Lennox's Free Cash Flow Under Pressure, Analysts Say - Lennox Intl (NYSE:LII)

Barclays analyst Julian Mitchell reiterated an Equal-Weight rating on the shares of Lennox International Inc LII and raised the price target from $228 to $240.
The company had set its long-term financial targets for 2026 and guided FY23.
The analyst lowered the near-term EPS estimate amidst a more challenging Residential demand backdrop. The commentary on the 2024-2026 Outlook and the implied 2023 cash headwinds was more notable.
The analyst noted that the Residential heating, ventilation, air conditioning (HVAC) market now looks likely to re-couple lower with broader Residential products.
LII's guide implies free cash flow conversion remains ~60% in 2023, after ~60% in 2022, due to headwinds of higher capex and working capital.
The company emphasized that some cost items were bigger headwinds / smaller tailwinds in the 1H23 than in the 2H.
The analyst estimates Q1 is worth 15% of FY23 EPS, slightly lower than normal.
UBS analyst Damian Karas reiterated a Neutral rating on the company's shares and raised the price target from $255 to $265.
The analyst said the investor day, the first led by CEO Alok Maskara, saw the company initiate achievable guidance for 2023, shake up the financial targets, and introduce a bullish 10-year market outlook.
While the EPS guide was in-line with expectations, the analyst thinks inferred margin expansion fell short, and commercial growth beat. Also, free cash flow appeared lower for longer than expected, the analyst added.
Price Action: LII shares are trading lower by 4.66% at $246.69 on the last check Thursday.
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