Lennox Continues to Deliver Impressive Margin Expansion

Lennox has capitalized on its efforts to gain market share and improve its cost structure against a backdrop of improving end-market demand. Its margin expansion story has been remarkable, with adjusted operating margins rising from about 8% during the last sales peak in 2007 to nearly 18% in 2023. We think its expanding distribution network and product portfolio have helped Lennox gain market share, while low-cost manufacturing and product sourcing and more cost-efficient product designs helped reduce its cost base. All the while, Lennox has maintained it premium brand standing that supports pricing power.