Lennox (LII) Expands Ultra-Low Emissions Gas Furnace Line

Zacks Equity Research

In a bid to expand ultra-low emissions gas furnace line, Lennox International Inc. LII developed four furnaces that meet California’s regulations on air pollution that require reduction in nitrogen oxide (NOx) emissions.

NOx emissions, which are a key contributor to air pollution in the state, increase respiratory problems and have a negative effect on vegetation.

Designed to comply with California's South Coast Air Quality Management District's (“SCAQMD”) Rule 1111 and San Joaquin Valley Air Pollution Control District's (“SJVAPCD”) Ultra-Low NOx Rule 4905, these furnaces (the SL297NV, SL280NV, EL195NE and EL180NE) will save homeowners and contractors’ energy as well as money.

Importantly, the ultra-low emissions furnace line is designed in a way that enables residents to have perfect air inside their homes, save energy and environment, while avoiding regulatory fee.

Initiatives Bode Well

In 2017, Lennox had unveiled the first ultra-low NOx gas furnace — SL280NV Variable-Speed, Ultra-Low Emissions Gas Furnace — for consumers. Again in 2018, it had launched SL297NV Variable-Speed, Ultra-Low Emissions Gas Furnace and EL195NE Ultra-Low Emissions Gas Furnace. This year, Lennox added the EL180NE Ultra-Low Emissions Gas Furnace to its portfolio.

Despite being hurt by adverse weather conditions and material and other cost headwinds, it ended third-quarter 2019 on a strong note. Both the top and bottom lines improved on a year-over-year basis. Adjusted revenues (excluding the impact from divestitures) grew 6% year over year, despite 2% negative impact from tornado. The upside was mainly driven by strong volume growth, and positive pricing and mix.

During the third quarter, the company reported adjusted earnings per share of $3.34, up 26% from the prior-year period. Solid contribution from the Residential Heating & Cooling segment supported the growth.  

It has been focusing on various initiatives like price increases, improved production efficiency and cost reduction. Moreover, the recent move is likely to boost its profitability going forward.

Courtesy of the above-mentioned tailwinds, Lennox — which shares space with AAON, Inc. AAON, Comfort Systems USA, Inc. FIX and Watsco, Inc. WSO in the Zacks Building Products - Air Conditioner and Heating industry — has outperformed its industry in the past year.



This Zacks Rank #3 (Hold) company has an expected three-five year EPS growth rate of 20%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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