Lennox Reports Strong 2022 Sales, LSD for 2023

Lennox 2022 Results

Recently Lennox shared its 2022 Q4, and annual, performance and shared some early thoughts on 2023. We thought we’d take a look at their earnings transcript (or here is a recording of the call) and share some thoughts:


  • Record results (Congratulations to Lennox but, do you know a manufacturer that didn’t have record results in 2022? A little thing called COVID, coupled with inflation, supply chain challenges and market growth reflected well on many.)
  • Q4 revenue was $1.1 billion for a total of $4.7 billion or up 14% YoY in currency (13% in sales) (which then begs the question, what was organic unit growth? How much was driven by price?)
    • They reference “strong price execution” and “continued volume growth”.
  • Had margin improvement … up 150 basis points as price gains outpaced costs from inflation and improved factory productivity.
  • Resi segment was up 13% for the quarter to $703 million with volume up 5%
  • Commercia was up 19% to $241 million. Volume was up only 3%.
  • Refrigeration was up 5% to $150 million. Volume was down 11%. North America was up substantially, 2x European growth.


  • Have transitioned their product portfolio to meet new minimum efficiency regulations. Feel that they can win share based upon this.
  • Back to good inventory levels and have increased their raw material safety stock.
  • Expect some channel “destocking” in two step distribution such as Allied Air, ADP and Heatcraft.
  • Launched some new products
  • Divesting of European assets.
  • Continuing to invest with new factory planned


  • Expect business to essentially be flat – 0-4% performance (and this is with them “taking share”, so they are expecting the market to be down.)
  • Current order rate (January) is “consistent” but are noticing “signs of a slowdown.”
  • Expect industry unit shipments to decline YoY in 2023
  • Focusing on three controllable factors:
    • Maintaining and expanding pricing initiatives with price increases and are prepared for more if inflation warrants.
    • Focused on commercial profit recovery
      • Commercial product line-up provides “greater value to our customers” and intend to “share part of that value through pricing and contract negotiations” (so, want to win business based upon price and presumably take share.)
    • Start “taking market share again” now that the Marshalltown reconstruction is complete and another factory adds capacity.
  • Feel that the company’s “direct to dealer network” provide a competitive advantage.

Analyst Q&A

  • Allied, ADP and Heatcraft go to market via two step distribution whereas the remainder of the business is direct to dealer. Saw some destocking for Heatcraft. Conversations with channel partners leads Lennox to believe that there will be destocking for Allied and ADP this year which they think will help the Lennox brand (the high end brand.)
  • Feel will recapture Lennox share this summer given Marshalltown back online.
  • Industry is used to the SEER change.
  • Commercial in Q4 was slightly higher than expected but still about 20% below normal factory output. Lost some share early in the year and think recovered some of it. Share shift occurred in the emergency replacement segment due to inventory issues.
  • Things industry resi decline will occur more in the first half of the year.
  • New home business is lower margin.
  • The Allied brand grew faster than the Lennox brand in Q4 (migration to lower cost brand?, regional? Size of home?)
  • According to Lennox, their larger, commercial customers are planning for significant upgrades in 2025 with the new low GWP refrigerants to meet carbon footprint goals and to achieve ESG goals (distributors and reps should start tracking which customers in their markets are being proactive on ESG / energy efficiency initiatives and have individuals responsible for this. Capture the information in a CRM system and market towards this topic.)
  • Seeing increased costs in compressors, variable speed motors from their suppliers, and lead-time issues (highlights the interdependency of supply chains and could impact business throughout the year.)
  • Had lost share due to availability and price and hope that is why they will be able to recapture share.

Take Aways

  • Record year but driven by price
  • 2023 expect a flat year
  • Addressing inventory issues
  • Counting on their dealers to delivery for them
  • Seeking to take share and will attempt through inventory and pricing. Lennox is doubling down on “price discipline” and using price strategically, something distributors should further consider as the market slows.

At the end of the day, Lennox reported strong revenues on okay volume in 2023 and expects low single digit growth in 2023, driven by share gains.

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