Lennox Delivers A Q3 Estimate Beat And Sets Up Nicely For Q4

Lennox International Inc. LII shares fell 1 percent following the company reporting robust beat results for Q3. Baird’s Timothy Wojs believes the pullback offers an attractive buying opportunity.

Wojs maintained a Buy rating on the company, with a price target of $168.

Strong Beat & Raise

“We like the setup post quarter, given easier Q4 and Q1 comps (rare for building products) and our confidence in 2017 estimates,” the analyst mentioned.

Lennox reported solid beat and raise results for Q3, with EPS of $2.33, ahead of the consensus and estimate, on revenue of $1,010 million, again ahead of expectations and representing year on year growth of 6 percent.

Adjusted EBITDA came in at $157 million, ahead of the estimate and consensus, with the upside being driven by higher EBIT in the Residential business.

Guidance Raised

Management raised the adjusted EPS guidance for 2016 from $6.50-$6.90 to $6.75-$6.95, while the revenue guidance was narrowed from growth of 3-7 percent to 4-6 percent.

However, the company lowered its pricing guidance by $5 million, which the analyst stated was understandable, given the lower FX headwinds and commodity costs. The corporate expense guidance was raised $5 million.

“Initial qualitative 2017 comments suggest steady demand growth and continued margin execution/FCF deployment,” Wojs noted.

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