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Lennox International reports profit on April 19th

Lennox International Inc. (NYSE: LII) designs and manufactures products for the heating, ventilation, air conditioning and refrigeration markets. The company offers energy-efficient air conditioning solutions for private and business customers by reducing their carbon footprint. This afternoon LII is trading up 0.5% at $ 314.79.

Lennox stock is up nearly 90% year-over-year, well above its three-year low of $ 168.41 in April 2020. Additionally, LII is up 20% year-to-date, hitting a record high of $ 321.70 just yesterday .

Early Monday morning, the stock landed two price target increases from Morgan Stanley and Stephens to $ 258 and $ 315, respectively. Further upgrades and / or price target increases seem overdue as 13 of the 14 brokers that have a “hold” or worse recommendation are on the rise today.

On March 12, the company announced a quarterly cash dividend of $ 0.77 per share. The dividend is payable on April 15th to shareholders of record as of March 31st. To date, the company has a forward dividend of $ 3.08 and a dividend yield of 0.96%.

Lennox is expected to show profits on April 19th. Lennox has exceeded earnings expectations in three of its last four earnings reports in recent history. For the first quarter of 2020, Lennox missed analysts’ estimates by a margin of $ 0.53 and reported earnings per share (EPS) of $ 0.56. For the second quarter of 2020, LII increased earnings per share to $ 2.97, beating expectations with a margin of $ 0.34. For the third quarter of 2020, Lennox posted a further increase in earnings to $ 3.53 per share. The company also beat estimates with a margin of $ 0.38. In its most recent quarterly report, Lennox reported earnings per share of $ 2.89, beating expectations by $ 0.24.

Basically, the Lennox share does not offer the most attractive risk / reward ratio. In particular, the potential reward is not great now as the LII stock price hits new all-time highs. Lennox stock is currently trading at an inflated price-to-earnings-ratio of 34.73 and is not expected to improve at a price-to-earnings-ratio of 28.90. On the flip side, the risk of investing in Lennox is also high as its total debt of $ 1.18 billion far outweighs the debt of $ 129 million.

Lennox has struggled to grow its revenue and net income in recent years, and the pandemic has only made the numbers worse. In fiscal 2020, the company’s revenue fell over $ 160 million, or 5%. Lennox’s net income also decreased more than $ 50 million, or 13%. Overall, Lennox stock does not currently offer enough incentive for investors to jump on board considering the current valuation and dividend yield.

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