Lennox International (LII) — Q2 2026 Earnings Preview

1. Earnings Preview

Key Takeaway: The setup is modestly constructive — consensus sits at a reasonable bar with Q2 EPS of ~$7.67 and revenue of ~$1.56B, both achievable given Carrier's Q2 beat-and-raise and improving residential/light commercial demand — but the wildcard is whether factory absorption fully cleared and whether HCS volumes inflected as management guided.

Heading into Q2 2026, the bar for LII looks manageable: consensus EPS of $7.67 and revenue of $1.56B represent a meaningful step-up from Q1's $3.35 GAAP EPS and $1.14B in revenue, consistent with LII's typical seasonal peak in Q2. Management's tone at the Q1 print was cautiously optimistic — full-year EPS guidance was reaffirmed at $23.50–$25.00 despite a ~$100M incremental tariff/commodity cost headwind, and revenue growth guidance was raised to ~8% — signaling confidence in the second-half pricing ramp and BCS momentum. Estimate revisions have been stable-to-slightly-higher since the Q1 print (Q2 EPS consensus moved from $7.64 to $7.67), suggesting the Street is not aggressively front-running a beat. The stock has rallied ~5% since the Q1 earnings date (April 29) but has underperformed XLI over the same window, implying the market has not fully priced in a beat. The single biggest wildcard is factory under-absorption: management guided that Q1's $15M headwind would linger modestly into Q2 before fully clearing — if absorption normalized faster than expected, segment margins could surprise to the upside; if it persisted, HCS margins will disappoint. Carrier's same-day Q2 beat-and-raise (residential up 9%, light commercial up 10%, full-year guidance raised) provides a strong positive read-through for LII's demand environment.

2. KPIs & Consensus Expectations

Key Takeaway: Consensus implies a strong seasonal step-up in both revenue and EPS; the bigger swing factor is HCS segment margin — whether factory absorption cleared and pricing actions began to flow through — rather than the top line, where Carrier's read-through is already positive.

Table 1 — Current Quarter Snapshot (Q2 2026)

Source: Visible Alpha Consensus and Actuals Data. All consensus figures as of July 28, 2026. Q2 2025 actuals and Q1 2026 actuals from Visible Alpha reported figures. FY 2026 guidance from Q1 2026 earnings call (April 29, 2026). Note: Q2 2025 EPS actual of $7.71 reflects the prior-year peak quarter; consensus of $7.67 implies a slight YoY decline, consistent with management's guidance for a slight enterprise margin decline in 2026 due to higher tariff/commodity costs.

Table 2 — Beat/Miss History (Last 8 Quarters, Top 2 KPIs)

Source: Visible Alpha Consensus and Actuals Data. LII has beaten on EPS in 6 of the last 8 quarters, with the two misses (Q3 2025 revenue, Q4 2025 both) concentrated in the destocking-driven downturn; the return to beats in Q1 2026 suggests the cycle is turning. Revenue beats have been more consistent than EPS beats historically, but the magnitude of EPS beats (often 10%+) reflects LII's strong operating leverage.

3. Guidance & Commentary Evolution

Key Takeaway: Guidance has not been formally revised since the Q1 print, but management's tone has incrementally improved — channel destocking is now described as '100% behind us' (upgraded from 'largely concluded' at Q1), and the June 2026 Section 232 proclamation reducing tariff rates on residential HVAC systems is a modest net positive that management characterizes as restoring competitive parity.

Source: Q1 2026 Earnings Call transcript and Earnings Release (April 29, 2026); Visible Alpha Consensus and Actuals Data (current consensus as of July 28, 2026). No formal guidance revision has been issued since the Q1 print. The June 2026 Section 232 proclamation reducing tariff rates on residential HVAC systems and components is the only material post-Q1 development affecting the cost outlook, and management has explicitly stated it does not change the full-year financial guidance.

4. Guidance vs. Estimate Revision Tracker

Key Takeaway: Estimates for Q2 2026 and FY 2026 have been remarkably stable since the Q1 print — Q2 EPS moved only +$0.03 and revenue was essentially flat — suggesting the Street has high conviction in the guidance framework and is not pricing in incremental upside or downside. The modest upward drift in July (driven by Carrier's positive read-through) is a constructive signal.

