Back to top

Image: Bigstock

Key Factors to Look for Ahead of Lennox's (LII) Q4 Earnings

Read MoreHide Full Article

Lennox International Inc.(LII - Free Report) is slated to report fourth-quarter 2017 results on Feb 6, before the market opens.

The company pulled off an average positive earnings surprise of 7.56% over the preceding four quarters. Notably, Lennox International’s adjusted earnings per share in third-quarter 2017 came in at $2.53 per share, beating the Zacks Consensus Estimate of $2.44.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Lennox International believes its research and development projects as well as new marketing programs will continue to boost its segmental revenues. Moreover, the company noted that new investments made to widen its distribution footprint will help drive aggregate top-line results in the fourth quarter. In addition, the company predicts that favorable foreign exchange rates will bolster its revenues for full-year 2017 by nearly $5 million.  Based on such optimistic views, Lennox International raised the lower-end of its revenue growth guidance for 2017 from 4-7% to 5-7%.

We believe improving replacement, new constructions and equipment sales will continue to drive Lennox International’s revenues. Notably, we notice that the Zacks Consensus Estimates for the company’s Commercial Heating & Cooling and Residential Heating & Cooling segment revenues are currently pegged at $246 million and $487, respectively, for fourth-quarter 2017, higher than the corresponding tallies of $243 million and $476 million recorded in the prior-year quarter.

Lennox International also anticipates that higher volume, favorable prices, reduced sourcing and engineering-led costs, and favorable foreign exchange impact will help widen its margins. The company expects to secure $35 million savings from lower sourcing and engineering-led costs in 2017. Also, it predicts generating $6-million savings from the Mexican manufacturing operations.

However, Lennox International noted that elevated commodity costs, unfavorable mix and expenses related to the ongoing research and development, as well as retailing and distribution expansion moves might impede its margins in the quarter to be reported. Notably, the company has lowered its adjusted earnings guidance for 2017 to the $7.75-$8.05 per share range from the previously estimated guidance of $7.75-$8.15. We fear that continued productivity issues within several major facilities might also dent the company’s near-term profitability.

Lennox International carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the company’s earnings is pegged at $1.67 for the quarter under review.

Stocks to Consider

Our proven model predicts that the three stocks zeroed down below from the Zacks Categorized Construction Sector will likely report a positive surprise in the fourth quarter. This is because these picks have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3, for this to happen.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

D.R. Horton, Inc. (DHI - Free Report) , with an Earnings ESP of +4.96% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boise Cascade, L.L.C. (BCC - Free Report) , with an Earnings ESP of +15.79% and a Zacks Rank #1. 

TopBuild Corp. (BLD - Free Report) , with an Earnings ESP of +0.31% and a Zacks Rank #2.

 Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Breaking News: Cryptocurrencies Now Bigger than Visa

The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.

Zacks has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.

Click here to access these stocks. >>

Published in