Lennox Earnings: Impressive Profit Margin Gains Continue; Full-Year EPS Guidance Raised

Narrow-moat-rated Lennox enjoyed a strong second-quarter performance, with core revenue growing 8% year over year to nearly $1.5 billion and adjusted segment operating margin expanding 100 basis points to 21.9%. Lennox's home comfort solutions segment, which sells residential heating, ventilation, and air-conditioning equipment, delivered 5% revenue growth and segment profit margin expanded 170 basis points to 23.3%. Notably, management called out that inventory destocking within its two-step distribution channel, which had been an ongoing headwind for volume, appears to have come to an end. And indeed, management expects this channel to deliver mid-single-digit percentage revenue growth in 2024, tempered by flat revenue growth from Lennox's direct-to-dealer channel.