Source: Visible Alpha Consensus and Actuals Data. Post-Q1 baseline (May 6, 2026) and current consensus (July 28, 2026) from Visible Alpha revision history. Guidance from Q1 2026 Earnings Call (April 29, 2026). The estimate trajectory is notably stable — both Q2 and FY estimates have moved less than 1% since the Q1 print, suggesting the Street is anchored to management's guidance framework. The modest upward drift in early July (Q2 EPS moved from $7.64 to $7.68 in the week of July 3) likely reflects positive HVAC industry data and Carrier's pre-earnings channel checks.

5. Stock Performance

Key Takeaway: LII has broadly tracked XLI since the Q1 print but with higher volatility; the stock's mid-June surge to ~$573 (driven by the Section 232 tariff relief news) has partially faded, and LII now trades at ~$544, roughly +5% since Q1 earnings vs. XLI +7% — suggesting the market has not fully priced in a beat and multiple expansion has been modest.

Indexed Performance Since Q1 2026 Earnings (April 29, 2026 = 100):

Source: Stock Price Data (Yahoo Finance). Sector ETF: XLI (iShares U.S. Industrials ETF), appropriate for LII's HVAC/building products sub-sector. Base = 100 at April 29, 2026 close ($517.62 for LII, $169.93 for XLI, $711.58 for SPY).

Key Events Since Q1 Earnings:

• Late April / Early May: LII rallied ~5% in the days following Q1 earnings on the beat-and-raise, then gave back gains as tariff uncertainty weighed on the broader industrials sector.
• Mid-May trough (~$483, May 19): LII underperformed XLI by ~6 points as the market digested the magnitude of the tariff/commodity cost headwind ($100M incremental) and concerns about HCS volume recovery.
• Mid-June surge to ~$573 (Jun 24–25): The June 2026 Section 232 proclamation reducing tariff rates on residential HVAC systems and components drove a sharp re-rating; LII outperformed XLI by ~200 bps on the day of the announcement.
• July pullback to ~$538 (Jul 8): LII gave back some of the tariff-relief gains as the market reassessed the magnitude of the benefit (management characterized it as 'slightly better' but not a change to FY guidance).
• Pre-earnings recovery to ~$544 (Jul 28): Carrier's Q2 beat-and-raise (reported same day) provided a positive read-through, with LII up ~1% on the day heading into its own print.

Valuation Context: LII trades at ~21.2x NTM P/E and ~15.8x NTM EV/EBITDA as of July 28, 2026. Over the past 3 months, the stock is +8.3% with multiple expansion of +8.3% (EV/EBITDA from 14.6x to 15.8x), suggesting the recovery has been multiple-driven rather than estimate-driven — consistent with the stable estimate trajectory noted above. Over 12 months, LII is -17.7% with multiple contraction of -19.3% (from 19.5x to 15.8x EV/EBITDA), reflecting the destocking cycle's impact on sentiment. The current multiple is below the 5-year average, suggesting room for re-rating if the H2 2026 recovery materializes as guided.

6. Material News & Developments

Key Takeaway: The most important development since Q1 earnings is the June 2026 Section 232 tariff relief on residential HVAC, which partially offsets the ~$100M incremental cost headwind flagged at Q1 and restores competitive parity vs. Mexico-based manufacturers — a modest but real positive for H2 2026 margins.

