Morningstar Rating

Stock Research and Analysis

by James Krapfel, CFA

Bulls Say

Residential HVAC volume has significant room to expand, given the still-depressed level of single-family housing starts and pent-up replacement demand.
Lennox's market share gains should continue, given its healthy investments in residential and commercial distribution and strong efforts with new product introductions such as the Raider commercial rooftop product line.
Operating margins should easily eclipse prior cycle highs, supported by the elimination of margin-dilutive Service Experts, a favorable price/cost environment, and fixed-cost leverage from recovering volume. Read more 

Bears Say

The outlook for commercial HVAC is constrained by continued weakness in new construction and exposure to Europe. Further, refrigeration is mature and slow growth.
Daikin's 2012 purchase of rival Goodman will lead to more price competition and a possible more aggressive foray into commercial HVAC and high-end residential HVAC.
Lennox's margin rise could prove fleeting as copper, steel, and aluminum raw material prices rise along with an eventual improvement in global economic activity. The company will not be able to raise prices quickly enough to support margins if this occurs. Read more 

Management

Todd Bluedorn has been CEO since 2007 and chairman since May 2012. Before joining Lennox, Bluedorn served in numerous senior management positions for rival United Technologies beginning in 1995, including president of Otis Elevator in the Americas,   Read more 

Profile

Lennox designs, manufactures, and markets heating, ventilation, air conditioning, and refrigeration products for the residential and light commercial markets. In 2013, revenue   Read more 

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