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Lennox International (LII) Q2 Earnings: What's in Store?

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Lennox International Inc. (LII - Free Report) is slated to announce second-quarter 2018 results on Jul 23, before the opening bell.

In the last reported quarter, the company delivered a positive earnings surprise of 4.63%. In fact, the company topped the consensus mark in each of the trailing four quarters, with the average being 3.17%.

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

Factors at Play

New investments for expansion of its distribution footprint, research and development projects, as well as recent marketing programs might have benefitted the company’s segmental revenues in the second quarter. We believe improving replacement, solid residential construction (primarily new constructions) and equipment sales will continue to drive Lennox International’s revenues.

Notably, we notice that the Zacks Consensus Estimates for second-quarter 2018 revenues of the company’s Commercial Heating & Cooling, and Residential Heating & Cooling segments are currently pegged at $278 million and $694 million, respectively, higher than the corresponding tallies of $259 million and $654 million recorded in the prior-year quarter.

The Zacks Consensus Estimate for second-quarter 2018 revenues of the company’s Refrigeration segment stands at $153 million, lower than the year-ago tally of $190 million. That said, the company expects second-quarter margins to grow on the refrigeration segment.

Overall, higher volumes, lower corporate taxes, SG&A leverage, supportive weather and strong price realization will aid Lennox International to boost its bottom line. However, rising steel, copper and aluminum costs, unfavorable mix, as well as ongoing growth-based investments might impede bottom-line growth in the near term.

Notably, second-quarter earnings are expected to take into account the charges associated with the divestiture of the South American business.

Overall, for the second quarter, the Zacks Consensus Estimate for earnings stands at $3.55, reflecting a 25.4% year-over-year increase. Meanwhile, the consensus estimate for revenues is pegged at $1.13 billion, implying 2.6% growth.

What Our Model Indicates

Lennox International has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — to increase the odds of an earnings beat.

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

Zacks ESP: Lennox International has an Earnings ESP of +1.37%.

Zacks Rank: Currently, Lennox International carries a Zacks Rank #2 (Buy).

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 witnessing negative estimate revisions.

Other Stocks to Consider

Here are some other companies in the construction sector, which according to our model also have the right combination of elements to post an earnings beat in their respective quarters to be reported:

RPM International Inc. (RPM - Free Report) has an Earnings ESP of +1.64% and holds a Zacks Rank #3. The company is slated to report quarterly numbers on Jul 19, 2018.

GCP Applied Technologies Inc. (GCP - Free Report) has an Earnings ESP of +2.56% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company is expected to report quarterly results on Aug 2, 2018.

Foundation Building Materials, Inc. (FBM - Free Report) has an Earnings ESP of +21.05% and carries a Zacks Rank #2. The company is expected to report quarterly numbers on Aug 2, 2018.

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