• June 2026 — Section 232 Tariff Relief on Residential HVAC: A June 1, 2026 presidential proclamation reduced Section 232 derivative tariff rates specifically on residential HVAC systems and components. Management characterized this as restoring competitive parity vs. Mexico-based manufacturers and as 'slightly better' for the overall tariff outlook, though it does not change the full-year financial guidance. Approximately 80% of LII's incremental cost increase was 232-related, so even a partial reduction is meaningful for H2 margin trajectory. Implication: Modest positive for H2 2026 HCS margins; reduces the pricing-to-cost gap that management needs to close.
• April 29, 2026 — Q1 2026 Earnings Beat-and-Raise: LII reported Q1 revenue of $1.14B (+6.1% vs. consensus) and adj. EPS of $3.35 (+5.0% vs. consensus). Full-year revenue guidance raised to ~8% growth; EPS guidance reaffirmed at $23.50–$25.00 despite ~$100M incremental tariff/commodity cost headwind. BCS delivered record quarterly performance (organic sales +26%). Implication: Established a positive baseline for Q2; management's confidence in the full-year framework despite higher costs was the key takeaway.
• April 2026 — Section 232 Derivative Tariffs Announced: New Section 232 tariffs on metals and derivatives were announced in April 2026, driving LII's cost inflation guide from +2% to +5% for the full year. Key input cost increases since prior guidance: aluminum +25%, steel +20–25%, diesel +50%, copper +10–15%. LII is ~70% hedged on commodity inputs; the remaining 30% plus tariffs represent the unhedged exposure. Due to FIFO accounting, no income statement impact from the new tariff rules was expected until Q3 2026. Implication: Q2 margins should be relatively clean from the new tariffs (FIFO buffer); Q3 is where the full cost hit lands.
• April 2026 — LII Price Actions Announced: Lennox announced pricing actions in late April 2026 (referenced on the Q1 earnings call as 'announced earlier this week') to offset the higher tariff and commodity cost environment. Management guided that most of the price impact would fall in H2 2026, with Q2 seeing only a partial benefit. Implication: Q2 price/mix benefit is partial; the full pricing tailwind is a H2 story, supporting the back-half weighted EPS guidance.
• March 2026 — HVAC Industry Antitrust Litigation (Berg v. Bosch et al.): Lennox was named as a defendant in 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. Implication: Tail risk; unlikely to affect near-term financials but could weigh on sentiment if the case progresses.
• Ongoing — Hub-and-Spoke Distribution System Rollout: 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%. Implication: Positive for parts/accessories attachment rate expansion and emergency replacement share gains; a structural margin driver.
• Ongoing — Supco/DuroDyne Integration: Integration of the Supco (parts/accessories) and DuroDyne acquisitions is on track, contributing meaningfully to both revenue and profit in Q1 2026. Parts and accessories attachment rate is currently in the teens, with management targeting 30–35% as the long-term entitlement. Implication: M&A contribution is a ~4% revenue tailwind for FY 2026; margin accretion from parts/accessories mix is a multi-year story.
• July 8, 2026 — LII Schedules Q2 2026 Results: Lennox formally announced Q2 2026 results will be released July 29, 2026, with a conference call at 9:30 AM ET. No pre-announcement or guidance update was included in the press release, consistent with management's practice of not providing intra-quarter updates.

7. Peer Commentary & Read-Throughs (Last 60 Days)

Key Takeaway: Carrier's Q2 2026 results (reported July 28, same day as this preview) are the most direct and timely read-through — residential up 9%, light commercial up 10%, total orders up ~40%, full-year guidance raised — and represent a strong positive signal for LII's Q2 demand environment. AAON's June 2 conference commentary corroborates the commercial HVAC recovery thesis. Both sources qualify as current-quarter commentary; stale prior-quarter peer results have been excluded.

Methodology Note: Only peer commentary that (a) covers LII's current Q2 2026 reporting period or (b) was provided after the peer's own most recent earnings call is included below. Prior-quarter earnings results from peers (e.g., CARR Q1 2026 results reported in April) are excluded as stale. Carrier's Q2 2026 results (July 28, 2026) and AAON's June 2026 conference remarks both qualify.

Carrier Global (CARR) — Q2 2026 Earnings (July 28, 2026) — DIRECT READ-THROUGH

Carrier reported Q2 2026 EPS of $0.86 vs. consensus of $0.82 and organic sales growth of 3% vs. consensus of -2%, with total orders up ~40% and full-year guidance raised to $23B in sales and ~$2.90 EPS. This is the most timely and directly relevant peer read-through for LII's Q2 2026 print.

