HVAC Industry Shift to New Refrigerants Has Boosted Lennox's Profits

Lennox has capitalized on its efforts to gain market share and improve its cost structure against a backdrop of solid end-market growth. Its margin expansion story has been remarkable, with adjusted operating margins rising from about 8% during the last sales peak in 2007 to over 19% in 2024. 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.