Lennox International Reports Record Revenue and Profit in Second Quarter
- Revenue up 8% to record $1.1 billion, led by 14% Residential growth - Record GAAP EPS from continuing operations of $2.71, up 8% - Record adjusted EPS from continuing operations of $2.83, up 12% - Raising low end of 2017 revenue growth guidance from 3-7% to 4-7% - Narrowing 2017 GAAP EPS from continuing operations guidance from $7.65-$8.25 to $7.73-$8.13 - Raising low end of 2017 adjusted EPS from continuing operations guidance from $7.55-$8.15 to $7.75-$8.15 - $175 million of stock repurchases year-to-date, and $75 million more planned for second half of 2017
DALLAS, July 24, 2017 /PRNewswire/ -- Lennox International Inc. (NYSE: LII) today reported financial results for the second quarter of 2017. All comparisons are to the prior-year period.
For the second quarter, revenue was up 8% to a record $1.102 billion. Foreign exchange was neutral to revenue. GAAP operating income was a record $175 million, up 9%. GAAP earnings per share from continuing operations was a record $2.71, up 8%. On an adjusted basis, total segment profit increased 14% to a record $183 million, and total segment margin expanded 80 basis points to a record 16.6%. Adjusted EPS from continuing operations rose 12% to a record $2.83.
"Lennox International posted strong revenue and profit growth in a record quarter for the company," said Chairman and CEO Todd Bluedorn. "The company hit new all-time highs for revenue, total segment margin and profit, and earnings per share.
"In our Residential business, revenue was up 14% on strength in both replacement and new construction business. Segment margin expanded 130 basis points to 21.5%, and segment profit rose 21%. Our Residential business set new all-time highs for revenue, segment margin and profit. In our Commercial business, we have seen lumpy customer demand and mix in the first half of the year. After a record first quarter with strong growth in revenue, margin, and profit, Commercial revenue was up 3% at constant currency in the second quarter, with segment margin of 17.3% down 140 basis points and segment profit down 6% from the record second quarter a year ago. Looking ahead at the second half of the year, we expect Commercial revenue, margin and profit to be up from the prior-year period. In Refrigeration, second-quarter revenue was down 1%, driven by a decline in Europe. Revenue was up in North America, South America, Australia, and Asia. Refrigeration margin expanded 30 basis points to 11.4%, and segment profit rose 1%.
"Looking ahead for the company overall, we continue to expect strong growth for a year of record revenue and profit, led by the strength in our Residential business. Given the company's first-half performance and outlook for the second half, we are raising the low end of our 2017 guidance for revenue and adjusted EPS from continuing operations, and we plan $75 million more of stock repurchases in the second half of the year."
FINANCIAL HIGHLIGHTS
Revenue: Revenue for the second quarter was $1.102 billion, up 8%. Foreign exchange was neutral to revenue. Volume was up, and price/mix was flat on a revenue basis.
Gross Profit: Gross profit in the second quarter was $341 million, up 8%. Gross margin was flat at 30.9%. Gross profit was positively impacted by higher volume, favorable price/mix, and sourcing and engineering-led cost reductions, with offsets from higher commodity costs, investments in distribution expansion, and foreign exchange.
Income from Continuing Operations: On a GAAP basis, income from continuing operations for the second quarter was $116.4 million, or $2.71 per share, compared to $111.2 million, or $2.52 per share, in the prior-year quarter.
Adjusted income from continuing operations in the second quarter was $121.0 million, or $2.83 per share, compared to $111.5 million, or $2.53 per share, in the prior-year quarter. Adjusted earnings from continuing operations for the second quarter of 2017 excludes net after-tax charges of $4.6 million: $3.4 million for special product quality adjustments, $1.0 million of special legal contingency charges, a total of $0.9 million for other items, and a benefit of $0.7 million for excess tax benefits from share-based compensation.