• North American Residential HVAC (direct LII HCS read-through): Carrier's Climate Solutions Americas (CSA) residential sales were up 9% in Q2 2026, with light commercial up 10% — 'a similar rate to the first quarter.' Carrier now expects the overall North American HVAC market to be 'around 7 to 7.5 million units this year, largely stable versus last year,' and raised its full-year CSA residential sales outlook to 'up high single digits.' Field inventory levels 'continue to remain healthy, ending Q2 down about 25% versus last year,' with current inventory 'down something like 20%.' The absence of destocking is expected to provide '10 points of benefit' to H2 sales. LII read-through: Strongly positive for HCS Q2 revenue; lean channel inventory supports H2 sell-through.
• Repair vs. Replace Dynamics: Carrier CEO David Gitlin noted that 'people are just getting a little bit more comfortable being uncomfortable with higher mortgage rates' and that 'it feels like we're getting back to basics and it's a replacement market.' He cited 'pent-up demand for existing home sales' at 20-year lows and 'only so long a customer can repair or replace.' LII read-through: Consistent with LII management's Q1 commentary that repair vs. replace has 'stabilized'; Carrier's language suggests the replacement cycle is beginning to normalize, which is positive for LII's HCS volumes.
• Commercial HVAC Orders (direct LII BCS read-through): Carrier reported commercial HVAC orders up ~65% in Q2, with data center orders 'up 4x over last year.' Total company backlog is 'now over $8 billion, up about 40% versus last year and up 20% sequentially.' Carrier is raising its full-year data center sales outlook to 'about $2 billion, which will be our second year in a row of doubling our sales in this important vertical.' LII read-through: Positive for BCS commercial demand; LII does not currently compete in data center cooling (chiller-based) but benefits from the broader commercial HVAC demand environment and national account momentum.
• Pricing: Carrier achieved ~3% pricing in Q2 and expects 'a little bit better price by a point or two in the back half,' with full-year pricing expected 'in the probably 4% range.' However, pricing was 'slightly margin dilutive' sequentially as it was primarily 'to offset tariffs.' LII read-through: Consistent with LII's mid-single digit price/mix guide for 2026; confirms pricing power exists but is being consumed by cost offsets rather than driving margin expansion.
• Tariffs/Input Costs: Carrier's adjusted operating margin was 'down 190 basis points from last year, predominantly due to favorable volume and productivity more than offset by the impact of increased input costs and unfavorable business mix.' The 'impact of tariffs and pricing associated with tariffs was a net negative' and 'a headwind to our margins in the quarter.' LII read-through: Confirms that tariff/cost headwinds are real and industry-wide; LII's FIFO accounting means the new April tariffs don't hit until Q3, so Q2 margins may be relatively cleaner than Carrier's.
• Full-Year Guidance Raised: Carrier raised full-year organic sales guidance to 'up mid-to-high single digits' from 'flat to up low single digits,' and raised EPS guidance to ~$2.90 from ~$2.80. CEO Gitlin cited 'record backlog levels and first half results being better than expected.' LII read-through: Carrier's raise is a strong positive signal for LII's own guidance reaffirmation or potential raise at Q2 earnings.

AAON Inc. (AAON) — William Blair Growth Stock Conference (June 2, 2026) — CURRENT-QUARTER COMMENTARY

AAON's President & CEO Matthew Tobolski presented at the William Blair Growth Stock Conference on June 2, 2026, during LII's Q2 2026 reporting period. This commentary reflects conditions as of early June 2026 and qualifies as current-quarter read-through.

