 through July 28, 2026. The single sale by the VP-Corporate Controller is small in size and not part of a 10b5-1 plan, but the absence of any insider buying ahead of what management has characterized as a recovery quarter is notable. Overall, insider activity provides no directional signal for the Q2 print.

Source: SEC Form 4 Filings Database. Window: April 29, 2026 – July 28, 2026 (filing date). Open-market transactions (Form 4 codes P/S) only.