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# Lennox Home Margin Drops To 18.7% From 23.6% As Price Cuts And Tariff Costs Bite
- URL: https://www.bullished.co/lennox-home-margin-drops-to-18-7-from-23-6-as-price-cuts-and-tariff-costs-bite-1be5815f/
- Published: 2026-10-28T20:05:58.000Z
- Updated: 2026-10-28T20:05:58.000Z
- Description: Lennox's residential unit earned $40 million less on 3% higher sales while the company spent $150.0 million on buybacks and leaned on short-term debt.
- Author: Matteo Parrino
- Tags: SEC Filings, LII, Industry: Industrials

[Lennox](https://www.bullished.co/tag/lii/)'s residential heating and cooling unit earned [$40 million less](https://www.sec.gov/Archives/edgar/data/0001069202/000106920226000096/lii-20260930.htm?ref=bullished.co) in the third quarter than a year earlier even as its sales rose 3%, and its margin fell to 18.7% from 23.6%. The HVAC maker's 10-Q, filed Wednesday, shows the company kept repurchasing stock while commercial paper climbed and $300.0 million of notes moved into current debt.

## Price cuts, tariffs and a thinner margin

Lennox International designs, makes and sells heating, ventilation, air conditioning and refrigeration equipment. Its Home Comfort Solutions segment sells furnaces, air conditioners and heat pumps; Building Climate Solutions covers light commercial and refrigeration gear.

Home Comfort segment profit was $175.7 million against $215.3 million a year earlier, on sales of $937.2 million. The company's [earnings release](https://www.sec.gov/Archives/edgar/data/0001069202/000106920226000094/lii-20260930xexx991pressre.htm?ref=bullished.co) says targeted price adjustments in select markets were made to defend and recapture share, and that those moves, inflation and tariff costs weighed on profit. The 10-Q breaks out the damage: $32 million from higher product costs including tariffs and lower factory absorption, $12 million from lower volume and $15 million from fuel, distribution and other cost inflation, offset by $13 million from mix and price and $6 million from acquisitions.

Companywide, gross margin fell 250 basis points (2.5 percentage points) to 31.6% from 34.1%. Product costs took 300 basis points, while mix and price added 80\. Diluted earnings per share were [$6.41 against $7.38](https://markets.ft.com/data/announce/detail?dockey=600-202610280645PR%5FNEWS%5FUSPRX%5F%5F%5F%5FDA81667-1&ref=bullished.co) a year earlier.

CEO Alok Maskara said margins and results "fell short of our expectations," citing "heightened competitive pressure" and persistent inflation. The company cut its full-year adjusted earnings guidance to [$21.00 to $21.50](https://seekingalpha.com/news/4658734-lennox-non-gaap-eps-of-684-misses-by-052-revenue-of-16b-beats-by-20m-lowers-fy-guidance?ref=bullished.co) from $23.00 to $24.00.

## Commercial strength, rising tax rate

Building Climate Solutions offset part of the hit: sales rose 24% to [$635.3 million](https://finance.yahoo.com/markets/stocks/articles/lennox-lii-q3-earnings-key-123005839.html?.tsrc=rss&ref=bullished.co) and segment profit rose $26 million to $166.5 million, with margin at 26.2%.

The effective tax rate was 24.6% in the third quarter, up from 20.8% in the second quarter and from 18.1% a year earlier, which the filing attributes to higher income in higher-tax jurisdictions. Interest expense rose to $18 million from $11 million on heavier commercial paper and a term loan taken out in October 2025.

The [prior quarterly filing](https://www.sec.gov/Archives/edgar/data/0001069202/000106920226000087/lii-20260630.htm?ref=bullished.co) had shown Home Comfort sales down 7%. The 10-Q also notes $25 million of tariff refunds helped nine-month Home Comfort profit.

## Buybacks against short-term borrowing

Lennox repurchased $150.0 million of stock in the quarter, and its equity statement shows $151.6 million of treasury stock purchases, against $43.3 million of cash at September 30\. Commercial paper outstanding stood at $455.1 million, and $300.0 million of senior notes due August 1, 2027 are now current maturities.

The July purchase of Heat Controller cost $215.3 million in cash and added $88.2 million of goodwill. Through September 30, the business brought in $29.5 million in revenue and $1.2 million in Home Comfort profit. The purchase price allocation is preliminary.

Heat Controller's final working capital adjustment is due in the fourth quarter of 2026.

### Sources

- [10-Q Filing — Lennox International (LII)](https://www.sec.gov/Archives/edgar/data/0001069202/000106920226000096/lii-20260930.htm?ref=bullished.co) — SEC EDGAR
- [10-Q Filing — Lennox International (LII), Q2 FY2026 filed 2026-07-29 (comparison basis)](https://www.sec.gov/Archives/edgar/data/0001069202/000106920226000087/lii-20260630.htm?ref=bullished.co) — SEC EDGAR
- [Earnings release (8-K Item 2.02, lii-20260930xexx991pressre.htm) — Lennox International, filed 2026-10-28](https://www.sec.gov/Archives/edgar/data/0001069202/000106920226000094/lii-20260930xexx991pressre.htm?ref=bullished.co) — SEC EDGAR
- [Lennox (LII) Q3 Earnings: How Key Metrics Compare to Wall Street Estimates](https://finance.yahoo.com/markets/stocks/articles/lennox-lii-q3-earnings-key-123005839.html?.tsrc=rss&ref=bullished.co) — Yahoo Finance
- [Lennox Reports 2026 Third Quarter Earnings Results – Company Announcement - FT.com](https://markets.ft.com/data/announce/detail?dockey=600-202610280645PR%5FNEWS%5FUSPRX%5F%5F%5F%5FDA81667-1&ref=bullished.co) — Financial Times
- [Lennox Non-GAAP EPS of $6.84 misses by $0.52, revenue of $1.6B beats by $20M, lowers FY guidance (LII:NYSE) | Seeking Alpha](https://seekingalpha.com/news/4658734-lennox-non-gaap-eps-of-684-misses-by-052-revenue-of-16b-beats-by-20m-lowers-fy-guidance?ref=bullished.co) — seekingalpha.com
- [Lennox Says Higher Costs Are Weighing on Residential HVAC Business](https://www.marketwatch.com/story/lennox-says-higher-costs-are-weighing-on-residential-hvac-business-8f9b0235?ref=bullished.co) — MarketWatch
- [Lennox: Q3 Earnings Snapshot – WTOP News](https://wtop.com/national/2026/10/lennox-q3-earnings-snapshot/?ref=bullished.co) — wtop.com

### More on Lennox International

- [Lennox Stock Tumbles 6%, Wiping Out $734 Million, After Profit Forecast Cut](https://www.bullished.co/lennox-stock-tumbles-6-wiping-out-734-million-after-profit-forecast-cut-a7ce0346/)
- [Lennox Cuts 2026 Profit Outlook To $21.00-$21.50 A Share As Price Cuts Hit Home Comfort Margins](https://www.bullished.co/lennox-cuts-2026-profit-outlook-to-21-00-21-50-a-share-as-price-cuts-hit-home-comfort-ce03867c/)

[All Lennox International (LII) coverage →](https://www.bullished.co/tag/lii/)