• Commercial HVAC Recovery Confirmed: Tobolski stated: 'We've definitely seen signs of recovery inside the commercial HVAC market' and 'in Q1, we saw a lot of that inertia really start translating into strength in bookings.' He characterized 2026 as 'a good strong recovery year for the AAON side of the business and definitely see it being a market share capture year.' The amount of new prospects 'continue to accelerate.' LII read-through: Corroborates LII's BCS recovery narrative; commercial HVAC bookings strength in Q1 likely continued into Q2.
• Light Commercial Demand Improving: AAON is 'seeing signs of momentum in the right direction on the light commercial market,' though 'not a fast recovery.' AAON updated its consolidated guidance to 'a 40-ish percent year-over-year growth rate' on its Q1 call, driven by both the AAON brand (light commercial) and BASX (data centers). AAON noted 'an outperformance in our side with bookings in that transactional market relative to the greater market as a whole.' LII read-through: Positive for LII's light commercial exposure within BCS; the transactional market (emergency replacement, smaller commercial) is recovering.
• Data Center Demand Robust: AAON's BASX brand (data center cooling) 'doubled last year, doubling this year, doubled the year before that,' with the company raising its data center outlook to '$1 billion.' Tobolski noted that 'even a liquid-cooled data center, you're still going to have to buy 30% to 40% of your capacity via air,' supporting demand for traditional airside products. LII read-through: LII does not currently compete in data center cooling but benefits from the broader commercial HVAC demand environment; the airside demand commentary is relevant for LII's commercial equipment business.
• Pricing Actions Flowing Through: AAON implemented pricing actions in Q3/Q4 2025 and noted that 'going forward, we're definitely getting a lot of better priced product flowing through the factory, which will show margin improvement.' AAON maintains a '10-ish percent premium' over competitors and has been 'pushing price discipline back up' after dipping to ~7%. LII read-through: Consistent with LII's pricing discipline narrative; industry pricing actions taken in late 2025 and early 2026 are beginning to flow through to margins.
• Supply Chain Professionalization: AAON built a 'true professional supply chain organization' that is 'unlocking a tremendous amount of value in not just cost savings but cost avoidance in inflationary markets' and providing 'better supply surety.' LII read-through: Consistent with LII's own supply chain optimization efforts (cross-border steel sourcing, dual-sourced vendor base); industry-wide supply chain improvements are a margin tailwind.

Sources: Carrier Global Q2 2026 Earnings Release and Conference Call Transcript (July 28, 2026); AAON William Blair Growth Stock Conference Transcript (June 2, 2026). Both sources cover LII's current Q2 2026 reporting period and qualify as timely read-throughs. Prior-quarter peer earnings results (e.g., CARR Q1 2026, TT Q1 2026) have been excluded as they reflect conditions in the prior period.

8. Insider Transaction Activity

Key Takeaway: Insider activity since the Q1 print is minimal — only one open-market sale by the VP-Controller in early May — and the absence of any open-market buying or unusual selling clusters is a neutral signal. No 10b5-1 plan initiations or large discretionary sales have been disclosed.

Source: SEC Form 4 Filings (Insider Transaction Data). Window: April 29, 2026 – July 28, 2026. Only open-market buys (code P) and sells (code S) are included. The single transaction identified is a discretionary sale by the VP-Controller on May 6, 2026, the week after Q1 earnings. The sale represents 47% of his holdings but is modest in absolute dollar terms (~$510K) and is not unusual for a controller-level executive following a quarterly earnings window opening. No open-market purchases by any insider have been disclosed in the period, and no CEO, CFO, or board-level transactions have been filed. The absence of clustered selling or large discretionary sales by senior executives is a neutral-to-slightly-positive signal heading into Q2 earnings.

Appendix: Key Assumptions & Risks

• Upside risks: (1) Factory absorption cleared faster than guided in Q2, driving HCS margin upside; (2) Carrier's Q2 beat-and-raise (residential +9%, light commercial +10%) translates directly to LII HCS volumes; (3) BCS national account wins and emergency replacement momentum exceed expectations; (4) Section 232 tariff relief is larger than management guided.
• Downside risks: (1) Factory under-absorption persisted into Q2 more than guided ($15M Q1 headwind not fully cleared); (2) HCS volumes disappointed due to weather or continued new construction weakness; (3) Tariff/commodity costs accelerated beyond the ~$100M incremental guide; (4) Antitrust litigation (Berg v. Bosch) creates headline risk; (5) Samsung ductless or Ariston water heater inventory build did not convert to sell-through.
• Key questions for the Q2 call: (1) Did factory absorption fully clear by end of Q2 as guided? (2) What is the Q3 tariff cost impact (first quarter of FIFO flow-through from April tariffs)? (3) Has the Section 232 tariff relief changed the full-year cost inflation guide? (4) What is the current state of channel inventory in both one-step and two-step? (5) Is management prepared to raise or narrow the FY 2026 EPS guidance range?